Which Stock Had Its Target Price Raised Despite the Bear Market?

[Asia Economy Reporter Kwon Jaehee] Amid the recent downturn in the market, while target prices for individual stocks have been continuously lowered, the target prices for semiconductor materials, parts, and equipment (SoBuJang) stocks have been raised, drawing attention.

According to the securities industry on the 26th, Daeduck Electronics, considered a representative semiconductor SoBuJang stock, saw its average target price by securities firms rise from 29,400 KRW at the end of last year to 42,111 KRW this month, an increase of about 43%. Similarly, L&F, a secondary battery materials company, saw its average target price by securities firms increase from 278,571 KRW at the end of last year to 371,875 KRW this month, up about 33.5%.

Park Kangho, a researcher at Daishin Securities, stated, "Daeduck Electronics' consolidated operating profit for Q2 this year is 60.2 billion KRW, which is a 353% increase compared to the same period last year and exceeds the previous estimate of 58.1 billion KRW." He added, "The valuation has been upgraded as the portfolio shifted to focus on semiconductor packaging, and especially, investment in semiconductor package substrates (FC BGA), which have high growth potential and high entry barriers amid supply shortages, will act as an opportunity for Daeduck Electronics' growth expansion."

Lee Changmin, a researcher at KB Securities, commented on L&F, "L&F's operating profit for Q2 was 69.6 billion KRW, a 1,111% increase compared to the same period last year." He added, "While sales to the front-end customer Tesla continue to perform well, the supply situation for high-nickel cathode materials remains tight, and a high level of operating rate is expected to be maintained following Q1."

The securities industry advises that in a declining market, portfolios should be restructured to focus on performance-driven stocks. Currently, the KOSPI's one-year forward price-to-earnings ratio (PER) and price-to-book ratio (PBR) are 9.1 times and 0.9 times respectively, which are still higher than 8.1 times and 0.61 times in 2020. The ratio of credit loan balance to market capitalization of KOSPI is also 1.0% (22 trillion KRW), higher than the 0.7% (6.8 trillion KRW) bottom in 2020. An analysis by Hana Financial Investment of the three-month returns before the KOSPI bottomed in March 2020 showed that investment performance was better when investing in sectors and stocks expected to improve earnings.

Lee Kyungsoo, a researcher at Hana Financial Investment, explained, "This is because interest in performance stocks intensifies to hedge against market uncertainty."