Samsung Electronics·Kakao... Foreign Investors Pinpoint Promising Q2 Earnings Stocks

Samsung Electronics Net Bought 313.4 Billion KRW Since Late Last Month... Kakao Also Acquired 170 Billion KRW
Half of 2Q Listed Companies Show Weak Earnings but 'Earnings Surprise' Promising Stocks Identified

[Asia Economy Reporter Minwoo Lee] Despite the direct impact of the novel coronavirus disease (COVID-19) on domestic companies in the second quarter, foreign investors have concentrated their net purchases on performance favorites such as Samsung Electronics and Kakao. As the earnings of listed companies are expected to be sluggish in the second quarter, it is predicted that companies with good performance will be relatively more highlighted.

According to the Korea Exchange on the 7th, Samsung Electronics was the top stock in net purchases by foreigners from the 22nd of last month to the 3rd of this month. During this period, foreigners net purchased Samsung Electronics worth 313.4 billion KRW. Although they only net purchased 86.6 billion KRW from the 1st to the 21st of last month, they began concentrated buying from the latter half of the month ahead of the second-quarter earnings announcement. Despite forecasts that domestic listed companies would post gloomy results in the second quarter, directly reflecting the impact of COVID-19, foreigners preemptively picked Samsung Electronics, which was expected to deliver an 'earnings surprise.'

According to financial information provider FnGuide, 153 companies listed on the KOSPI market are estimated to record a consolidated operating profit of 23.1839 trillion KRW in the second quarter of this year. This is a 23.3% decrease from 30.23 trillion KRW in the same period last year. Sales during the same period are also estimated to have decreased by 11.1% to 387.9115 trillion KRW. Including expanded losses and transitions to losses, 68.6% of all companies, or 7 out of 10, are expected to see a decline in operating profit compared to last year.

On the other hand, Samsung Electronics shows a different trend. Based on consensus (market forecast), Samsung Electronics’ operating profit for the second quarter of this year was expected to decrease by 1.92% year-on-year to 6.4703 trillion KRW. However, ahead of the earnings announcement on the 7th, securities firms have been raising their operating profit forecasts one after another. On the 1st, KTB Investment & Securities suggested 7.382 trillion KRW, followed by IBK Investment & Securities at 7.622 trillion KRW, Daishin Securities at 7.06 trillion KRW, Hyundai Motor Securities at 7.52 trillion KRW, and Shin Young Securities at 7.37 trillion KRW, all revising upward to over 7 trillion KRW. Ji-hye Moon, a researcher at Shin Young Securities, explained, "Following the first quarter, price increases and shipment volume growth continued across all memory products," adding, "The recovery of production in the Consumer Electronics (CE) and Smartphone (IM) divisions and the resulting shipment volume increase proceeded at a faster pace than expected, which was also effective."

Foreign investors also showed interest in Kakao, a representative company of the non-face-to-face (untact) culture due to COVID-19. From the 22nd of last month to the 3rd of this month, they net purchased a total of 177.8 billion KRW, ranking second in net purchases after Samsung Electronics. In particular, buying momentum seems to have intensified this month. In just this month, they have already purchased 119.4 billion KRW, about three times the net purchase volume of 43.3 billion KRW from the previous month. This amount is more than twice that of Seegene (53.3 billion KRW), the second-highest net purchase stock this month.

The reason is solid performance. Kakao’s second-quarter earnings consensus estimates sales of 913.9 billion KRW and operating profit of 95.2 billion KRW. These figures represent increases of 24.6% and 135%, respectively, compared to the same period last year, bringing the company close to achieving its highest quarterly earnings ever. It is analyzed that online advertising, which had somewhat contracted due to the COVID-19 impact, is recovering, while ecosystems in various fields such as online shopping, finance, and mobility are becoming more robust.

In addition, foreigners net purchased SK Hynix (98 billion KRW), Seegene (90.3 billion KRW), and Celltrion (89.3 billion KRW). Jaeman Lee, a researcher at Hana Financial Investment, said, "When earnings estimates for the domestic stock market are revised downward, the stock price premium of sectors with upward revisions in earnings estimates increases, so it is necessary to pay attention to sectors leading earnings changes." He added, "Since sectors such as semiconductors and equipment, and software have begun to show simultaneous improvements in operating profit estimates for the second and third quarters, they could lead momentum changes during the earnings announcement season."

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