As the KOSPI continues an explosive rally this year, brokerages have raised target prices for 8 out of 10 domestically listed companies. With share prices climbing faster than expected, cases are mounting of brokerages belatedly lifting their targets. Critics say target prices may be reflecting share-price momentum late rather than corporate value.
According to FnGuide on the 21st, as of the 18th of this month, of 267 stocks for which three or more brokerages provided target prices, 206 saw their targets raised from the end of last year. That accounts for 77% of all stocks. In contrast, 61 stocks (23%) saw their targets cut. As the KOSPI has surged 115% so far this year on the back of the semiconductor rally, target-price hikes have increased accordingly.
The stock with the largest target-price increase this year was Daewoo Engineering & Construction. The company's average target rose 673%, from 4,400 won at the end of last year to 34,000 won this month. The move is seen reflecting expectations for Middle East reconstruction demand and momentum from the Czech nuclear project order.
Lee Hye-jin, a Daishin Securities researcher, said, "With the recent Dukovany nuclear power plant order in the Czech Republic, Daewoo Engineering & Construction secured its first overseas nuclear reference," and added, "Further pipeline expansion is expected, including additional Temelin nuclear units in the Czech Republic and the Ninh Thuan plant in Vietnam."
The stock with the second-largest target-price increase was Samsung Electro-Mechanics. Its target was raised 513% this year, from 301,571 won to 1,848,600 won. The rise reflects heightened expectations for earnings improvement on higher prices for AI-use multilayer ceramic capacitors (MLCC).
While upward revisions to earnings estimates are cited as grounds for the target changes, some say brokerages are hiking targets belatedly as actual share-price gains outpace them. In particular, some stocks saw targets repeatedly adjusted sharply over a short span.
Meritz Securities on the 1st of last month raised its Samsung Electro-Mechanics target from 700,000 won to 1.02 million won. On the trading day just before that hike, the closing price was 832,000 won, already far above the previous target. On the 20th of the same month, it revised the target again to 1.6 million won. Even then, the closing price seven days earlier (1,029,000 won) had already topped the target (1.02 million won).
It then raised the target to 1.9 million won on the 27th of the same month, and again to 2.1 million won on the 4th of this month. In just over a month, the target more than doubled.
Daishin Securities also raised its SK Square target from 760,000 won to 1 million won on Apr. 27, then to 1.5 million won on May 24, a month later. On the 18th of this month, it lifted it again to 1.87 million won. Over the same period, SK Square's share price jumped 116%, from 789,000 won at the Apr. 27 close to 1.7 million won at the close on the 18th.
Lee Hyo-seop, a senior research fellow at the Korea Capital Market Institute, said, "As the domestic stock market has risen steeply in a short time, target prices are also tending to climb quickly," but noted, "If current prices are a short-term peak, individual investors could see large losses if they buy late after reading brokerage reports."