Fears of a large number of listed companies delivering earnings shocks are spreading in the Seoul stock market after Samsung Electronics Co. released a projection of its operating profit for the fourth quarter of last year, which fell far short of the market estimate.
Market data provider FnGuide said on Jan. 9 that securities companies lowered the operating profit projections for the fourth quarter for seven out of 10 companies listed on the benchmark KOSPI market during Jan. 2 to 9. They raised and maintained the projections for 19 percent and 13 percent, respectively, of the total. This is very different from the same period last year when the rate of increase and decrease in the operating profit projections for the fourth quarter of 2017 was similar with 40 percent and 47 percent, respectively.
It shows how dim the outlook for domestic companies’ performance this year is. The situation is getting worse as Samsung Electronics released its earnings 20 percent lower than the consensus of more than three securities companies and LG Electronics Inc. a whopping 80 percent lower a day ago.
The earnings outlooks for major companies on the KOSPI market are rapidly getting lower as the day of earnings announcement is coming. Daishin Securities Co. lowered the operating profit projections for the fourth quarter of SK Hynix Inc., one of the top two semiconductor companies in the country along with Samsung Electronics, by 15 percent from 553.6 billion won (US$494.73 million) to 469.6 billion won (US$419.66 million) on Jan. 8. This was due to the possibility of lower shipments of DRAM and NAND chips than expectations on sluggish demand.
Other securities firms set the figures more conservatively. Eugene Investment & Securities Co. reduced the projections of Korean Air Lines Co. by 54 percent. Meritz Securities Co. cut its projections for POSCO Group by 8.47 percent, while NH Investment & Securities Co. lowered its estimate for Hyundai Steel Co. by 14.95 percent. Meritz Securities expected that S-Oil Corp. would make an operating loss, while IBK Securities Co. and Eugene Investment & Securities predicted a loss for SK Innovation Co. and BNK Financial Group, respectively.
Securities companies are also lowering target stock prices. On Jan. 9, Yuanta Securities Co. lowered the target stock price of LG Electronics by 20 percent from 96,000 won (US$86) to 77,000 won (US$69). Hana Financial Investment Co. decreased the target stock price of POSCO from 440,000 won (US$393) to 360,000 won (US$322) and Kyobo Securities Co. cut the figure for Hotel Shilla Co. from 110,000 won (US$98) to 88,000 won (US$79).
These were all based on projections of poor performance or uncertain market conditions. It doesn’t seem easy to reverse the current trend in the future as well. The operating profit estimate of KOSPI-listed companies for the first quarter of this year stands at 38.84 trillion won (US$34.71 billion). The figure is expected to grow by only 1.5 trillion won (US$1.34 billion) from 37.34 trillion won (US$33.37 billion) at the fourth quarter of last year. It is expected to amount to 189.66 trillion won (US$169.49 billion) on a yearly basis this year, showing a negative growth of 2 percent from 193.39 trillion won (US$172.82 billion) a year ago.
The Korea Exchange (KRX) said that the operating profit of KOSPI-listed firms for the third quarter of 2018, except for Samsung Electronics, stood at 82 trillion won (US$73.28 billion), down 0.1 percent from the same period a year earlier. This trend is forecast to continue this year as well.