Rivalry in Global Market
Samsung Electronics and Apple, Hyundai Motor Company, and Toyota competed fiercely with each other in the global market in 2013. Since earlier this year, Apple and Toyota have stood on the winning side in terms of stock price movement amid international litigation, foreign exchange wars, and economic policy directed toward trade protectionism. However, Samsung and Hyundai are expected to catch up with their arch rivals in 2014, capitalizing on the growth of the mid-end smart phone market and the new cars to hit the global market next year.
According to the Korea Exchange, Samsung Electronics broke the 10 trillion won (US$9.5 billion) mark in operating profits in the third quarter of 2013 to continue its earnings surprise, but its stock price did not follow. This is because market participants’ expectations for Samsung are so high. The decoupling between the global and Korean stock markets since the beginning of this year and the Vanguard issues have played their part, too.
Still, many market watchers are expecting that the sluggish performance will stop this year, because Samsung Electronics is outperforming Apple when it comes to valuation and cost competitiveness. “Samsung has already increased the ratio of self-developed components significantly, and the brighter outlook of the global semiconductor industry is likely to contribute to its operating profits,” said Shinhan Investment Corporation Research Analyst Kim Yeong-chan, adding, “Also, Samsung Electronics’ stocks are undervalued with a price earnings ratio of 7.8, which is lower than Apple’s 14.09 and the KOSPI’s 9.5.”
Meanwhile, Apple has to procure more components from Samsung Electronics, SK Hynix, and the like, which means its margin is likely to fall with time. It is Samsung Electronics that is expected to take the most advantage of the situation.
According to financial information provider FnGuide and Bloomberg reports, Samsung Electronics’ business profits are estimated at 38.93 trillion won (US$37.00 billion) this year, with a year-on-year growth rate of 34%. The percentage is predicted to reach 7.47% in 2014 as well. However, Apple’s annual operating profits are forecast to decline by 6.17% this year and go up by just 3.87% next year.
In the meantime, this year’s stock prices of the rivals in the auto industry were determined by the currency exchange rate. Hyundai and Kia have gained 5.26% and 0.18% since the first day of this year, but Toyota’s share price skyrocketed by as much as 60% thanks to the Abenomics policy and the weak yen trend.
The trend is likely to be ongoing at least for a while, but the Hyundai Motor Group’s outlook is quite positive. The yen-dollar rate has already shot up to 105 yen per US dollar in May and thus an additional shock is limited. The group’s overseas manufacturing plant expansion is weakening the impact from exchange rate fluctuations.
“Hyundai’s growth momentum is getting stronger as the exchange rate impact is declining, and new models such as the New Soul and New Genesis are on the market,” Korea Investment & Securities researcher Seo Seong-moon explained, continuing, “Hyundai will be able to enjoy greater growth than Toyota because of the base effect.” Hyundai and Kia’s price earnings ratio is between five and seven, lower than Toyota’s 14.