From August, Increasing Stakes in Tesna, Korea Zinc, Hyosung, and Wemade
Optimistic Industry Conditions and Earnings Expectations...Reducing Shares in Steel, Apparel, and Pharmaceutical Sectors
[Asia Economy Reporter Park Ji-hwan] The National Pension Service (NPS) has been focusing on buying shares of Hyosung and Korea Zinc, which are expected to continue a strong performance rally in semiconductor and gaming stocks in August and September, while significantly reducing its holdings in the steel, apparel, and pharmaceutical sectors.
According to financial information provider FnGuide on the 15th, among the stocks in which the NPS held more than 5% stake from August 1 to the previous day, the shares increased in four companies: Tesna (8.53%→10.05%), Korea Zinc (8.87%→10.01%), Hyosung (10.73%→10.91%), and Wemade (7.45%→7.53%). All of these companies are expected to have favorable business conditions, with solid earnings anticipated not only in the second half of this year but also next year.
On August 24, the NPS purchased 1,715,807 shares of semiconductor testing company Tesna, raising its holding ratio above 10%. Tesna is a specialized system semiconductor testing company for its major client Samsung Electronics. Its second-quarter earnings declined compared to the first quarter due to reduced operating rates caused by semiconductor production disruptions at its major client. However, from the third quarter, a turnaround in performance is expected due to increased operating rates and the start of operation of new equipment invested in the first half of the year, with forecasts of steep growth continuing into next year. Seong-yeon Seo, a researcher at Heungkuk Securities, said, "Since fixed costs account for 71% of costs, profit improvement is expected to be significant with the increase in client operating rates." He added, "The equipment import and operation related to the additional 82 billion KRW investment made last month will be fully underway next year, so earnings growth is expected to continue."
Hyosung's overwhelming earnings growth across the entire group, including its subsidiaries, is cited as the reason for the NPS's choice. The three major material subsidiaries of the Hyosung Group?Hyosung TNC, Hyosung Advanced Materials, and Hyosung Chemical?all recorded 'earnings surprises' in the second quarter, leading the holding company Hyosung to achieve its highest-ever quarterly earnings. The second half of the year is also expected to continue the record-breaking earnings streak due to the subsidiaries' performance growth. Hyosung's annual operating profit this year is projected to reach 679.5 billion KRW, a 390% increase compared to the previous year.
Korea Zinc is evaluated to have secured future growth potential by entering the secondary battery materials business recently, alongside the stable upward trend in earnings from its existing core zinc smelting business. Wemade has recently gained a relative advantage compared to competitors due to the Chinese government's restrictions on minors' gaming time. Since most paying users of its main revenue source, the Mir IP game, are adults, it is analyzed that there will be almost no impact on earnings.
On the other hand, the NPS sold more than 50,000 shares of POSCO, whose earnings outlook is bright, reducing its holding ratio below 10%. Considering the stock price has risen 34.7% this year, this is presumed to be a profit-taking move. The NPS tends to reduce the number of shares held when a particular stock price rises because it must maintain holdings according to its benchmark. Additionally, the NPS reduced its holdings below 10% in apparel companies Hanse Industrial and Hwasung Enterprise, where business recovery has been delayed due to the spread of the Delta variant. Pharmaceutical and bio companies HanAll Biopharma (9.40%→8.39%) and Dong-A ST (10.34%→9.97%) also saw a decrease in NPS holdings.
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