Target Prices Raised Across the Board in the New Year... Promising Themes to Watch Alongside Semiconductors [Real Investment Tech]

Automotive and Bio Sectors, Last Year's Underperformers, Expected to Rally
Beneficiaries of Separate Taxation on Dividend Income and Share Buybacks Also in Focus

The momentum of the domestic stock market has been remarkable since the beginning of the year. On the first trading day of the new year, the KOSPI hit an all-time high, and the KOSDAQ also surpassed the 950 mark for the first time in 28 months. While leading semiconductor stocks are once again spearheading the rally, there are other themes that warrant attention. What are the promising sectors that the securities industry is focusing on this year?

Stocks Left Out of Last Year's Rally and Global Events in Focus

In the short term, the automotive sector is the first theme to watch. After reaching a yearly high in early December last year due to the retroactive application of U.S. tariff cuts and then pulling back, the automotive sector is now expected to gain new momentum, especially as the 'CES 2026' approaches, aligning with the physical AI theme.

Hyundai Motor, in particular, is drawing significant attention at this year's CES 2026. The first-ever demonstration of Atlas, the humanoid robot from its subsidiary Boston Dynamics, is fueling investor sentiment. Haneul, an analyst at NH Investment & Securities, commented, "With the market's growing interest in Boston Dynamics' humanoid robot and strengthened collaboration with Nvidia, Hyundai Motor is reinforcing its valuation as a leading company in the era of physical AI," and raised the target price from 3.3 million won to 4 million won.

Yang Seungyun, an analyst at Eugene Investment & Securities, advised, "Initially, attention should be paid to companies directly exhibiting at CES, and subsequently, the trickle-down effect on related component value chain companies should also be considered." He recommended keeping an eye on Hyundai Motor Group affiliates (Hyundai Mobis, Hyundai Autoever) and related companies (HL Mando, SPG, Robotis, SBB Tech, Samhyun, Korea PIM, etc.).

The bio sector, which was as overlooked as the automotive sector in last year's rally, is also expected to see a turnaround this year. The upcoming '2026 JP Morgan Healthcare Conference,' scheduled from January 12 to 15, is seen as a key momentum driver. Notably, Celltrion has emerged as a top bio stock this year, with nine securities firms raising their target prices for the company just this month.

Kwon Hae-soon, an analyst at Eugene Investment & Securities, stated, "Despite concerns over price cuts for existing biosimilar products and intensifying competition, 2026 is expected to see a decline in cost ratios due to the expansion of high-margin new product launches, as well as strong growth in both revenue and profit driven by the expansion of the CMO business." She raised the target price from 2.2 million won to 2.5 million won. Celltrion's consolidated sales for 2026 are projected to reach 5.127 trillion won (up 24.6% year-on-year), with operating profit expected at 1.6684 trillion won (up 43.1%), marking an all-time high.

Small- and mid-cap bio stocks that are not tied to the large-cap value chain are also expected to perform well. Park Seungyoung, an analyst at Hanwha Investment & Securities, noted, "Based on annual returns, the biotechnology sector outperformed the KOSPI 30% of the time in the 2000s, 60% in the 2010s, and 80% in the 2020s, showing a steady increase." He explained, "This is because Korean companies are positioning themselves in the growing number of global pharmaceutical licensing deals, particularly in the early stages of clinical trials. Healthcare is likely to continue outperforming the market, especially among KOSDAQ bio stocks."

Separate Taxation on Dividend Income and Share Buybacks

With the full implementation of separate taxation on dividend income starting this year, traditional high-dividend stocks such as financials and holding companies are also worth watching. Companies eligible for separate taxation are those whose cash dividends have not decreased from the previous year and either have a dividend payout ratio of 40% or more, or a payout ratio of at least 25% with a dividend increase of 10% or more compared to the previous year. Dividend income received this year will be subject to a tax rate between 14% and 30%.

Choi Jaewon, an analyst at Kiwoom Securities, pointed out, "Major financial stocks, such as banks, which are representative high-dividend companies, are amending their articles of incorporation to change the dividend record date to late February, late March, or early April." He added, "It is also necessary to consider the possibility of preemptive inflows of funds targeting high-dividend stocks starting in January." In fact, in January 2024 and last year, when dividend procedures were improved, the average return of high-dividend stocks was 3.2%, outperforming the KOSPI 200 (-0.6%).

There is also speculation that companies with a dividend payout ratio just below 25% may announce surprise dividend increases to meet the criteria for separate taxation. Candidates expected to deliver dividend surprises among companies with a payout ratio between 20% and 25% include GS, SK Gas, KB Financial Group, and HD Hyundai Heavy Industries.

Holding companies are also expected to benefit from the third amendment to the Commercial Act, which is scheduled to be processed this month. If treasury shares are canceled, the equity ratio of existing shareholders increases, and the number of shares outstanding decreases, resulting in higher earnings per share (EPS) and return on equity (ROE). According to the amendment, companies are required to cancel treasury shares within one year of acquisition, and the same obligation will apply to existing treasury shares after a certain grace period.

Lee Sangheon, an analyst at iM Securities, commented on SK, saying, "With the advent of the era of mandatory cancellation of treasury shares, it is inevitable that a significant portion of the 24.8% of treasury shares held by the company will be canceled, which will serve as a basis for an increase in valuation." He raised the target price from 2.6 million won to 3.3 million won. Other listed companies with a high proportion of treasury shares as of the end of last year include Infovine (54.18%), Shin Young Securities (53.10%), Chokwang Leather (46.57%), Il Sung IS (46.15%), Telcoware (44.11%), and Bookook Securities (42.73%).