Despite the Secondary Battery Boom, Institutions Are Obsessed with Performance Stocks... Focusing on Fundamentals

기관 July Sends Love Calls to Naver and S-Oil
Stock Market: "Focus on Earnings Improvement Stocks with Low Price Burden"

As individual investors flock to secondary battery stocks, creating a speculative frenzy, institutional investors have been buying value stocks throughout July. With the market's concentration on secondary battery stocks expected to gradually ease, a differentiated market based on corporate earnings is likely to unfold. Securities firms advise focusing on companies with improving fundamentals, which tend to have relatively lower price burdens and volatility.

Top Net Buyer NAVER Highlights Growth Potential in the AI Era

According to the Korea Exchange, institutions recorded a net selling of 3.256 trillion KRW in July. In contrast, foreigners and individuals posted net buying of 1.0624 trillion KRW and 2.3439 trillion KRW, respectively. Notably, while individuals filled their baskets with secondary battery stocks and foreigners focused on semiconductors and secondary batteries, institutions showed a completely different pattern. Despite heavy net selling, institutions concentrated on stocks with assured earnings improvements in the second half of the year.

The top net purchased stock by institutions in July was NAVER, with a total purchase of 426.3 billion KRW. NAVER's stock price had been declining over the past two years. In the high-interest-rate era, investment sentiment toward growth stocks cooled, and concerns about business viability increased. However, as experts emphasize steady profit growth, institutions have started buying again. In particular, recent decisions to consolidate some underperforming services and the upcoming launch of the massive AI service 'HyperCLOVA X' have attracted investor interest. Jaemin Ahn, a researcher at NH Investment & Securities, explained, "NAVER had been left out of the global internet companies' stock price rally, but the search expertise built as the number one player over the past 20 years is expected to be applicable in the AI era."

Samsung Securities Research Center also recommended NAVER as one of its picks. Despite concerns over slowing advertising revenue growth due to the economic downturn, NAVER continues to generate steady profits. According to financial information provider FnGuide, NAVER's expected operating profit for this year is 1.4821 trillion KRW, a 13% increase from the previous year. Samsung Securities Research Center stated, "Compared to global tech stocks like Meta and Alphabet, NAVER has been uniquely sidelined, which raises expectations for a stock price increase." Yuanta Securities Research Center also recommended NAVER, noting that "despite concerns about declining search market share, the number of paid keyword searches remains robust," and "earnings improvement is expected in the second half."

Definite Earnings Improvement in the Second Half: S-Oil

The second most net purchased stock by institutions was S-Oil, with 113.8 billion KRW bought. S-Oil is expected to see earnings improvement due to the potential recovery of refining margins in the second half. Jeongwon Wi, a researcher at Daishin Securities, advised, "It is good to approach from a trading perspective based on definite profit momentum in the second half." NH Investment & Securities recently raised S-Oil's target price from 90,000 KRW to 96,000 KRW, a 6.66% increase, citing expected earnings improvement and a historically low price-to-book ratio (PBR). Researcher Youngkwang Choi projected, "Reflecting the rising oil prices and refining margins, we raise S-Oil's operating profit forecasts for this year and next by 14% and 4%, respectively. In Q3, with strong refining margins and no scheduled maintenance, there will be no opportunity loss, and the negative lagging effect seen in Q2 will disappear, improving operating profit to 620.2 billion KRW."

During July, international oil prices rose about 10 USD per barrel, and Singapore refining margins increased by about 5 USD per barrel. As of the 27th, Singapore refining margins stood at 10 USD per barrel, surpassing the historical average of 5.5 USD, indicating a boom period. Youngkwang Choi added, "The strong gasoline margins and the strengthening spread of aromatics products, along with the resulting strong performance in the chemical business segment, are also positive factors."

Jaesung Yoon, a researcher at Hana Securities, said, "Due to the impact of falling oil prices, Q2 operating profit fell short of consensus, but in Q3, operating profit is expected to increase by 1553% quarter-on-quarter and 18% year-on-year to 601.6 billion KRW, exceeding the consensus estimate of 401 billion KRW by 47%." He estimated that total operating profit for the second half will improve by 116% to 1.2 trillion KRW compared to the first half, and annual operating profit will increase by 33% year-on-year to 2.3 trillion KRW.

Turnaround Expectations in the Second Half... Semiconductor Stocks Also Receive Love Calls

SK Hynix, which institutions net bought by 101.7 billion KRW, is seeing growing expectations for a turnaround in the second half following its Q2 earnings announcement. Despite recording an operating loss exceeding 6 trillion KRW in the first half of this year, the company posted results that beat market expectations, raising hopes for earnings improvement in the second half. Yujun Choi, a researcher at Shinhan Investment Corp., said, "Fundamentals will be the key variable going forward," highlighting semiconductors as a sector to watch. SK Hynix posted an operating loss of 2.8821 trillion KRW in Q2, narrowing the deficit from 3.4 trillion KRW in Q1, and Samsung Electronics is planning additional production cuts in the second half, boosting expectations for a semiconductor market recovery. Choi analyzed, "Visibility of earnings improvement (fundamental turnaround) in the second half is important, and semiconductors fit this criterion. The weight of supply and demand is also shifting toward semiconductors."

Hana Securities Research Center also recommended SK Hynix, noting, "Q2 sales and operating loss were 7.3 trillion KRW and 2.8 trillion KRW, respectively, but signs of semiconductor market improvement are evident," and "the company has secured a competitive edge with differentiated products such as high-bandwidth memory (HBM)."

Other top net purchased stocks by institutions in July included Korean Air (106.4 billion KRW) and Rino Industrial (83.6 billion KRW), ranking third and fifth, respectively. Korean Air is expected to benefit from growth centered on international flights and improved profitability. Rino Industrial, a semiconductor stock, is seen as benefiting from the recovery in the semiconductor materials and parts industry.

Meanwhile, the institutional shift away from secondary battery stocks is expected to ease the market's concentration. Yujun Choi advised, "Recently, the market showed high volatility due to concentrated demand around secondary battery stocks, and stocks outside this sector were increasingly neglected. As this concentration eases, the market is finding balance, and with many companies reporting earnings, stock price differentiation is occurring based on the content, so attention should be paid to corporate fundamentals."

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