BNK Investment & Securities said this year's net profit outlook for KOSPI 200 corporations could be about 60 trillion to 100 trillion won lower than the market currently expects. Despite record second-quarter results, SK hynix's equity valuation gains from Kioxia could turn into valuation losses in the second half, and one-off expense burdens such as fourth-quarter bonuses could also grow.
On the 18th, analyst Kim Seong-no at BNK Investment & Securities said in a report that the KOSPI 200 controlling shareholders' net profit consensus of 783.7 trillion won this year "in reality needs to be revised down by 60 trillion to 100 trillion won."
Looking only at results through the second quarter, the trend was strong. Second-quarter operating profit for KOSPI 200 corporations was 245.3 trillion won, up 285.7% from a year earlier and 44.9% from the previous quarter, marking a record high. Controlling shareholders' net profit also rose to 237 trillion won, up 429.7% and 69.0%, respectively.
However, one-off valuation gains played a large role in the net profit increase. SK hynix reflected 63.3 trillion won in valuation gains from investment assets such as its equity in Kioxia, and including equity-method effects at SK Square and SK, the related increase in net profit was estimated at 78 trillion to 79 trillion won. Excluding this, second-quarter KOSPI 200 controlling shareholders' net profit is analyzed at about 159 trillion won, up 13.3% from the prior quarter.
Kim analyzed, "The second-quarter valuation gains from SK hynix's Kioxia equity are highly likely to be recognized as large valuation losses in the third quarter." Based on Kioxia's current share price, the calculation is that the third-quarter KOSPI 200 controlling shareholders' net profit outlook should be lowered by about 54 trillion won when combining the impacts on SK hynix, SK Square and SK.
The potential for higher fourth-quarter expense was also cited as a burden. In the fourth quarters of 2020–2024, one-off expenses averaged about 22.9 trillion won. This year, there is an outlook that demands for larger bonuses could grow in sectors with sharply improved results, including Samsung Electronics and SK hynix, as well as defense, shipbuilding, machinery and finance.
First-half KOSPI 200 controlling shareholders' net profit totaled 377.3 trillion won. But excluding Kioxia-related valuation gains, underlying net profit falls to about 298.8 trillion won. To achieve the current market expectation for annual net profit of 783.7 trillion won as is, high profit growth would need to continue in the second half, but given valuation losses and expense increases, a lowering of expectations is seen as inevitable.
The growth pace of the semiconductor cycle is also showing signs of slowing. In the second quarter, KOSPI manufacturing sales growth rate reached a record high of 37.4% from a year earlier, helped by higher semiconductor prices, since the adoption of K-IFRS. However, starting in July, the year-over-year growth in export prices for DRAM and NAND began to slow, and as the won-dollar exchange rate also fell, BNK Investment & Securities projected that third-quarter manufacturing sales growth rate is likely to stay at second-quarter levels.
Kim said, "In dollar terms, DRAM and NAND prices are continuing to rise, but the fact that the pace of increase has started to slow could lead to weaker stock price momentum."