With shares of Samsung Electronics and SK hynix up 49% and 36% this year, respectively, analysts in the securities industry said that "even considering the tendency of stock prices to lead earnings, there is still room for further gains."

In the afternoon on the 11th, a digital board in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul displays the closing prices of SK hynix and Samsung Electronics. KOSPI closes at 5,354.49, up 52.80 points (1.00%) from the previous session, while KOSDAQ ends at 1,114.87, down 0.33 points (0.03%). At 3:30 p.m., the dollar-won exchange rate in the Seoul foreign exchange market records 1,450.1 won, down 9 won from the previous day's 3:30 p.m. weekly close. /Courtesy of News1

Yeom Dong-chan, an analyst at Korea Investment & Securities Co., said in a report published on the 13th, "One of the market's recent concerns is how long the strength in Samsung Electronics and SK hynix will continue," noting, "This is because the view has emerged that it will be hard to maintain last year's second-half pace of gains, and some indicators look worrisome."

However, after reviewing the indicators, he said he concluded there is no need to cut exposure too quickly.

Looking back at the upcycles in semiconductor earnings in 2017 and 2020, stock price peaks led earnings peaks by six to nine months.

Yeom said, "Earnings for Samsung Electronics and SK hynix are set to rise quickly through the third quarter, after which quarter-over-quarter growth rate will slow, and year-over-year growth rate is expected to peak in the second quarter."

However, in the 2017 cycle, the market capitalization peak formed around the same time as the peak in operating profit growth rate. The current market capitalization of Samsung Electronics and SK hynix is up 250% from a year earlier.

Yeom explained, "While the market capitalization growth rate will slow, we expect market cap gains to continue through the second quarter as long as there is earnings momentum."

As profits at the two corporations increase, the 12-month forward price-earnings ratio (PER) is not at a burdensome level, but the price-to-book ratio (PBR) has risen to the highest level since 2011, which is also treated as a concern.

Yeom emphasized, however, that PBR should be remembered as a function of return on equity (ROE). He said, "At present, Samsung Electronics and SK hynix have seen ROE rise enough to explain their PBRs," adding, "If anything, for corporations other than these two, it is hard to say ROE has increased enough to explain their PBR increases."

He added, "It is not appropriate to view PBR as burdensome without considering the high ROE."

※ This article has been translated by AI. Share your feedback here.