'Hidden Gem Stocks' That Rise in Value Even in a Bear Market

Meritz Securities "Kangwon Land 30,000→34,000 KRW, Domestic Leisure Rapid Recovery"
Hana Financial Investment "Hyundai Department Store 86,000→98,000 KRW, Increasing Department Store Stock Weight"
IBK Securities "Hotel Shilla 110,000→120,000 KRW, Strengthening Turnaround Momentum"

[Asia Economy Reporter Song Hwajeong] Recently, as the stock market continues to weaken, target prices for stocks have also been adjusted downward. On the other hand, some stocks related to reopening (resumption of economic activities) and insurance stocks have seen their target prices revised upward, drawing attention.

According to financial information provider FnGuide on the 13th, stocks with recently raised target prices include a large number of reopening-related stocks such as Kangwon Land, Hotel Shilla, Youngone Corporation, Hanse Industrial, Hyundai Department Store, Korean Air, F&F, and Cosmax.

Meritz Securities raised Kangwon Land's target price from 30,000 won to 34,000 won. Researcher Lee Hyojin of Meritz Securities explained, "The previous fair price used the average price-earnings ratio (PER) of 18 times from the past (2010-2017, calculated in 2018), but the new fair price applies the average PER of 20 times from 2017 to 2019 to the expected 2023 earnings per share (EPS)." He added, "As the total sales volume system began to be observed, Kangwon Land's nature changed to a defensive stock, raising the valuation band." Meritz Securities estimates Kangwon Land's third-quarter sales to increase by 215.9% year-on-year to 242 billion won, with operating profit turning positive to 24.9 billion won. The researcher said, "With rising vaccination rates and the easing of social distancing measures expected in the future, the domestic leisure sector is anticipated to recover the fastest. Demand is abundant, and the reopening of operations is linked to performance recovery, making it the safest choice within the leisure industry."

Hana Financial Investment raised Hyundai Department Store's target price from 86,000 won to 98,000 won and upgraded its investment opinion from 'neutral' to 'buy.' Researcher Park Jongdae of Hana Financial Investment said, "We raised both the target price and investment opinion due to upward revisions in earnings estimates and valuation. Considering future earnings and the 'With Corona' era, increasing weight in the department store sector is valid, and Hyundai Department Store is the only major analyzed company in the third quarter with upward earnings revisions."

IBK Investment & Securities raised Hotel Shilla's target price from 110,000 won to 120,000 won. Researcher Ahn Jiyoung of IBK Investment & Securities said, "The company is showing operational superiority compared to the market in the second half, easing valuation burdens, which is reflected in the raised target price. Ahead of the 'With Corona' era next year, turnaround momentum is expected to strengthen."

Insurance stocks also saw target price increases. Hana Financial Investment simultaneously raised target prices for Hanwha General Insurance, Meritz Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and Samsung Fire & Marine Insurance. KB Securities also raised target prices for DB Insurance, Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, Tongyang Life Insurance, and Hanwha Life Insurance. Researcher Kang Seunggeon of KB Securities explained, "Non-life insurers are showing better-than-expected results due to continued favorable automobile insurance loss ratios, while life insurers face limitations from negative new contract growth but maintain profits through improvements in non-interest income. The rise in long-term bond yields is turning uncertainties about the new International Financial Reporting Standard (IFRS17) into optimism and will reduce discount factors for the insurance sector."

It is also noteworthy that third-quarter earnings forecasts are being adjusted by industry. Compared to a month ago, industries with upward revisions in third-quarter operating profit forecasts include non-metallic minerals, steel and metals, electrical and electronics, distribution, transportation and warehousing, banking, securities, and insurance. Given the stock market's volatility due to domestic and international factors, third-quarter earnings are crucial, so close attention should be paid to earnings adjustments by industry and individual stocks.