Time for Telecom Stocks... "5G Beneficiary Equipment Stocks Rebound"

[Asia Economy Reporter Ji Yeon-jin] There is a forecast that telecommunications stocks, which are about to announce their earnings, will enter a full-fledged upward trend. All three major telecom companies are expected to deliver 'surprise earnings' that exceed market expectations for the second quarter. Since large-scale investments to resolve ultra-high-speed internet quality issues are inevitable, this is seen as an opportunity to buy telecommunications equipment stocks, which have recently shown weakness, at a low price.

According to the financial investment industry on the 6th, LG Uplus started announcing its second-quarter earnings on this day, followed by KT (August 10) and SK Telecom (August 11). The market expects all three telecom companies to post results exceeding expectations. It is anticipated that operating profits in the telecommunications sector will surge as the average revenue per user (ARPU) for mobile phone users increases. This leads to expectations of dividend increases, suggesting that stock prices may continue to rise even after the earnings announcements.

With the sales of new phones from Samsung and Apple starting this month, marketing competition among the three telecom companies may intensify, but the net increase in 5G subscribers could also expand, potentially boosting telecommunications sector earnings in the second half of the year. The three telecom companies are actively advancing their 5G smart factory businesses applying robotics, artificial intelligence (AI), security, and diagnostics, and the emergence of next-generation 5G services from the end of this year is another reason for expecting stock price increases.

In particular, telecommunications equipment companies have recently experienced sluggish stock prices due to concerns about second-quarter earnings. However, with the upcoming National Assembly audit next month expected to address 5G and ultra-high-speed internet quality issues, and considering the increase in traffic volume, large-scale investments by telecom companies in the second half of the year are inevitable, so telecommunications equipment companies are also expected to improve their earnings. In fact, the Korea Consumer Federation announced the day before that the number of consumer damage cases related to 5G reported to the 1372 Consumer Counseling Center last year was 1,995, a 16% increase compared to 2019.

Since the beginning of this month, the telecommunications sector's returns have lagged the KOSPI by 2.5%. During this period, compared to the KOSPI's rise, SK Telecom underperformed by 2.8 percentage points, KT by 2.2 percentage points, and LG Uplus by 2.3 percentage points.

Kim Hong-sik, a researcher at Hana Financial Investment, said, "Among telecommunications stocks, we recommend focused buying of KT and LG Uplus, which have growing expectations for dividend increases after the second-quarter earnings announcements, and telecommunications equipment stocks such as Sollid, Innowireless, and RFHIC, which have strong expectations of benefiting from 5G."

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