Earnings Downtrend Pauses...Stock Market Breathes a Sigh of Relief

KOSPI Q2 Operating Profit Consensus Revised Up 1.53% from Previous Week
Brokerage Sector Outlook Up 5.97%
SK Hynix Rises 2.89%

[Asia Economy Reporter Song Hwajeong] As corporate earnings were revised upward last week, the downward trend that had persisted is showing signs of stopping. If the downward revision of earnings halts, the burden on the recently strong stock market is also expected to ease.

According to financial information firm FnGuide on the 8th, the consensus operating profit for the KOSPI in the second quarter of this year was revised upward by 1.53% from the previous week to KRW 26.1039 trillion. The third quarter is also estimated to be higher by 0.62% from the previous week at KRW 38.9681 trillion. Net profit forecasts for the second and third quarters also rose by 0.15% and 0.38%, respectively, compared to the previous week.

By industry, the securities sector's forecast rose the most sharply, up 5.97% from the previous week, followed by chemicals at 3.01%. Researcher Cho Seungbin of Daishin Securities said, "Securities firms' earnings are expected to recover rapidly due to strong product management income from the global index rebound and a surge in trading volume," adding, "However, since the increase in trading volume may be a temporary phenomenon, excessive expectations should be cautioned." In addition, the consensus operating profit for the second quarter was revised upward compared to the previous week in pharmaceuticals (0.07%), food and beverages (0.84%), distribution (0.82%), transportation equipment (0.96%), and construction (0.02%).

Among the top market capitalization stocks, SK Hynix showed the largest adjustment. SK Hynix's second-quarter operating profit consensus was revised upward by 2.89% from the previous week to KRW 1.5681 trillion, a 145.93% increase compared to the same period last year. Researcher Lee Sunhak of Hanwha Investment & Securities said, "SK Hynix's second-quarter earnings are expected to slightly exceed market expectations with sales of KRW 8 trillion and operating profit of KRW 1.8 trillion," adding, "The reason for the upward revision compared to previous estimates is that the average selling price (ASP) and exchange rate assumptions have improved." Hanwha Investment & Securities also raised SK Hynix's target price to KRW 120,000, noting that concerns about DRAM price declines have been alleviated and that NAND profitability is improving due to increased shipments of solid-state drives (SSD) for servers. Forecasts for LG Chem (1.89%), Hyundai Motor (0.18%), and Kakao (0.28%) also rose compared to the previous week.

On the other hand, Samsung Electronics was revised downward by 0.78% from the previous week, showing that the downward trend in earnings continues. Researcher Kim Kyungmin of Hana Financial Investment said, "Samsung Electronics' second-quarter operating profit estimate is revised downward from KRW 6.5 trillion to KRW 5.7 trillion," explaining, "This is because the one-time profit from the organic light-emitting diode (OLED) display division is unlikely to be reflected in the second quarter accounting, lowering the display division's operating profit from KRW 200 billion to an operating loss of KRW 600 billion." Samsung SDI's earnings forecast dropped by 2.33%, marking the largest downward revision among the top 10 market capitalization stocks.

As the pace of downward revisions slows, the burden on the stock market is expected to ease. Researcher Cho said, "The current 12-month forward price-to-earnings ratio (PER) of the KOSPI is 12.2 times, which corresponds to the peak level in April 2009 right after the financial crisis," adding, "To relieve valuation pressure, upward revisions of earnings forecasts are necessary."

Even after the global financial crisis, downward revisions of earnings and rising stock prices occurred simultaneously, increasing valuation pressure. However, as earnings forecasts improved afterward, valuation pressure was relieved, and the market entered an earnings-driven phase. Researcher Cho said, "It is necessary to confirm whether the recent signs of upward revisions will lead to a trend of sustained upward movement," explaining, "The higher the valuation pressure, the greater the likelihood of increased stock market volatility."

This content was produced with the assistance of AI translation services.