Semiconductor Stocks Like Samsung Electronics and SK hynix Soar... Which Stocks Should Investors Watch Next? [Weekend Money]

Earnings Rise in IT Hardware, Power Equipment, Nuclear Power, and Securities Sectors

"Focus on Samsung Securities, APR, and Korea Financial Group"

Although capital continues to concentrate on semiconductor stocks such as Samsung Electronics and SK hynix, investors seeking additional returns are increasingly focusing on identifying non-semiconductor stocks with the potential to deliver strong performance. As a result, analysts point out the need for a performance-driven investment strategy in sectors—such as power equipment and securities—where earnings are rising rapidly.

On May 3, Lee Jeongbin, a researcher at Shinhan Securities, stated, "Sectors showing visible earnings momentum beyond semiconductors include IT hardware, power equipment, nuclear power, and securities." He added, "Among the stocks with a probability of over 70% to beat market expectations for first-quarter operating profit, attention should be paid to Samsung Securities (+15.1%), APR (+74.1%), and Korea Financial Group (+17.1%), all of which have double-digit 12-month forward return on equity (ROE)." He further suggested, "For secondary batteries, we recommend a gradual investment positioning as a growth option."

The strong earnings of semiconductor companies have reset market expectations. In the first quarter, Samsung Electronics and SK hynix posted operating profits of KRW 57.2 trillion (+42.3% compared to market consensus) and KRW 37.6 trillion (+3.3%), respectively, exceeding market forecasts. Subsequently, the consensus for this year's operating profit was revised upward to KRW 306 trillion for Samsung Electronics (+53.7% month-on-month) and KRW 239 trillion for SK hynix (+45.0%).

Since the earnings announcements, the share of semiconductor profits within KOSPI has shown steep growth. On a 12-month forward operating profit basis, semiconductors now comprise about 68% of KOSPI profits. This has naturally led to a flow of capital toward assets generating robust earnings. Semiconductor stocks have recorded an 84% increase in share prices year-to-date, far outpacing the KOSPI's overall rate of 53%.

Nevertheless, Samsung Securities pointed out that investors seeking additional gains are now shifting their focus to non-semiconductor stocks. The projected price-to-earnings ratio (PER) for non-semiconductor stocks within KOSPI this year stands at more than 15 times. In comparison, Samsung Electronics and SK hynix have PERs in the low 5 times range, dragging the overall KOSPI PER, including semiconductors, down to around 8 times—a relatively low figure. Samsung Securities analyzed this as a distortion in the overall market valuation caused by the influence of semiconductors.

Lee further explained, "The construction (expected PER 20.7x), machinery (58.6x), shipbuilding (20.5x), and IT appliances (136.7x) sectors are classic examples where future profits are already priced in at current levels." He added, "To sustain share price growth, these sectors must materialize their existing order backlogs and secure additional contracts."

In this context, Samsung Securities emphasized the necessity of building a performance-based investment strategy in non-semiconductor sectors. Sectors seeing upward revisions in 12-month forward earnings per share (EPS) include semiconductors, trading/capital goods, nonferrous metals, and energy. In contrast, chemicals, utilities, and transportation are experiencing downward revisions of more than 10%.

Lee noted, "For trading/capital goods, the double-counted earnings from SK Square and SK hynix have led to EPS upgrades, while in energy, securities, and machinery, share prices and profits are moving in tandem." He continued, "IT hardware and certain growth stocks fall into a 'pre-reflection phase,' where share prices have moved ahead of earnings. Among sectors with accompanying earnings growth, we believe the strongest momentum between profits and share prices lies in power equipment and securities."

From a bottom-up perspective, Lee highlighted the importance of monitoring companies yet to announce their first-quarter results but expected to deliver positive surprises. Specifically, he pointed out Samsung Securities, L&F, APR, Shinsegae, and Korea Financial Group—all with a probability of exceeding expectations above 70%.

This content was produced with the assistance of AI translation services.