Kakao, NCSoft likely to lead record-breaking earnings in 2021

South Korea’s mobile platform giant Kakao Corp. and game developer NCSoft Corp. are looking to post their best-ever earnings for a second straight year in 2021, with their operating profits set to surge by over 50% each, according to analyst estimates.

Sales at both Kakao and NCSoft are projected to leap by 30% year on year in 2021, led by new businesses such as ride-hailing and mobile payment services from Kakao Mobility and Kakao Page, as well as four new NCSoft games set for launch this year.

Overall, the number of South Korean companies tipped to rack up their highest-ever earnings in 2021 is likely to increase from last year, with the earnings recovery seen to spread to domestic-focused sectors such as department stores and advertising agencies, data from FnGuide, a market research firm, shows. The data was compiled at the request of The Korea Economic Daily.

Of the 296 companies for which more than three securities companies provide earnings estimates, a total of 126 firms are expected to post their record-high operating profits this year, up from last year’s number of 99.

In terms of sales, 136 firms are projected to report their highest-ever numbers in 2021, up from last year’s 118. Samsung Electronics Co., Samsung SDI Co. and LG Electronics Inc. are among the 136 companies, with 11 other names in the Kospi's top 20 stocks also included.

The broader base of earnings growth could justify record-breaking rallies in Seoul stock markets, of which the total capitalization ratio to the nominal GDP topped 100% for the first time.

“Sales from the non-memory chip business will likely grow by 31% to top 22 trillion won at Samsung Electronics, leading its earnings improvement, said NH Investment & Securities analyst Doh Hyun-woo.  

Increased DRAM chip prices and US sanctions against Samsung’s rival Huawei Technologies Co. are also expected to give Samsung a tailwind.

Regarding LG Electronics, Daishin Securities analyst Park Kang-ho said: “Sales from its automobile electronics will likely jump by 27.1%, led by the orders received last year.” 

2021 Earnings estimates for major Kospi-listed companies

Company name	2021 Sales estimates (in billion KRW)	2021 Operating profits estimates
Kakao	5,339.6 (29.4%)	753.4 (67.8%)
NCSoft	3,140.4 (30.9%)	1,297.0 (53.2%)
Samsung SDI	14,205.0 (22.7%)	1,199.6 (61.4%)
Samsung Electronics	259,993.1 (9.3%)	46,545.8 (26.1%)
LG Electronics	67,331.6 (7.7%)	3,607.6 (13.6%)
Innocean Worldwide	1,428.6 (14.4%)	134.0 (24.8%)
Hyundai Department Store	3,009.8 (24.8%)	305.2 (87.0%)
Note: Numbers in brackets refer to year-on-year change

Of the 118 companies that recorded their highest sales last year, 103 companies are expected to report record-breaking sales again this year.

In particular, both Samsung SDI and LG Chem are likely to post their strongest annual results in both operating profit and sales, with their electric vehicle battery businesses poised to turn to a profit for the first time this year.

DOMESTIC SALES-ORIENTED FIRMS
 
Hyundai Department Store, the country’s third-largest department store chain, stands to benefit from the domestic consumption recovery once the COVID-19 pandemic recedes. Its operating profit is estimated to spike by 87% to 305.2 billion won from a year earlier.

“Hyundai Department Store has major stores in the affluent area of Gangnam in Seoul and is opening a new store in Yeouido this year. The pace of its earnings growth will be accelerating,” said Shinyoung Securities analyst Seo Jung-yeon. Yeouido is Seoul's main business and financial district.

Innocean Worldwide, an advertising agency controlled by the Hyundai Motor Group, is likely to report its highest-ever earnings this year, benefiting from a series of new model launches by both Hyundai Motor Co. and Kia Motors Corp.

Earnings at SK Rent A Car Co. and Clio Cosmetics Co. are also expected to rebound. 

In the fourth quarter of last year, exporters are estimated to have led a sharp increase in listed Korean companies' fourth-quarter earnings from a year earlier, outweighing shortfalls in the pandemic-hit airline and travel-related sectors, according to FnGuide.

Write to Ye-rin Choi at rambutan@hankyung.com
 Yeonhee Kim edited this article.