Who Will Benefit in the Upcoming Earnings Season on the Stock Market?

Changes in Third-Quarter Earnings Forecasts
Securities Firms’ Performance Downgraded Amid Market Slump
Refiners Expected to Prosper on High Oil Prices

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With the third-quarter earnings season approaching, it has been observed that earnings forecasts for securities and electrical/electronics sectors on the KOSPI have been revised downward. In contrast, expectations for the refining, chemical, and pharmaceutical sectors have improved.

Securities Firms' Earnings Forecasts Revised Down as Stock Market Remains Sluggish

According to financial information provider FnGuide on September 29, the securities sector experienced the largest downward revision in operating profit forecasts on the KOSPI over the past month, with a decline of 8.32%. This was due to the recent correction in the domestic stock market, which resulted in major securities firms seeing their third-quarter operating profit estimates lowered.

The consensus for Mirae Asset Securities’ third-quarter operating profit was 298.3 billion won, down 17.1% compared to a month earlier. NH Investment & Securities (-5.6%), Kiwoom Securities (-5.5%), and Samsung Securities (-3.7%) also saw their forecasts decrease. The downward revision in securities firms' earnings expectations was mainly due to a sharp deterioration in their business environment following the correction in the domestic stock market during the third quarter.

According to Shinhan Investment & Securities, the average daily trading value on the KOSPI (including ETFs) surged from 84 trillion won in April to 138 trillion won in June, but then plummeted to 56 trillion won in September. Heeyeon Lim, research fellow at Shinhan Investment & Securities, stated, "As the preference for safe-haven assets has strengthened, the movement of funds from the stock market to bank deposits has accelerated," adding, "We have also revised down our target prices for major securities firms to reflect the downward revision in their profit forecasts."

The earnings forecasts for the electrical and electronics sectors, including Samsung Electronics and SK hynix, have also been revised down by 1.7% over the past month due to the decline in the won-dollar exchange rate. The third-quarter operating profit consensus for Samsung Electronics was 11.057 trillion won, a decrease of 2.61% compared to a month ago. SK hynix's figure dropped to 7.808 trillion won, down 0.86%.

The won-dollar exchange rate fell sharply from the 1,550-won range in early July to the 1,360-won range recently. For semiconductor companies that earn foreign currency through exports, a weakening dollar cuts into their profits. In its recent semi-annual report, SK hynix analyzed that if the won-dollar exchange rate drops by 10%, profit before tax could decrease by approximately 4.75 trillion won.

Brokerages have slightly lowered their earnings forecasts for semiconductor firms in light of exchange rate effects. BNK Investment & Securities recently cut its estimates for Samsung Electronics’ and SK hynix’s third-quarter operating profit by 5% and 6%, respectively, compared to previous forecasts. This takes into account the average drop in the won-dollar exchange rate and a slowdown in the rise of generic DRAM prices.

As profit forecasts for the highly influential semiconductor sector on the KOSPI have been revised downward, the overall third-quarter operating profit estimate for the KOSPI was also revised down by 1.52% compared to one month ago.

Refiners Expected to Deliver Strong Performance Amid High Oil Prices

While some sectors have had their forecasts revised downward, there are positive outlooks for refining, chemical, and pharmaceutical sectors. Consensus for third-quarter operating profit in the refining and chemical sector was 7.61 trillion won, up 5.84% from one month earlier. This is largely attributed to projections that refiners such as SK Innovation (26.2%) and S-Oil (7.5%) will see even stronger results thanks to the rise in international oil prices.

According to Hana Securities, SK Innovation is expected to post a third-quarter operating profit of about 3.1 trillion won, surpassing the consensus estimate of 1.9 trillion won by 65% -- effectively delivering a surprise result. Jaesung Yoon, research analyst at Hana Securities, explained, "The petrochemical segment has performed exceptionally well driven by higher global oil prices, and even the lubricants business has contributed to record-high operating profits. We have raised our operating earnings forecasts for this year and next by approximately 30% to 40%," he added.

Additionally, the pharmaceutical sector (up 2.35%) and insurance sector (up 0.98%) have also seen their profit estimates revised upward. For pharmaceuticals, the revision was driven by Hanmi Pharm's export of its next-generation anti-obesity drug candidate to Genentech, a subsidiary of Roche Group, in a deal valued at 3 trillion won. The insurance sector's upward adjustment was motivated by expectations that rising interest rates will improve profits.

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