Major publicly trading Korean names will likely contribute to a 30 percent gain in cumulative operating profit this year, according to estimations by brokerage houses predicting a reversal in the chip cycle after a bust year in 2019.
Consensus compiled by market research firm FnGuide put consolidated operating profit of 282 companies listed on the country’s main Kospi and secondary Kosdaq at 162.3 trillion won ($137.2 billion), up 30.2 percent from the previous year.
The 282 companies studied were those with projections from more than three brokerage houses. Although the number is small against the more than 2,000 firms publicly trading on the local bourse, they make up the bulk of the combined operating profit and market cap.
An anticipated rebound in the global semiconductor industry is the primary driver of the positive outlook.
Market analysts project a surge in demand for memory chips that power data servers amid the rapid rollout of the 5G wireless network worldwide and explosive growth of cloud and online streaming services. The chip industry last year suffered a bruising bust as memory chip prices plummeted due to a supply glut in the wake of a two-year boom.
Analysts forecast earnings of 18 Korean chip and mobile phone companies this year to soar 55 percent to 31.1 trillion won.
The earnings improvement is expected to stand, even when excluding the chipmaking giants Samsung Electronics and SK Hynix, which are also Korea’s top two market-cap stocks.
The estimated operating profit of 280 companies, minus the two heavyweights, is 115 trillion won in 2020, up 22.2 percent from the previous year.
The 13 auto and auto part makers studied are expected to see their combined earnings rise 22.1 percent to 12.4 trillion won. They had also reported a 35 percent profit jump in 2018.
IT, internet services, game and software companies are also poised for a strong year. Analysts estimate the operating profit of the 20 companies in the sector to be 4.98 trillion won, up 45.7 percent on year.
“Korea-listed firms have rarely reported a fall in profit for three straight fiscal years except during the 1997 Asian financial crisis and other extreme situations,” said Kim Hak-kyun, research center head at Shinyoung Securities.
“While semiconductors will lead the pack, other industries are also expected to see a cyclical rebound from the poor figures of 2019,” he said.
He added that leading economic indicators appear to have hit bottom in the third quarter and projected the economy to pick up from April-May.
Out of the 282 companies studied, 241 are expected to see their operating profit rise this year, with 12 to swing back to profit.
Some critics warn the economic recovery could be stalled if the coronavirus outbreak drags on.
By Woo Je-yoon and Kim Hyo-jin
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]