SK Hynix Expected to Maintain 2nd Place in Net Profit This Year
Naver Business Revaluation and LG Chem Operating Profit Record Anticipated
[Asia Economy Reporter Lee Seon-ae] The fierce competition for the second-largest market capitalization stock last year is expected to continue this year as well. If net profit is the criterion, SK Hynix is likely to maintain its second place this year, so no change in ranking is anticipated. However, the industrial changes that companies vying for the second-largest market capitalization may bring could positively influence index rises, making this a key point to watch.
According to the Korea Exchange on the 17th, based on the previous day's closing prices, the top market capitalization stocks were Samsung Electronics (KRW 506.835 trillion), SK Hynix (KRW 96.46 trillion), LG Chem (KRW 69.039 trillion), Naver (KRW 64.72 trillion), Samsung Electronics Preferred (KRW 62.704 trillion), Samsung SDI (KRW 55.218 trillion), Hyundai Motor (KRW 52.883 trillion), Samsung Biologics (KRW 52.667 trillion), Kakao (KRW 45.576 trillion), and Celltrion (KRW 43.874 trillion), in that order.
As of the first trading day of the year, January 4, the rankings were Samsung Electronics (KRW 495.492 trillion), SK Hynix (KRW 91.728 trillion), LG Chem (KRW 62.757 trillion), Samsung Electronics Preferred (KRW 61.223 trillion), Samsung Biologics (KRW 54.851 trillion), Naver (KRW 48.129 trillion), Celltrion (KRW 46.912 trillion), Samsung SDI (KRW 46.141 trillion), Hyundai Motor (KRW 44.336 trillion), and Kakao (KRW 35.021 trillion). The notable change was Naver rising to 4th place, with its market capitalization increasing by approximately KRW 16.591 trillion.
Naver, which had risen to 3rd place in market capitalization last year, fell to 6th place after being surpassed by LG Chem, Samsung Biologics, and Hyundai Motor. However, it climbed to 5th place on the 22nd of last month and successfully reclaimed 4th place on the 15th. On the 16th, Naver closed at KRW 394,000, up 2.2% (KRW 8,500) from the previous trading day, and during the session, it surged to KRW 405,000, breaking the KRW 400,000 mark for the first time ever, showing strong momentum.
Naver's business growth potential is expected to be re-evaluated. Securities firms have analyzed that Naver Shopping's value could reach up to KRW 18 trillion due to the re-evaluation triggered by Coupang's IPO plans. Park Ji-won, a researcher at Kyobo Securities, stated, "Although the business strategies differ from Coupang, Naver Shopping is expected to be re-evaluated for its competitive advantages such as rapid transaction growth, high seller and user engagement, and value chain strengthening through partnerships." Kim Hyun-yong, a researcher at Hyundai Motor Securities, also explained, "Naver Shopping is one of the top two players competing with Coupang in terms of scale. It has a solid ecosystem with strengths such as high point accumulation rates, strengthened linkage with in-house content like webtoons and music, and seller loans."
LG Chem also boasts solid business growth potential. LG Chem's operating profit is expected to hit record highs by 2022. The operating profit forecasts for LG Chem are KRW 3.6 trillion in 2021 and KRW 4 trillion in 2022. The average target price for LG Chem, which closed at KRW 978,000 on the 16th, is KRW 1,237,000 according to 17 securities firms.
Nevertheless, the general consensus in the securities industry is that SK Hynix will maintain its position as the second-largest market capitalization stock this year. The intense competition for second place in August and September last year ended with SK Hynix holding its ground. Although LG Chem's market capitalization rose to 101% (including preferred shares), Samsung Biologics to 101%, and Naver to 99% relative to SK Hynix last year, they did not surpass SK Hynix in net profit and thus remained in 3rd to 5th place. The criterion for claiming the second spot is surpassing the net profit of the current second-ranked company.
Lee Jae-sun, a researcher at Hana Financial Investment, analyzed, "Looking at the commonality among new second-largest market capitalization companies such as POSCO in 2007, Hyundai Motor in 2011, and SK Hynix in 2016, they all surpassed the net profit of the previous second-ranked company. The reason no company surpassed SK Hynix last year is that, except for Samsung Electronics, no top market capitalization company exceeded SK Hynix's net profit." He added, "If the same criterion applies this year, there is no company that can surpass SK Hynix."
SK Hynix's market capitalization is around KRW 100 trillion, the highest ever for a single company ranked second in market capitalization, and its net profit forecast for this year is an impressive KRW 7.1 trillion.
Meanwhile, although Naver reclaimed 4th place, the solid earnings outlook of its challengers makes the competition for 4th to 6th places another point to watch. Samsung Biologics and Celltrion have the highest operating profit margins among the top market capitalization companies. Their operating profit margin forecasts for this year are 42% for Celltrion and 29% for Samsung Biologics. Hyundai Motor is the only domestic company, aside from Samsung Electronics, expected to record sales in the KRW 100 trillion range. Its sales forecast for this year is KRW 115 trillion, making it the second-largest company by sales.
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