Big chip, IT, battery stocks picked as Kospi buys in earnings season

2021.04.27 14:34:17 | 2021.04.27 14:34:46

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Korean big chip, battery and internet stocks may gain traction to revisit their peaks upon the momentum of earnings release.

According to financial market tracker FnGuide on Monday, Kospi’s 12-month forward price-to-earnings ratio (PER) reached 13.7 times as of last Friday based on the closing price of 3,186.1, falling from 14.2 times in February and 13.8 times in March.

Recent figures show that that earnings and market consensus of Kospi-listed companies improved.

According to Daishin Securities, the combined first quarter operating profit of Kospi companies disclosed as of April 23 exceeded consensus by 8.3 percent. The operating profit consensus for the full year also increased 4 percent from the previous month.

Lee Kyung-min, a researcher at Daishin Securities, said that the upward adjustment in earnings projection of Kospi companies eases Kospi valuation burden and enhances relative attraction.

Lee said the benchmark stock market will be driven by earnings performance, shedding light on large-cap shares in chip, secondary battery, and automobile sectors.

According to Daishin Securities, the market capitalization of top two chip shares accounted for 34.5 percent of total Kospi operating profit in the first quarter ended March. They are expected to gain larger presence with their operating profit share surging to 43.1 percent in the second quarter, 50.2 percent in the third quarter, and 56.3 percent in the fourth quarter.

Shares in automobile, secondary battery, and internet sectors are also expected to command bigger weight in Kospi operating income in the second quarter from the first quarter.

Lee from Daishin Securities said that top market cap shares are expected to be main players leading earnings-driven Kospi market. The researcher advises buy in chip, automobile, secondary battery, and internet shares.

Large-cap shares also boast higher valuation with stock prices falling from this year’s highest point.

Shares of Samsung Electronics, for example, fell 8.2 percent from its annual high of 91,000 won on January 11 to 83,500 won on Monday. SK Hynix also saw price fall 11.4 percent from its annual high of 148,500 won in February. LG Chem shares also plunged 14.1 percent from highest 1.28 million won on February 5.

Choi Seok-won, head of research center at SK Securities, said that focus is being shifted to large-cap shares as their earnings are being adjusted upwards amid recovering global demand for Korean goods.

By Shin Yoo-kyung and Lee Eun-joo

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