'Unstable Stock Market' Korean Listed Companies Show Strong Operating Profits "Amore, Shinsegae Inter, Kia Catch Attention"

Concerns Raised Over 'Peak-Out' in the Second Half of the Year

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] Amid concerns over the stock market due to the spread of COVID-19 and economic downturn, the operating profit forecasts for domestic listed companies in the second quarter have been revised upward, drawing attention. As the second-quarter earnings announcement season officially begins, whether the upward revision in earnings can quell the stock market's uneasy adjustment is being closely watched.

According to financial information provider FnGuide on the 18th, the consensus estimate for the consolidated operating profit of 153 companies listed on the KOSPI market, for which three or more securities firms have provided earnings forecasts, was 46.6081 trillion KRW as of the 16th. This is nearly double the second-quarter earnings of last year (24.6418 trillion KRW), which were severely impacted by the COVID-19 pandemic.

With Samsung Electronics, LG Electronics, POSCO, and others, who opened this earnings season, consecutively announcing preliminary results exceeding market expectations, the overall earnings outlook has also improved.

The second-quarter operating profit consensus for these 153 companies is 16.3% higher than the estimate three months ago (40.0878 trillion KRW) and 7.3% higher than the estimate one month ago (43.4318 trillion KRW).

Looking at earnings forecasts by company, notable improvements are seen especially in sectors heavily affected by COVID-19, such as distribution, refining, aviation, tourism, and leisure.

Among companies that posted losses in the second quarter of last year, 17 companies including Shinsegae, Emart, Hotel Shilla, Shinsegae International, Aekyung Industrial, Hanse Industrial, SK Innovation, and S-Oil are expected to turn profitable. Additionally, companies like J Contentree, GKL, Kangwon Land, CJ CGV, Jeju Air, and Hana Tour are expected to reduce their deficit sizes. Companies that posted profits but had poor performance, such as Lotte Shopping (5623.6%), Hyundai Department Store (567.9%), AmoreG (260.9%), and AmorePacific (223.8%), are also expected to see significant increases in operating profit.

Improved earnings forecasts are also prominent among the top market capitalization companies leading the stock market. Among the top 10 by market cap, Kia (846.2%), Hyundai Motor (223.1%), Samsung SDI (141.8%), and LG Chem (106.7%) are expected to more than double their operating profits compared to the second quarter of last year.

Researcher Kim Jae-eun of NH Investment & Securities explained, "Since mid-last year, looking at the operating profits of domestic companies, the profits of large-cap stocks improved first due to global economic recovery, followed by a trickle-down effect to mid-cap and small-cap stocks." He added, "The KOSPI's second-quarter operating profit forecast is continuously being revised upward," and "Typically, second-quarter operating profits are expected to be lower than the first quarter, so achieving the forecast is not burdensome, making the possibility of an 'earnings shock' low."

Meanwhile, despite the bright outlook for second-quarter earnings, there are also 'peak out' forecasts suggesting that from the third quarter, the improvement in listed companies' earnings and the pace of economic recovery in major countries may slow down. Mirae Asset Securities predicted that the operating profit growth rate of domestic companies, which was 122.8% in the first quarter, will decrease to 37.6% in the third quarter. Researcher Yoo Myung-gan of Mirae Asset Securities said, "Concerns about earnings peak out are expected to increase as the second half progresses," estimating that "assuming an 'earnings shock' for domestic companies in the fourth quarter, the combined operating profit for the second half will be 98.1 trillion KRW, about 8 trillion KRW less than the first half."

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