KOSPI, Bottom Escape?... Sharp Rebound in Operating Profit Estimates

Semiconductor Sector Profit Upgrades
Shipping, Tech Hardware, Construction Surpass Previous Annual Earnings Estimates

Listed Companies' Operating Profit Hits 255 Trillion Won This Month
8 Trillion Won Higher Than Last Month's Estimate

[Asia Economy Reporter Ji Yeon-jin] This year, the operating profit estimates for the KOSPI have rebounded sharply. Last year, the domestic stock market experienced a prolonged correction due to concerns about a "peak out" (decline after an economic peak) as the growth rate of earnings slowed. However, recently, with semiconductor and other earnings surpassing expectations, the operating profit outlook for this year has also surged steeply. The market interprets this as the KOSPI bottoming out.

According to the financial investment industry on the 12th, the operating profit of KOSPI-listed companies is expected to increase to 255 trillion won this month. This is an 8 trillion won increase from the estimate of 247 trillion won at the end of last month. It is analyzed that the preliminary Q4 results of Samsung Electronics on the 10th exceeded market expectations, significantly raising the KOSPI earnings estimates. Earlier, Shinhan Financial Investment raised Samsung Electronics' sales forecast for this year to 308.9 trillion won and operating profit to 60.9 trillion won, anticipating a significant improvement in semiconductor earnings from Q2 this year due to the recovery in the memory semiconductor market. SK Hynix's earnings forecast for this year was also revised upward. Hana Financial Investment raised SK Hynix's sales and operating profit estimates by 1 trillion won each to 54.8 trillion won and 14.2 trillion won, respectively.

KOSPI operating profits have been slowing in growth since a 119% increase in Q1 last year. The growth rate for Q4 last year is expected to be 55%, and it is forecasted to retreat to 13% in Q1 this year. Concerns about the slowdown in domestic companies' earnings limited the KOSPI's gains throughout last year. Although the KOSPI surpassed the historic high of 3300 early last year, it gave back most of its gains due to peak out concerns, ending with a modest 3.63% increase compared to the beginning of the year.

The earnings slowdown is expected to continue this year as well. The annual KOSPI operating profit growth rate is forecasted to drop from 60% last year to 10% this year. This is the main reason for the expectation of a sluggish KOSPI performance this year.

However, following the recent upward revision of semiconductor sector profits, earnings estimates for shipping, technology hardware, construction, and shipbuilding are also expected to exceed previous forecasts this year. Lee Kyung-soo, a researcher at Hana Financial Investment, said, "This turnaround is likely to have a positive effect on foreign investors' supply and demand and indicates that the KOSPI market can bottom out." He added, "Although the overall number of stocks with upward earnings revisions is not yet increasing, as earnings differentiation progresses, alpha investment focusing on key earnings improvements rather than index investment would be more appropriate."

However, early this year, investors showed a preference for undervalued stocks over earnings upgrades. Interest was higher in stocks that had fallen sharply rather than those that had surged, with a focus on companies with low valuations. Lee said, "Based on past experience, interest in undervalued stocks remains high until February, but from just before the Q1 earnings season, interest in earnings-related factors increases." He added, "Considering the small number of stocks currently experiencing earnings upgrades, companies with improved earnings among last year's heavily discounted undervalued stocks represent the safest strategy at the beginning of the year."

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