"There Was Such a Star Performer at SK"... The Top 2Q Earnings Surprise Missed While Watching Only Hynix

Changing Landscape of Second-Quarter Earnings by Sector
Diverging Results for Samsung Electronics and SK hynix
Staggered Buying in Sectors with Strong Earnings Remains Effective

As the release of second-quarter earnings for listed companies approaches completion this year, the leading sectors that drove the previous quarter's earnings surprise have changed significantly. Notably, it was found that six out of every ten listed companies exceeded market expectations (consensus).

In the oil and gas sector, SK Innovation's performance stood out. Thanks to improved profitability in the battery and lubricant businesses in the second quarter, the company achieved an operating profit of 3.4873 trillion won, successfully turning a profit.

According to financial information provider FnGuide, as of August 5, among the 141 listed companies for which at least three securities firms provided operating profit estimates, 87 companies (61.7%) recorded operating profits surpassing consensus. Following the previous quarter (where 73 out of 119 beat consensus), companies continued to post strong results in the second quarter as well.

However, the sectoral landscape looked quite different. In the first quarter, industries such as retail, including Hotel Shilla (difference between actual operating profit and securities consensus: 705.0%), chemicals like POSCO Future M (289.7%), electronics equipment and devices like Ecopro BM (108.3%), and game software such as Krafton (36.1%) led the earnings rally. In contrast, in the second quarter, sectors like oil and gas, including SK Innovation (65.6%), consumer durables like LG Electronics (49.3%), shipbuilding such as HD Korea Shipbuilding & Offshore Engineering (38.1%), and medical equipment and services including InBody (34.7%) newly entered the earnings surprise group. Only the energy facilities and services sector, including Hanwha Solutions, maintained its top position in both the first and second quarters, with results of 184.4% and 63.3%, respectively.

In the oil and gas sector, SK Innovation's performance stood out. Thanks to improved profitability in the battery and lubricant businesses in the second quarter, the company achieved an operating profit of 3.4873 trillion won, successfully turning a profit. Since the battery business was spun off, it posted its highest-ever quarterly profit, while the refining and lubricant businesses continued to deliver solid results. This was driven by higher base oil margins resulting from geopolitical risks such as the U.S.-Iran conflict and the lagging effect (time lag of raw material input) from the rise in oil prices.

Hanwha Solutions, which led the energy facilities and services sector, saw major business divisions—including renewable energy, chemicals, and advanced materials—post profits for a second consecutive quarter. In the consumer durables sector, LG Electronics and Hyundai Livart performed well. LG Electronics benefited from competitiveness in its home appliances business, the effects of sporting events, and the growth of its electronics parts business. Additionally, a one-time profit of around 300 billion won was recognized as the company received a full refund of previously paid tariffs from the U.S. government. Despite a sluggish construction market, Hyundai Livart, a furniture company, saw its second-quarter operating profit rise 9.4% year-on-year to 5.559 billion won, thanks to improved cost ratios. This was the result of efficient management efforts that strengthened profitability.

By company, those with the largest beats over consensus were SK Innovation (123.8%), HD Hyundai (85.8%), Hanwha Systems (76.2%), LX Hausys (75.6%), KG Steel (66.8%), Hanwha Solutions (63.3%), Hyundai Corporation (53.1%), Kakao Pay (52.1%), Poongsan (50.9%), and Hyundai Livart (50.2%). Hanwha Solutions was the only company to finish in the top 10 for both consecutive quarters among listed firms.

On the other hand, companies that significantly lagged behind expectations included Green Cross (-80.7%), Handsome (-60.0%), SOOP (-50.6%), Korea Aerospace Industries (-45.6%), BH (-40.9%), LG Energy Solution (-39.8%), Partron (-33.2%), Hanwha Engine (-32.1%), BNK Financial Group (-27.3%), and Nexen Tire (-26.3%).

The earnings of leading semiconductor stocks were mixed. Samsung Electronics’ operating profit for the second quarter was 89.4924 trillion won, exceeding market expectations (84.8367 trillion won) by 5.5%, demonstrating its solid profitability. In contrast, SK hynix’s second-quarter operating profit was 60.5426 trillion won, falling 6.4% short of consensus (64.6941 trillion won). This was attributed to the reflection of some bonus provisions as well as a slowdown in DRAM shipment growth.

On the 7th, the KOSPI and KOSDAQ indices are displayed on the status board in the dealing room of Hana Bank in Jung-gu, Seoul. As of 9:02 a.m. this day, the KOSPI rose 72.76 points (1.16%) from the previous close to 6,369.14, and the KOSDAQ index also increased by 12.26 points (1.53%) to 813.93 from the previous close. Yonhap News Agency

Meanwhile, on August 7, the domestic stock market started higher and is currently taking a breather. The KOSPI began the day up 1.09% from the previous session at 6,365.07, and as of 9:55 a.m., it was trading up 0.47% at 6,325.81. Over the same period, the KOSDAQ was trading down 0.64% at 796.50.

Overnight, the New York stock market closed lower. On August 6 (local time), the Dow Jones Industrial Average ended down 464.02 points (-0.85%) at 53,885.10. The S&P 500 fell 13.61 points (-0.18%) to 7,709.95, and the tech-heavy Nasdaq Composite declined 15.09 points (-0.06%) to close at 26,348.35. Market sentiment was dampened by reports from Iran’s Fars News Agency that the Iranian parliament’s national security committee is reviewing a bill to ban all hostile nation vessels, including those from the U.S. and Israel, from passing through the Strait of Hormuz. As a result, Brent crude futures rose 3.8% from the previous session to settle at $82.49 per barrel.

Shares of memory semiconductor makers SanDisk and Western Digital plunged after their earnings announcements. SanDisk outperformed market expectations for sales and net income, but the outlook fell short, leading to a 6.81% drop. Western Digital, despite exceeding expectations, saw its stock fall 13.03% as sales growth was attributed more to price increases than to higher shipment volumes. Micron rebounded by 1.31% after plunging over 7% intraday, driven by optimism that Alphabet’s large bond issuance would lead to increased semiconductor spending. SK hynix’s American Depositary Receipts (ADR) also fell sharply initially before paring losses to close down 4.97% at $143.53. The Philadelphia Semiconductor Index finished up 0.33%.

Jiyoung Han, a researcher at Kiwoom Securities, said, "Unlike the past rebound led exclusively by large-cap semiconductor stocks after the significant decline in the first half of the year, the upward momentum is now spreading throughout the overall market. During rebounds, rather than selling, it is advisable to maintain current holdings or, if further adjustments come, employ a phased buying strategy focused on sectors with strong earnings momentum, such as semiconductors, next-generation multilayer ceramic capacitors (MLCC), securities, distribution, and the defense industry."

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