Which Sectors Defend Against Negative Earnings in South Korean Companies with Lowered 'Eye Level'?

On the 8th, the KOSPI opened at 2352.49, up 18.22 points (0.78%) from the previous trading day, at the Hana Bank dealing room in Jung-gu, Seoul. The won-dollar exchange rate started at 1297.5 won, down 2.3 won from the previous trading day. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Ji Yeon-jin] Expectations for the earnings of KOSPI-listed companies in the second quarter of this year are declining. It is analyzed that in a bear market, the automotive and secondary battery sectors with profit momentum are advantageous.

According to Shinhan Financial Investment on the 9th, the operating profit of KOSPI-listed companies in the second quarter of this year is expected to be 60 trillion won, and net profit is expected to be 40 trillion won. The growth rates of sales, operating profit, and net profit are projected to be 18.5%, 5.6%, and 1.8% respectively compared to the previous year. This is lower than the initial market forecast. It is analyzed that this is due to the downward revision of the one-month earnings per share (EPS) for display, semiconductors, retail (distribution), non-ferrous metals, and steel sectors. In particular, the recent one-month and 12-month forward EPS change rates for display and semiconductors are -14.5% and -7.8%, respectively.

Samsung Electronics announced on the 7th that its preliminary operating profit for the second quarter of this year is 14 trillion won, about 5% below market expectations. The year-on-year growth rate is 11%. Researcher Lee Jung-bin of Shinhan Financial Investment said, "As the second quarter earnings season begins, large-cap stocks have fallen short of consensus, but the year-on-year growth rate is likely to be good," adding, "Considering the consumption slowdown due to interest rate hikes and the bear market, downward revisions of earnings for the second and third quarters are inevitable."

The KOSPI index fell below the 2300 level on the 6th, marking a 30% drop from last year's peak. When the KOSPI decline exceeds 30% in the past, the trailing price-to-book ratio (Trailing PBR) fell to around 0.6 times. Since the current KOSPI trailing PBR is 0.9 times, there is a point that the possibility of a price adjustment to 0.8 times, the lower end of the average PBR minus one standard deviation, should be considered within the second half of this year.

Researcher Lee said, "In a period when the overall market profits are declining, the safe havens are expected to be automobiles and secondary batteries," adding, "The relative profit momentum of secondary batteries compared to KOSPI has been accelerating since March, and sectors or industries whose profits are not deteriorating are unlikely to collapse easily, and price adjustments are likely to be temporary." Among the top market capitalization stocks in the automotive sector, Hyundai Motor and Kia Motors are also considered defensive stocks as they have a high possibility of surprise earnings in the second quarter.

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