The debt ratio and net profit margin of non-financial listed corporations in the first half of this year have worsened compared to last year. This indicates that key stability and profitability indicators are shaking. Due to policy burdens, corporate strength may be further undermined, posing a burden on the stock market as well.
On the 18th, ChosunBiz analyzed the companies that registered 'XBRL (eXtensible Business Reporting Language)' in the Financial Supervisory Service's electronic disclosure system (DART) at the end of the first half of this year, comparing them with the end of last year.
The debt ratio of 1,901 listed companies surveyed stood at 111.4% at the end of June this year. This is an increase of 6.1 percentage points from 105.3% at the end of last year. The debt ratio is calculated by dividing total liabilities by equity. A debt ratio exceeding 100% means that liabilities are greater than equity.
By market segment, the debt ratio of 610 companies listed on the KOSPI was 134.3% at the end of June this year, up 9 percentage points from 125.3% at the end of last year. The debt ratio of 1,291 companies listed on the KOSDAQ rose from 95.9% to 100.5%, an increase of 4.6 percentage points during the same period.
By the end of June this year, there were four companies in the KOSPI market and seven in the KOSDAQ market that were completely insolvent, meaning that all of their equity was exhausted and total capital turned negative (-). This is an increase of two and three compared to the end of last year, respectively.
Even if the debt ratio exceeds 100%, it is not a major issue as long as cash flow is supported. With the Bank of Korea consecutively lowering interest rates in the first half of this year, it seems that corporations may have attempted to increase their liabilities to expand investment.
The problem is that corporate profitability has also deteriorated. Among 1,683 corporations surveyed, 635 (37.7%) recorded net losses in the first half of this year. This is an increase in loss-making corporations compared to 534 (31.7%) last year. The net profit margin of corporations that made profits also fell to 12.2% in the first half of this year, below last year's annual net profit margin of 13.5%.
In the KOSPI market, the net profit margin of listed companies improved slightly from 11.2% last year to 11.5% in the first half of this year. In contrast, the net profit margin for listed companies on the KOSDAQ declined from 15% to 13% during the same period.
Amid these circumstances, the government has announced tax reform plans to raise corporate taxes, while the ruling party is pushing for the passage of the 'yellow envelope law,' which aims to expand the scope of users and limit compensation for labor disputes. Concerns about management difficulties are repeatedly being voiced in the business community.
When corporate business performance deteriorates, valuation is inevitably undervalued. The ability to return value to shareholders also decreases.
Yoo Seong-min, head of global investment strategy at Samsung Securities, noted, "Korean stocks have exited the absolute undervaluation zone (with a price-to-book ratio below 1 for the next 12 months) and the focus of the stock market is expected to shift from valuation improvement due to institutional reform to securing long-term growth momentum and increasing return on equity (ROE)."