2022 KOSPI Earnings Growth Rate Declines Due to 'Base Effect'... Promising Sectors and Stocks
[Asia Economy Reporter Lee Seon-ae] Shinhan Financial Investment forecasted that the earnings per share (EPS) growth rate of the KOSPI next year is likely to decline compared to this year.
On the 1st, Lee Jung-bin, a researcher at Shinhan Financial Investment, said, "The net profit of the KOSPI this year is expected to be 177 trillion won, and the EPS consensus growth rate (YoY) is 90.6% (excluding NAVER's one-time gains)." He added, "The EPS growth rate for 2022 is expected to be 11.1%, and it is highly likely that the growth rate will decline compared to 2021." This is because the base effect was largely reflected in 2021. Additional earnings momentum depends on whether there is an earnings surprise in the third quarter and the resolution of uncertainties (Delta variant, supply chain disruptions).
Although the operating profit growth rate (YoY) of the KOSPI in the third and fourth quarters is encouraging, the pace of consensus upgrades has slowed. This reflects the market's skepticism about the earnings.
By sector, the sectors with encouraging operating profit growth rates (YoY) in 2022 are utilities, communication, industrials, consumer discretionary, and IT. By detailed industry, these include media education, software, retail (distribution), IT hardware, IT appliances, machinery, construction, semiconductors, automobiles, and cosmetics. Although software's EPS is expected to decline in 2022 due to the NAVER effect, its operating profit growth rate is encouraging.
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The industries experiencing a decline in operating profit are chemicals, steel, display, securities, and insurance. Materials and finance are expected to see profit declines in 2022 due to significant earnings growth in 2021. The researcher named the top 10 stocks with high earnings momentum scores as Kangwon Land, Zinus, LG Display, S-Oil, Hyundai Steel, SK, SK Innovation, Hyosung Advanced Materials, Hwasung, and OCI.
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