Global] Hong Kong, China, European profit momentum continue to slump

[Future Asset Securities Strategy/Quant Famous Magazine] Weekly Strategy and Profit Trends (Week 4 of March)

★ Summary ★

[Global] Hong Kong, China, European profit momentum continue to slump

[Korea] Semiconductor-focused earnings upgrade; KOSPI PBR hits 1x

■ Global earnings trends (MSCI, 12MF EPS)

* Global EPS Change Rate (1 M)
: : -0.1%(DM: +0.1% > EM: -0.7%)

* Consensus Upward Countries (1M)
: Japan (+1.4%), the United States (+0.2%), Taiwan (+0.2%), and India (+0.2%)

* Consensus Downward Countries (1M)
: Hong Kong (-2.5%), China (-1.3%), Europe (-0.4%)

* Consensus Upward Industry (1M, DM+EM)
: IT (+1.2%), Utilities (+0.7%), Industrial Goods (+0.3%)

* Consensus Downward Industry (1M, DM+EM)
: Material (-2.6%), Energy (-0.8%), Healthcare (-0.5%)

■ Domestic profit trends and valuation

* 1Q24 Change in operating profit consensus
: : +0.3%(1W), +2.4%(1M)

* Change in 24-year operating profit consensus
: : +0.1%(1W), +0.7%(1M)

* * KOSPI 12M Fwd. PER, 12M Trail. PBR
: 11.1x, 1.00x

■ Domestic profit trends by industry (24-year operating profit rate of 1W change)

▶Consensus Upside Down Industry: Semiconductors, Internet/Game, Secondary Battery, Chemical, IT Hardware

① Semiconductors (+1.1%; 24-year operating profit rate of 1W change)
* SK Hynix (+4.0%) expects Q1 earnings results on higher DRAM, NAND ASP. HBM sales share and increased mix continue to raise profit forecast
* Wonik IPS (+7.7%) and Eugene Tech (+5.9%) forecast turnaround in second half earnings on expectations of a rise in new orders for semiconductor equipment

② Internet/Games (+0.4%)
* WeMade (+5.2%) is the new Nightcrow's good initial performance and profit forecast ↑
*Kakao Games (+2.9%) is expected to grow through global publishing within this year, but there are concerns that sales of its flagship games will decrease
* Afreeca TV (+1.5%) expects high growth in advertising and reflection of Twitch domestic withdrawal

③ Secondary Battery (+0.3%)
* LG Energy Solution (+0.6%) expects earnings above 1Q24 consensus; expects profitability to recover due to metal price rebound despite continued weak demand

* Increase in Chemical (+0.3%, Lotte Chemical, DL), IT Hardware (+0.2%, Samsung Electro-Mechanics, LG Innotek, Lee Su Petasis)

▶Consensus Downward Industries: Display, Clothing, Enter, Automotive, Energy

① Display (expanding deficit, rate of change of operating profit of 1W in 24 years)
* LG Display (expanding deficit) forecasts 1Q24 operating loss due to sluggish smartphone sales from North American customers, inventory adjustment of parts and increased burden of fixed costs

② Clothing (-1.6%)
* Fila Holdings (-9.1%) widened its operating deficit in 4Q23. Both South Korea and the U.S. offered deficit guidance for 24 years
*Hwaseung Enterprise's profit forecast (-4.4%) ↓ Expects to see lower earnings and lower earnings as it enters the final phase of inventory adjustment for customers
*Forever Trading (-4.2%) continues to adjust customers' inventory and sluggish SCOTT performance

③ Enter (-0.5%)
*JYP Ent. (-5.5%) predicts sales due to album sales and adjustment of rookie debut timing ↓

* Automotive (-0.4%, Kia, Hyundai Motor, Hyundai Wia), Energy (-0.3%, Hanwha Solution) Downgraded

■ ■ Weekly Commentary
Japan and the U.S. continued to raise their profit forecasts, while Taiwan and South Korea also shifted their profits. On the other hand, Hong Kong, China and Europe continued to suffer from sluggish profit momentum. Overall, the earnings cut continued due to China's influence (12MF EPS 1-month change rate of -0.7%). By industry, IT, utilities, and industrial goods were positive, while materials, energy, healthcare, and essential consumer goods were sluggish.

Korean companies' combined operating profit forecasts for 1Q24 and 2024 were raised +0.3% and +0.1% over the week. The upward revision was made mainly in the semiconductor industry, which has a large profit contribution. Both Samsung Electronics and SK Hynix have good profit forecasts.

In addition, profit forecasts for games, secondary batteries, chemicals, and IT hardware industries were raised for a week. Profit momentum of WeMade, Afreeca TV, LG Energy Solution, Lotte Chemical, DL, and Samsung Electro-Mechanics showed good trends.

On the other hand, the profit forecasts for displays, clothing, entertainment, automobiles, and energy industries were lowered. LG Display's deficit continued to widen, and Fila Holdings, Hwaseung Enterprise, and Yeongwon Trading were largely affected by poor performance.

Hyundai Mipo Dockyard, Wonik IPS, Lotte Chemical, Eugene Tech, WeMade, SK Hynix, DL, Kakao Games, T'way Air, Chong Kun Dang, IS Dongseo, LG Household & Health Care, Paradise, T&L, Hanwha Ocean, Afreeca TV, Dongsung Hwa Intec, S-Oil, LS ELECTRIC, CJ, etc. are among the companies that have increased their operating profit forecast for 2024 (excluding consensus).

After the FOMC, the market's interest is expected to shift to its first-quarter performance. As I emphasized last time, it is a time when the sensitivity between profits and stock prices increases. The performance of domestic companies does not show high performance growth in the first quarter except for semiconductors. The semiconductor industry is likely to continue. In addition, the industries with good profit momentum are cosmetics and electric devices.

▶ Earnings Revision (Week 4 of March)
https://han.gl/s6Le8

* Mirae Asset Securities Strategy/Quant Channel
t.me/eqmirae

I hope you have a comfortable weekend, thank you.