"With 'SamjeonNix' Concentration Easing, It’s Time for Small and Mid-Cap Stocks"

As the concentration on 'Samjeon-Nyx' stocks in the domestic stock market subsides, there are analyses indicating that small and mid-cap stocks are set to attract greater attention.

The independent research firm Growth Research announced on September 21 that it has published an industry report analyzing the relative attractiveness and revaluation factors of small and mid-cap stocks as the market's focus on Samsung Electronics and SK hynix is easing.

According to the report, Samsung Electronics and SK hynix accounted for 78.3% of the KOSPI's gains in the first half of this year. While the surge in memory prices fueled earnings growth for the two companies, the pace of price increases has started to slow in the second half. Growth Research pointed out that as the memory market shifts from price-driven to volume-driven growth, the relative appeal of previously overlooked small and mid-cap stocks is likely to become more prominent.

Performance among small and mid-cap stocks is also improving. The operating profit of KOSDAQ-listed companies rose by 62.2% in the first half of this year compared to the same period last year. Similarly, after the concentration in BBIG stocks in 2020, large-cap stocks fell by about 1% in 2021, while mid-cap and small-cap stocks rose by approximately 9% and 15%, respectively. This suggests a need to select companies that continue to deliver profit growth and have low valuations, especially those that have been relatively neglected in terms of market demand, rather than focusing solely on simple price declines.

Based on profit growth, undervaluation, and supply-demand neglect, Daejoo Electronic Materials, Sunjin, and MegastudyEdu were highlighted as notable companies. Daejoo Electronic Materials is expected to see continued growth in both silver paste supply and the conductive paste for MLCCs as well as silicon anode materials. As of the first half of this year, Sunjin’s cash and cash equivalents combined with short-term financial assets totaled 273.8 billion won, exceeding its market capitalization. As of the closing price on September 18, MegastudyEdu had an expected dividend yield of about 9.4%.

Honghee Han, a researcher at Growth Research, stated, "Rather than a slowdown in earnings growth for the memory sector itself, it is important to focus on the process in which the gap in earnings growth that had been concentrated on Samsung Electronics and SK hynix is gradually narrowing. Going forward, it will be crucial to select small and mid-cap stocks with profit growth and undervalued appeal, which have not yet seen their share prices fully reflect their performance due to supply-demand concentration."

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