Securities Market: 6 out of 10 Listed Companies Lower Target Prices

Defense and Bio Stocks Target Price Upward Revision

In the fourth quarter, the domestic stock market showed weakness due to concerns over the slowdown in the domestic economy and tariff uncertainties related to the election of Donald Trump as U.S. President. Among listed companies, 6 out of 10 had their target prices revised downward. Notably, target price reductions were prominent in semiconductor and cosmetics-related stocks.

According to financial information provider FnGuide on the 25th, among 281 stocks with target prices set by three or more securities firms as of the 20th, 179 stocks had their target prices lowered compared to the end of September. This accounts for 63.7% of the total.

On the other hand, only 100 stocks (35.6%) saw their target prices raised. The remaining two stocks maintained the same level.

This is interpreted as the overall market weakness caused by concerns over a domestic economic slowdown and the anticipation of increased trade pressure ahead of President-elect Trump's inauguration.

The stock with the largest target price decline was Isu Petasys. The average target price dropped 50.1%, from 67,250 KRW at the end of September to 33,571 KRW this month. Tae-woo Kwon, a researcher at KB Securities, stated, "Despite increased demand for high-value-added networks, fourth-quarter operating profit is expected to fall short of market expectations due to some one-time costs related to performance bonuses. Additionally, one-time costs incurred during the acquisition of JO and earnings dilution from a capital increase have raised investment risks."

Cosmetics company C&CI International saw its target price fall 36.0%, from 135,000 KRW to 86,429 KRW, marking the second-largest downward adjustment. This was influenced by poor third-quarter performance due to delivery delays to North American clients and decreased sales in its Chinese subsidiary, along with concerns that fourth-quarter sales growth would be limited.

The third was semiconductor printed circuit board manufacturer Simtek, whose target price dropped 35.6%, from 32,000 KRW to 20,603 KRW, due to a forecasted fourth-quarter loss amid weak demand for legacy (general-purpose) memory.

Following were Wontec (-35.0%), Wonik QnC (-33.0%), Doosan Testna (-32.8%), and Clio (-32.4%).

Among the top 10 stocks with the largest target price declines, four were semiconductor-related and three were cosmetics-related companies. The semiconductor sector appears to reflect concerns over profitability deterioration due to weak demand for general-purpose memory. The cosmetics sector is facing worries about a consumption slump in China and a peak-out in U.S. cosmetics exports.

The stock with the largest average target price increase in the fourth quarter was entertainment company DearU. Its target price rose 37.5%, from 33,000 KRW at the end of September to 45,375 KRW this month. Expectations for expanded entry into China through a partnership with Tencent Music Entertainment influenced this increase. Do-young Ahn, a researcher at Korea Investment & Securities, said, "As services in China become visible, expectations for additional growth will be reflected in the stock price."

The second was Yuhan Corporation, with a 34.4% increase from 127,273 KRW at the end of September to 171,111 KRW this month. This was due to strong third-quarter results following the U.S. launch of the lung cancer treatment drug 'Layzotinib' (product name Rexlaza). The launch of Rexlaza in regions outside the U.S. is also expected to contribute to further performance improvements.

Third and fourth were defense stocks Hanwha Aerospace and Hyundai Rotem, respectively. Expectations for fourth-quarter earnings grew amid continued new orders. Hanwha Aerospace's target price rose 32%, from 350,188 KRW to 461,500 KRW, and Hyundai Rotem's increased 25%, from 63,933 KRW to 79,781 KRW.

Following were Hugel (21.5%), Doosan (20.2%), JB Financial Group (18.6%), and Hyosung Heavy Industries (18.5%).

Experts expect downward pressure on the domestic economy to continue next year amid ongoing export sluggishness. If this continues, the downward trend in target prices for domestic listed companies may persist. Kyu-yeon Jeon, a researcher at Hana Securities, said, "Considering the global economic slowdown and adjustments in major raw material prices such as crude oil, export sluggishness in cyclical industries is likely to continue for some time. With increased U.S. trade pressure, semiconductor exports to China are expected to slow, and demands for increased imports from the U.S. are likely to grow after the launch of Trump's second term."