Semiconductor Stocks Stretch Out with Earnings Wings

Operating Profit of 11 Related Companies in Q2
Expected to Increase by 8.51% Compared to Last Year
Semiconductor Sector Rose 1.9% Last Week

[Asia Economy Reporter Oh Ju-yeon] Attention is focused on whether the stock prices will regain momentum as the earnings forecasts of domestic semiconductor companies have been revised upward.

According to financial information firm FnGuide on the 29th, as of the 26th, the operating profit forecast for the second quarter of this year for Samsung Electronics and 11 semiconductor and related equipment companies, as predicted by three or more securities firms, is 8.0137 trillion KRW, an 8.51% increase compared to 7.3854 trillion KRW in the second quarter of last year.

SK Hynix is expected to increase by 161% year-on-year to 1.6649 trillion KRW, and KOSDAQ-listed companies Wonik QnC (14.4 billion KRW) and Tes (13.6 billion KRW) are expected to grow by more than 200%, while Techwing and Wonik Materials are estimated to increase operating profit by 12.2% and 9.6%, respectively.

Samsung Electronics was forecasted to decrease by 6.8% from 6.5971 trillion KRW in the second quarter of last year to around 6.1494 trillion KRW, but over the weekend, several places revised Samsung Electronics' earnings upward, with some raising the estimate to the mid-6 trillion KRW range. Hana Financial Investment raised its estimate by 700 billion KRW from the previous 5.7 trillion KRW to 6.4 trillion KRW. Since the COVID-19 pandemic, smartphone sales have been rapidly recovering in June, raising the second-quarter smartphone sales forecast from 50 million units to 55 million units. Additionally, monitor sales remain steady due to remote work, and air conditioners have entered their peak sales season in home appliances.

The expectations from this earnings increase are also reflected in stock prices. Last week, while the KOSPI rose by -0.3%, the semiconductor sector increased by 1.9%. In particular, Samsung Electronics' stock price, which hovered in the 40,000 KRW range throughout May, broke through the 50,000 KRW range this month and has maintained a solid trend despite the decline in the KOSPI index. On the day when the KOSPI fell 1.69% intraday due to concerns over the resurgence of COVID-19 and delayed economic recovery, the semiconductor sector initially dropped 1.51% but reduced the loss significantly to -0.23%.

Kim Kyung-min, a researcher at Hana Financial Investment, said, "The upward revision of Samsung Electronics' earnings estimates is an important event in terms of stock prices," adding, "Quarterly operating profits bottoming out in the first and second quarters is a signal that promotes stock price increases." He emphasized that from 2010 to the present, the 12-month forward operating profit consensus direction and stock price direction have shown a correlation of 0.8 and have generally aligned.

There are expectations that the earnings improvement trend will be even more pronounced in the third quarter. The operating profit forecast for the third quarter of this year for Samsung Electronics and 11 semiconductor and related equipment companies is 11.59 trillion KRW, a 38.5% increase compared to 8.3667 trillion KRW in the third quarter of last year. Samsung Electronics is expected to increase by 22.2% year-on-year to 9.5 trillion KRW (7.7779 trillion KRW in the same period last year), and SK Hynix is estimated to grow by 293.4% to 1.859 trillion KRW (472.6 billion KRW in the same period last year). KOSDAQ-listed companies Wonik IPS and Tes are expected to turn from losses last year to profits, and Techwing and Silicon Works are expected to show double-digit growth compared to the same period last year.

Lee Soo-bin, a researcher at Daishin Securities, said, "Considering that stock prices reflect information six months in advance, the current stock prices of Samsung Electronics and SK Hynix are only about 1.3 times and 1.1 times their 12-month forward book value per share (BPS), respectively, so their valuation attractiveness is high."