Estimated Operating Profit of Listed Companies
Comparison Before and After Re-spread
243 Companies: From 37.1874 Trillion KRW on the 9th
to 37.0286 Trillion KRW on the 24th, a 0.43% Decrease
New COVID-19 Cases Continue in Triple Digits
Consensus on Future Earnings Likely to Decline Further
[Asia Economy Reporter Oh Ju-yeon] Until last month, as the novel coronavirus infection (COVID-19) seemed to subside, the domestic stock market focused more on companies' fundamentals (earnings) than on 'COVID risk,' pushing the KOSPI above 2400. Many companies' second-quarter earnings also showed better-than-expected 'earnings surprises.' Accordingly, expectations for third-quarter earnings improvements rose, but the situation changed as COVID-19 resurged. Economic forecasts, which were made assuming COVID-19 would peak in the second quarter, are expected to be revised downward one after another, putting third-quarter earnings of companies on alert.
On the 25th, financial information firm FnGuide compared and analyzed operating profit estimates of domestic listed companies from the previous day. The third-quarter operating profit estimates for 243 companies, each estimated by three or more securities firms, totaled 37.0286 trillion KRW. This represents a 0.43% decrease in earnings consensus over two weeks.
As of the 9th, when the number of new COVID-19 cases was 30, the third-quarter operating profit estimates for the same 243 listed companies under the same conditions were 37.1874 trillion KRW. The number of new COVID-19 cases increased thirteenfold to 397 on the 22nd compared to the 9th, directly impacting corporate earnings. Compared to the third quarter of last year (31.8967 trillion KRW), this is a 16.01% increase, but as the COVID-19 spread continues, the third-quarter earnings consensus is likely to decline further.
Media, Textile & Apparel, Department Stores, etc.
Face-to-face sectors show noticeable declines
Earnings consensus varies among major companies. Among the top market capitalization stocks, Samsung Electronics and LG Household & Health Care showed no change over two weeks, while leading stocks that drove the market up, such as NAVER, LG Chem, and Celltrion, slightly increased. Samsung Electronics' third-quarter operating profit estimate is projected at 9.0273 trillion KRW, a 16.1% increase year-on-year, and NAVER, LG Chem, and Celltrion are expected to increase by 35.5%, 53.6%, and 84.5%, respectively, compared to the same period last year. SK Hynix is expected to increase by 224.7% year-on-year, but due to recent issues such as DRAM price declines, its consensus decreased by 5.6% compared to the 9th.
Compared to the 9th, before the COVID-19 resurgence issue, the sectors with noticeably decreased third-quarter earnings consensus are representative face-to-face (contact) sectors such as media, textile & apparel, personal care products, and department stores.
Jcontentree's third-quarter operating profit consensus is 3 billion KRW, down 80.1% year-on-year and 77.7% compared to the 9th. Companies classified under textile & apparel, such as Shinsegae International, Hwaseung Enterprise, and Hansae Co., also saw double-digit decreases in operating profit consensus compared to the 9th. They are expected to decrease by 49.6%, 52.5%, and 47.7% year-on-year, respectively, and compared to the 9th, by 42.1%, 36.6%, and 12.9%, respectively. Additionally, retailers classified under personal care products, such as Lotte Shopping, Aekyung Industrial, and Hyundai Department Store, saw their consensus decrease by 13-18% compared to the 9th, reflecting concerns over the COVID-19 resurgence.
The securities industry is focusing on whether social distancing will be raised to level 3. An Young-jin, a researcher at SK Securities, said, "Both the government and the market are caught in a dilemma between COVID-19 prevention and economic vitality." He added, "The increase in triple-digit confirmed cases this week is entering its second week, and around the 27th, the 14th day, will be a turning point for whether social distancing will be raised to level 3." He also emphasized the downward revision of economic growth rates. SK Securities has lowered the domestic economic growth rate from the previous -0.1% to -0.9%. Researcher An said, "We feel the need to further revise downward due to the unexpected COVID-19 resurgence."
Lee Kyung-soo, a researcher at Hana Financial Investment, said, "Compared to other emerging markets, Korea is experiencing slightly stronger net foreign selling due to concerns over the COVID-19 resurgence." He added, "Considering that there has never been a case where only the domestic stock market panicked due to Korea's own issues, it is necessary to focus on whether COVID-19 is under control."
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