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Earnings

Kospi-listed companies perform well, even without Samsung

Nov 18, 2020 (Gmt+09:00)

Kospi-listed companies’ operating profits have turned bullish in the third quarter compared to the year-earlier period, swinging back from the negatives posted in the first and second quarters.

South Korean companies are boasting speedy recoveries compared to other key countries, owing to a competitive edge in exports that helped them weather the global pandemic crisis.

The valuation gap, considered to be a major risk factor in the stock market following the COVID-19 crisis, is expected to ease. Securities firms have raised their forecasts for next year’s benchmark Kospi index to exceed 2,700 points.

Q3 OPERATING PROFIT JUMPS OVER 30%

In the third quarter, combined revenue for 590 Kospi-listed companies dropped by 0.9% to 503.6 trillion won ($456.7 billion) compared to the same period last year, according to a report issued by the Korea Exchange and Korea Listed Companies Association on Nov. 18.
Graphics by Jerry Lee


However, the combined operating profit climbed by 30.9% compared to the year-earlier period, reaching 36.4 trillion won. This marks the first year-on-year increase since the COVID-19 outbreak.

Performances were satisfying, even excluding market bellwether Samsung Electronics Co. The Q3 revenue for Kospi-listed companies excluding Samsung Electronics came in at 430.4 trillion won ($390.3 billion), down 4.3% from the same period last year. But their operating profit increased by 15.7% to 24.4 trillion won alongside a 42.8% rise in net profit to 16.1 trillion won.

The consensus estimate for 251 companies’ Q3 operating profit was a combined 37.4 trillion won, but their actual operating profit reached around 41.5 trillion won, 10.9% higher than projections. Some 157 companies performed better than market consensus.

“We saw more companies exceed market forecasts than we have since the global financial crisis,” said Kim Kwang-hyun, an analyst at Yuanta Securities.

PERFORMANCES IMPROVE ACROSS ALL SECTORS

There was a notable improvement in the shipbuilding, energy, steel industries as well as in cyclicals. The electricity and gas industry, which posted 263.3 billion won ($238.7 million) in operating profit in Q2, surged to 2.7 trillion won in Q3, up 101.4% from the same period last year. 

Sectors that have steadily recovered since the first half of the year also saw strong performances. The electrical and electronics industry climbed 67.3% to post 15.8 trillion won in operating profit. Other sectors, including pharmaceuticals (50.7%), non-metal minerals (44.0%), and food and beverages (32.5%) also performed well.

Meanwhile, pulp and paper, fiber and textile, and steel and metal industries' performances dropped by 65.3%, 17.6% and 16.2%, respectively.

Only six of 17 sectors saw their year-on-year performances weaken, adding weight to the argument that the recovery is spreading across all sectors.

The Q3 net profit for the financial sector reached 7.7 trillion won, up 27.1% from the year-earlier period. Within the financial sector, the securities industry saw the biggest spike with a 154.4% increase. 



RECOVERY TREND TO CONTINUE INTO NEXT YEAR

“Cyclical sectors performed poorly in the first half of the year, but recently recovered, lifting the overall performance,” said Lee Chang-mok, a director at NH Investment & Securities. “The Q3 performance growth rate is impressive considering the base effect from poor business conditions in the semiconductor industry last year," Lee explained.

Market watchers forecast the recovery trend to continue into next year. According to financial data provider FnGuide, the consensus Q4 operating profit estimate for 209 companies rose from 32.4 trillion won to 34.5 trillion won recently. Also, next year's estimate for 228 companies was adjusted from 170.7 trillion won to 176.5 trillion won.


Write to Byeong-hun Yang and Ye-rin Choi at hun@hankyung.com

Danbee Lee edited this article.

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