Concerns over a slowdown in operating profit margins of domestic listed companies, including large-cap stocks such as Samsung Electronics, are growing due to concerns about tightening and high oil prices. There is advice from the stock market that it is necessary to selectively approach the telecommunication and information technology (IT) home appliance industries, which are less likely to deteriorate profitability.
According to the financial investment industry on the 11th, the combined market capitalization of Samsung Electronics, SK Hynix and Hyundai Motors, which have the largest net profit among domestic companies, was 524 trillion won, down 14% from December last year. On the other hand, the market capitalization of the stock market (KOSPI), excluding three companies, was 1531 trillion won, up 1% during the same period. Lee Jae-man, a researcher at Hana Financial Investment, analyzed, “Samsung Electronics, SK Hynix, and Hyundai feel the KOSPI index of 2570, but when three companies are excluded, the perceived index is 3000.”
The reason why the KOSPI is showing a box-bound trend is believed to be due to the concentration of selling by foreign investors in large-cap stocks. Foreigners’ total net selling of the KOSPI reached 8 trillion won this year, of which foreign net sales of domestic semiconductors and automobiles accounted for 2 trillion won and 1.5 trillion won, respectively.
Experts also point out that the KOSPI’s operating profit margin is rapidly declining compared to the US Standard & Poor’s 500 as a problem. According to the analysis of Hana Financial Investment, the combined sales of Apple, Microsoft, and Alphabet in the US this year are expected to increase 7% from the previous year to US$844.8 billion, while the combined sales of Samsung Electronics, SK Hynix, and Hyundai Motors in Korea are expected to increase 14% to KRW 504 trillion. do. The projected sales growth rate is higher for domestic companies.
However, the operating profit margin forecast is the opposite. The S&P 500 operating margin is expected to remain at an all-time high of 16%, and the KOSPI operating margin peaked at 11% last year and is currently below 10%. Specifically, Apple is expected to maintain its highest level since 2015 at 30%, while Microsoft and Alphabet are expected to set new all-time highs at 42% and 36%, respectively. In comparison, Samsung Electronics recorded 19%, which is lower than the 2018 peak, and SK Hynix and Hyundai Motors are also expected to fall short of their previous highs at 29% and 6%, respectively.
“In Korea, as import prices rise faster than exports, concerns about the profitability of companies may be highlighted,” said the researcher. The researcher explained, “In preparation for the possibility that the current situation will continue, it is necessary to conduct a ‘stress test’ for operating profit ratios by industry.”
In addition, he suggested the sectors where the operating profit ratio is expected to increase this year compared to the previous year among the sectors where the operating profit ratio (return on equity in the financial sector) has not deteriorated significantly compared to the previous quarter in a similar situation to the above since 2006. These include telecommunication, home appliances, rechargeable batteries, cosmetics, clothing, automobiles, energy, construction, machinery, hotels, and leisure. Companies that ranked high in the stress test results within the industry were KT, Samsung SDI, LG Electronics, Amorepacific, Kolmar Korea, Kia, SL, SK Innovation, KCC, Hanssem, Hyundai Doosan Infracore, SFA, Paradise, etc.
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