[South Korea] Semiconductor earnings hike broadens

[South Korea] Semiconductor earnings hike broadens

■ Global earnings trends (MSCI, 12MF EPS)

* Global EPS Change Rate (1 M)
: : -0.1%(DM: +0.0% > EM: -0.4%)

* Consensus Upward Countries (1M)
: Japan (+1.2%), Korea (+0.6%), Australia (+0.5%), and Taiwan (+0.4%)

* Consensus Downward Countries (1M)
: Hong Kong (-5.6%), China (-0.6%), and Europe (-0.3%)

* Consensus Upward Industry (1M, DM+EM)
: Utilities (+0.7%), IT (+0.5%), Industrial Goods (+0.2%)

* Consensus Downward Industry (1M, DM+EM)
: Material (-1.8%), Essential Consumer (-0.5%), Energy (-0.5%)

■ Domestic profit trends and valuation

* 1Q24 Change in operating profit consensus
: : +1.0%(1W), +1.8%(1M)

* Change in 24-year operating profit consensus
: : +0.6%(1W), +0.7%(1M)

* * KOSPI 12M Fwd. PER, 12M Trail. PBR
: 11.0x, 1.00x

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

▶Consensus Upward Industries: Semiconductors, Automobiles, Banks

① Semiconductors (+3.0%; 24-year operating profit rate of 1W change)
* Samsung Electronics (+2.5%) is expected to turn into a surplus in the semiconductor sector in the first quarter due to increased memory prices.↑
* SK Hynix (+4.9%) expects positive first-quarter earnings like Samsung Electronics Co. continues to raise its profit forecast due to increased share of HBM sales and mix
* Hanmi Semiconductor (+4.7%) expects the company's equipment demand to continue to increase due to increased investment in its customer's HBM
* RINO Industries (+1.8%) expects profitability improvement from increased sales of high value-added products

② Automotive (+0.4%)
* Hyundai Motor (+0.8%) expects good first-quarter earnings on higher exchange rates and strong sales; outlook for continued improvement in cash flow
* HL Mando (+0.5%) expects to normalize profitability due to increased sales and cost improvements in the Indian market

③ Bank (+0.5%)
* Hana Financial Group (+0.5%) and KB Financial (+0.3%) change their profit forecasts due to the launch of new coverage. Emphasize low PBR attractiveness and high shareholder return capacity

▶Consensus Downward Industry: Landlords, secondary batteries/IT appliances, shipbuilding, steel, cosmetics/clothing

① Holding (-0.9%, 24-year operating profit change rate of 1W)
* Hanwha (-5.9%)'s Q1 earnings are expected to show a large profit margin due to higher construction costs and sluggish Hanwha Solutions

② Secondary Battery/IT Home Appliance (-0.4%)
* L&F (expanding deficit) expects short-term earnings to remain sluggish due to sluggish shipments and falling metal prices
* LG Electronics (-0.7%) forecast profit due to increased marketing costs due to intensifying competition↓

③ Joseon (-0.5%)
* Hanwha Ocean (-5.0%) is expected to see a significant first-half earnings improvement due to a chargeback. Expect a turnaround in second-half earnings
* HD Hyundai Heavy Industries (-2.9%) forecast profit due to fixed costs in the maritime sector↓

* Downgraded Steel (-0.2%, Daehan Steel), Cosmetics/Clothing (-0.2%, Fila Holdings, AmorePacific)

■ ■ Weekly Commentary
Japan and South Korea's profit momentum was positive, while Hong Kong, China and Europe were sluggish. The slowdown in the U.S. earnings upward revision slowed the profit momentum of advanced countries. Emerging countries continued to cut their earnings. By industry, utilities, IT, and industrial goods had good profit momentum, while materials, essential consumer goods, and energy were sluggish.

Korean companies' combined operating profit forecasts for 1Q24 and 2024 were raised +1.0% and +0.6% over the week. With the publication of preview reports for the first quarter, semiconductors are speeding up their earnings upgrades. Samsung Electronics, SK Hynix, and Hanmi Semiconductor are representative.

Excluding semiconductors, the performance consensus of domestic companies has stagnated. Display, holding, media, clothing, secondary battery, energy and steel industries have seen big downward revisions in the past month.

Earnings and stock price concentrations are intensifying. This is because there are limited businesses or companies with good performance. Excessive concentration can be burdensome, but there are not many alternatives. The profit momentum style is advantageous for the April earnings season.

Stock market valuations are higher (12 MF PER: 11.0x, 12 MT PBR: 1.0x). If interest rates are not lowered, the burden of rising stock prices could increase in the meantime. It is also worth noting that oil prices and exchange rate volatility have increased recently.

For the past week, J&T, Korean Li, SK Hynix, Doosan, Hanmi Semiconductor, Samsung Electronics, Lee Know Industrial, HD Hyundai Electric, Krafton, Aekyung Industrial, Hyundai Motor, Cosmeca Korea, and LS ELECTRIC have increased their operating profit forecast for 2024 (excluding consensus addition/deletion).

▶ Earnings Revision (Week 1 of April)
https://han.gl/2Jgrx

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

I hope you have a comfortable weekend, thank you.