Except for Semiconductors... Listed Companies' 'Strong Performance' Amid Harsh Market Conditions

Analysis of Top 100 Companies Q4
Estimated Sales 554.8 Trillion KRW, Up 17% YoY...Operating Profit Down 27%
Excluding Samsung Electronics and Hynix, Sales Up 22%, Operating Profit Up 7%

[Asia Economy Reporter Park Hyungsoo] Despite the fierce triple waves of high interest rates, high exchange rates, and high inflation, the top 100 listed companies in Korea (based on market capitalization as of the closing price on December 20) performed relatively well in the fourth quarter of this year. According to financial information firm FnGuide on the 22nd, the estimated sales revenue for the top 100 companies by market capitalization among domestic listed companies in the fourth quarter is expected to increase by 17% compared to the same period last year, reaching 554.7708 trillion KRW. The estimated operating profit is expected to decrease by 27% to 25.8323 trillion KRW from last year's 35.3383 trillion KRW.

The story changes when excluding Samsung Electronics and SK Hynix. The performance of the other 98 listed companies was not bad. Sales are expected to increase by 22%, and operating profit by 7%. This clearly shows how significant Samsung Electronics, SK Hynix, and the semiconductor industry are to the Korean economy. Industries such as secondary batteries, shipbuilding, and automobiles performed relatively well despite various adverse factors. Among the companies, 75 saw an increase in estimated sales compared to the fourth quarter of last year. Thirty-one listed companies, including Samsung Electronics and SK Hynix, are expected to see a decrease in operating profit.

Secondary battery and materials companies continue their growth trend. Notable sales growth rates include L&F (267%), EcoPro BM (261%), POSCO Chemical (92%), LG Energy Solution (86%), Samsung SDI (57%), SK Innovation (49%), and LG Chem (37%).

Sales of Korea Shipbuilding & Offshore Engineering and Hyundai Heavy Industries also increased. Although global new ship orders from January to November this year decreased by about 40% compared to last year, the market share of domestic shipbuilders increased from 33.8% as of November last year to 40.3% this year. Domestic shipbuilders secured 118 out of 155 large liquefied natural gas (LNG) carriers ordered up to November this year. Kim Honggyun, a researcher at DB Financial Investment, explained, "The delivery schedules for ships at major domestic shipyards are already set through 2026," adding, "Based on sufficient order backlogs, they are also aiming to improve profitability through selective order-taking."

The vehicle semiconductor supply shortage that has continued since last year somewhat eased in the second half of this year, helping improve Hyundai Motor Group's performance. Hyundai Motor's estimated sales for the fourth quarter are expected to increase by 22.9% year-on-year to 38.155 trillion KRW. Operating profit is expected to rise by 88.5% to 2.8844 trillion KRW. Kia's sales are expected to surge 38.9% to 23.8799 trillion KRW, and operating profit is forecasted to jump 94.3% to 2.2839 trillion KRW. Hyundai Motor Group has also enhanced brand awareness by strengthening product competitiveness and successfully introducing the electric vehicle-exclusive platform (E-GMP). As the electric vehicle market rapidly expands, strengthening electric vehicle competitiveness compared to competitors is cited as a growth factor.

The Waves of High Interest Rates and High Inflation Were Fierce

Samsung Electronics, which recorded an operating profit of 13.9 trillion KRW in the fourth quarter last year, is seeing its operating profit forecast gradually decline. The current average estimate remains around 8 trillion KRW, but foreign securities firms are continuously lowering their forecasts. On the 19th, Goldman Sachs lowered Samsung Electronics' fourth-quarter operating profit estimate for this year by 25.6% from 7.8 trillion KRW to 5.8 trillion KRW. In particular, the expected operating profit for the semiconductor division was lowered from 2.6 trillion KRW to 1.5 trillion KRW. Among domestic securities firms, Samsung Securities, DB Financial Investment, and Eugene Investment & Securities also forecast that Samsung Electronics' operating profit for the fourth quarter will fall short of 7 trillion KRW.

The situation for SK Hynix is even more severe. Although it recorded an operating profit exceeding 4 trillion KRW in the fourth quarter last year, it is expected to post a loss of more than 600 billion KRW in the fourth quarter this year. Some securities firms predict SK Hynix's operating loss could exceed 1 trillion KRW. Jo Jaeun, a researcher at Daishin Securities, said, "The downward revision of earnings estimates for Korean companies is larger compared to major countries worldwide," adding, "This is due to Korea's export-dependent economic structure and the large proportion of the semiconductor industry."

The poor performance of Samsung Electronics and SK Hynix, Korea's representative export companies, is interpreted as an unavoidable consequence of the global adverse effects of high interest rates and high inflation. Although they benefited somewhat from the high exchange rate, which reached the 1,400 KRW level, the impact of high inflation and high interest rates reduced real income, leading to more customers tightening their wallets. As sales of information and communication technology (ICT) products such as smartphones, PCs, and home appliances declined, semiconductor demand also decreased. Lee Jongbin, a researcher at Meritz Securities, said, "The slump in domestic semiconductor companies was more due to price declines than volume," and predicted, "The semiconductor market bottom is expected between the end of the first quarter and the second quarter of next year." He forecasted that if semiconductor prices rebound, the performance of the two companies will improve.

In terms of operating profit, the two companies are not the only ones performing poorly. Among the top 100 listed companies, 31 companies, including Samsung Electronics and SK Hynix, are expected to see a decrease in operating profit compared to the same period last year. Twenty-five companies maintained profitability but saw a reduction in profit size. Five companies turned to losses. The remaining one company, Korea Electric Power Corporation, is expected by the securities industry to see its operating loss widen from 4.7 trillion KRW in the fourth quarter last year to 9.3 trillion KRW in the fourth quarter this year.

What about the performance of major listed companies next year? There are concerns that the crisis felt by companies will be even greater, given the high likelihood that early next year's results will fall short of estimates. Yeom Dongchan, chief researcher at Korea Investment & Securities, explained, "Downward revisions of earnings estimates for domestic companies continue," adding, "Although volatility in estimates has slowed since mid-last month when all third-quarter results were disclosed, the direction of estimates is still downward." He also noted, "Ninety-eight percent of domestic listed companies have December fiscal year-ends," adding, "In the fourth quarter, the last quarter of the fiscal year, issues such as asset depreciation and reflection of annual expenses remain."

While domestic and international economic recessions are expected to continue, industries such as nuclear power and renewable energy, which the government plans to foster, are expected to grow. Oh Taedong, head of research at NH Investment & Securities, said, "Nuclear power and renewable energy sectors are expected to grow as the government provides policy support," and forecasted, "The semiconductor market will also bottom out and rise after inventory adjustments are completed."

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