Earnings Shock Stocks Fail to Recover Despite Market Rebound

KOSPI Rebounds in Just One Day
Earnings Shock Stocks Underperform in Q3
Dalba Global Plunges 20%
Focus Needed on Sectors With Profit Momentum

The stock market rebounded in just one day, but some stocks remained weak and failed to recover. These were the so-called "earnings shock" stocks that reported results in the third quarter of this year that fell short of market expectations. As the stock market remains susceptible to corrections due to price pressures, investors are advised to pay closer attention to corporate earnings.

According to the Korea Exchange on November 7, Dalba Global closed at 127,900 won, plunging 20.51% from the previous session. The stock, which had been in the 160,000 won range, dropped to the 120,000 won range in just one day after two consecutive days of decline.

Despite the market rebound, the sharp decline in Dalba Global was attributed to an earnings shock. On November 5, Dalba Global announced in a regulatory filing that its consolidated operating profit for the third quarter was provisionally tallied at 16.7 billion won, up 18.6% year-on-year. Revenue for the same period rose 59.3% to 117.3 billion won. However, these figures fell short of market expectations. According to financial information provider FnGuide, the consensus among securities firms for Dalba Global's third-quarter results was 122.2 billion won in revenue and 24.1 billion won in operating profit.

Son Minyoung, a researcher at KB Securities, analyzed, "The factors behind the lower-than-expected results were a slowdown in revenue growth due to seasonal off-peak effects and a deterioration in profitability."

Securities firms have been lowering their target prices for Dalba Global one after another. NH Investment & Securities reduced its target from 240,000 won to 200,000 won, and Kiwoom Securities lowered its target from 250,000 won to 210,000 won. KB Securities cut its target by 13.0% to 200,000 won, while DB Securities lowered its target from 200,000 won to 180,000 won. Researcher Son explained, "After reviewing the third-quarter results, we lowered the operating profit forecasts for 2025 and 2026 by 10.6% and 24.3%, respectively, as overseas growth did not meet expectations."

Doosan Fuel Cell also fell 8.85% in the previous session, marking three consecutive days of decline. On November 5, Doosan Fuel Cell announced that its consolidated revenue for the third quarter was 90.8 billion won, with an operating loss of 15.6 billion won. While revenue increased 184% year-on-year, the size of the loss also expanded.

Moon Kyungwon, a researcher at Meritz Securities, analyzed, "Doosan Fuel Cell's third-quarter results fell short of the consensus (-7.8 billion won), mainly due to a 4.8 billion won one-off expense for the disposal of obsolete inventory, a 2.1 billion won increase in costs due to the low yield of the new solid oxide fuel cell (SOFC) product, and a 4.0 billion won increase in fixed costs from the expansion of the new SOFC plant." He added, "It will be difficult to see significant improvement in the deficit even through the fourth quarter."

Doosan Enerbility also reported an earnings shock in the third quarter, with its stock price dropping 5.14% in the previous session. The stock fell below the 80,000 won level after two consecutive days of decline. Doosan Enerbility's third-quarter results showed a 14.3% year-on-year increase in revenue to 3.8804 trillion won and a 19.4% rise in operating profit to 137.1 billion won. The consensus was 4.0271 trillion won in revenue and 283.2 billion won in operating profit.

In addition, Kakao Games and Hugel also suffered stock declines due to earnings shocks. In the previous session, Kakao Games closed down 4.02% and Hugel fell 4.81%. Both stocks have declined for three consecutive days.

Given that last month's strong stock market rally was based on favorable earnings forecasts, the market is expected to continue focusing on earnings. Choi Jaewon, a researcher at Kiwoom Securities, commented, "The background for the strong performance in October was the rapid improvement in earnings forecasts for domestic companies as the third-quarter earnings season progressed. Although the trend of differentiated earnings among sectors is becoming more pronounced, as the overall market is expected to continue seeing improvements in earnings, sectors with solid earnings momentum are likely to maintain a favorable trend."