‘Stock diversification’ Analysis of the highest net stocks bought by foreigners
Large picture Mr Kim (37), an office worker who was all-in on Samsung Electronics, recently sold half of his stocks when the stock price adjusted this month. He also joined the selling trend of individual investors this month, predicting that the closing price would not exceed the record high of 88,000 won.
As of April 22, the net sales amount of Samsung Electronics by individuals amounted to 324.8 billion won. The selling by individuals was mainly due to the fact that the first report cards of the year from foreign semiconductor companies such as ASML of the Netherlands and TSMC of Taiwan were weaker than expected.
TSMC, the world’s No. 1 company in semiconductor foundry (load production) sales, including artificial intelligence (AI) chips, dropped its load production growth rate this year from 20% to the mid-10% range, creating fear in the market. Semiconductor equipment maker ASML’s first quarter performance lent support to the semiconductor bubble theory. This is because sales in the first quarter were down 27% compared to the fourth quarter last year.
Individual investors believe that their poor performance will ultimately lead to a worsening outlook for Samsung Electronics. Mr. Kim said, “AI-related semiconductor orders have already been completed and demand for electronic products is also slow, so the correction of semiconductor stocks is likely to continue for now ,” he added, “I want to counter the stock price correction period by including representative stocks from other industries.”
Recently, there has been a move among investors to protect their portfolios by buying stocks representing industries other than semiconductors. The people they refer to are foreigners. This month, foreigners have been quietly accumulating stocks that are representative stocks in the industry but are relatively neglected or undervalued. These stocks include Hyundai Rotem in the defense industry, Enchem, a secondary battery materials company, and Samsung Heavy Industries in the shipbuilding industry.
Investors like Mr. Kim who are looking to diversify their portfolios by exiting semiconductors are paying attention to these stocks. This month (April 1-22), foreigners gained 144.7 billion net worth of Hyundai Rotem stocks. As Iran and Israel exchange missiles and escalate to all-out war, domestic defense industry stocks are jolting together. Meanwhile, Hyundai Rotem is getting attention from foreigners as it is undervalued compared to Hanwha Aerospace, a leading defense stock.
According to FnGuide on the 23rd, Hanwha Aerospace’s price-to-earnings ratio (PER) based on net profit for the next 12 months is 18.25 times. By the same standard, Hyundai Rotem’s is 16.03 times. This is because Hanwha Aerospace’s stock price rose 79% from the 23rd of this year, but Hyundai Rotem’s rate of increase was less at 53%. Securities analysts believe Hyundai Rotem will fill this gap. The driving force behind this is the ‘surprise performance’ in the first quarter. Analysts at major securities firms have raised operating profit estimates for Hyundai Rotem by 50% in the past month. Hyundai Rotem’s performance is explained by Poland. In preparation for war, Poland has ordered a large number of weapons from Hyundai Rotem, and the supply of 18 K2 tanks is expected to be reflected in the performance of the first quarter. Hyundai Rotem, represented by the K2 tank, is expected to sign an additional contract for 820 units in the future. 500 units will be produced locally, and discussions regarding the transfer of tank technology are underway with Poland.
An official from a securities company said, “There is no information asymmetry in the information related to arms exports, either everyone knows it or everyone doesn’t.” He added, “It is suitable for general investors to invest based on performance alone.” Hyundai Rotem’s estimated operating profit for the first quarter is 54 billion won. This is an increase of 69.2% since the first quarter of last year.
There is also the good news that the company is the biggest beneficiary of the law review. Arms exports are so large that the importer often asks for financial assistance. Last year, Poland significantly increased its arms imports, but additional exports were put on hold because the bank’s funding limit was reached. Financial support is provided by the Export-Import Bank of Korea (Eximbank), and the capital limit is expected to increase significantly due to the revision of the Mercury Act this year.
Enlarge photo At the end of last year, Hyundai Rotem’s currency equivalent earned 396.1 billion. You can also estimate the stock price level based on cash equivalents. As of the 23rd, Hyundai Rotem’s market capitalization was 4.4475 trillion won, which is 11 times higher than its cash equivalent. By the same standard, the market capitalization of Hanwha Aerospace compared to its cash equivalent is 6 times. This is the result because Hanwha Aerospace’s cash assets are 1.8064 trillion won, which is 4.6 times that of Hyundai Rotem. This means that while Hyundai Rotem is undervalued in terms of net profit, Hanwha Aerospace is a cheaper stock in terms of cash equivalents. Enlarge photo Enchem stocks secondary battery materials. Four main materials, including electrolyte, are key materials in making secondary batteries. Other key materials include anode materials, cathode materials, and separators. Enchem is Korea’s largest electrolyte producer and the 4th largest global market share.
As we develop our existing electrolyte material technology, we are expanding our business from products focused on electric vehicles to energy storage systems (ESS). To this end, it continued to issue convertible bonds last year to raise investment funds, and continues to grow by acquiring the unlisted domestic company ‘TDL’ and investing in facilities in Tennessee, USA.
From an investor’s point of view, it is a typical high-risk, high-return stock. The stock price is bound to plummet as soon as the growth stops. As these risks are reflected, securities analysis of stocks like Enchem is rare. Daishin Securities is the only company that published a report on Enchem this year. Given its unrivaled position, the lack of stock market analysis of Enchem is close to a ‘dereliction of duty’.
As the US retains control of Chinese electrolyte companies, Enchem is expected to establish itself as the sole electrolyte company in North America. Even if other companies want to enter the market, it will take a long time, so Enchem’s performance this year is expected to improve significantly.
In 2023, Enchem’s sales and operating profit were 424.7 billion won and 3 billion won, respectively. Daishin Securities predicts that Encom’s sales will more than double and reach 1 trillion won in 2025. Yang Ji-hwan, a researcher at this securities company, said, “Enchem will advance to the United States with battery customers and significantly improve production capacity after 2025. In Europe, we will receive local supplies from LG Energy Solutions and SK On, focusing on Poland and Hungary “Performance will continue to increase,” he predicted.
Zoom image Along with Hyundai Rotem and Nchem, Samsung Heavy Industries is a stock that gets attention in the first quarter. This is because the three major domestic shipbuilding companies, HD Korea Shipbuilding & Marine Engineering, Samsung Heavy Industries, and Hanwha Ocean, are expected to achieve surpluses in the first quarter. This is the first time in 13 years since 2011 that they have made a surplus together. Now, it is expected that the long-term recession will emerge and the low price competition will end, focusing on eco-friendly, high added value ships.
Among the three companies, the ‘first choice’ of foreigners this month was Samsung Heavy Industries. Samsung Heavy Industries net purchase amount from foreigners is 84.1 billion won. During the same period, foreigners net sold HD Korea Shipbuilding & Marine Engineering and Hanwha Ocean. The reason why foreigners sent love calls to Samsung Heavy Industries this month is because of its performance and profitability. It is estimated that the operating profit of Samsung Heavy Industries in the first quarter won 84.4 billion, which is a rapid increase of more than four times from the 19.6 billion won in the same period last year.
High margins compared to other shipbuilders also increase the investment appeal of Samsung Heavy Industries. Samsung Heavy Industries’ operating profit ratio was 2.91% in 2023, but this year’s forecast is 4.35%. The expected operating profit ratios of HD Korea Shipbuilding & Marine Engineering and Hanwha Ocean this year are only 3.79% and 2.69%, respectively. Samsung Heavy Industries’ high profits are also a result of its aggressive ship sales. A representative example is the signing of a joint construction contract for 22 liquefied natural gas (LNG) carriers with Russia’s Zvezda Shipyard in 2021. The down payment alone is equivalent to 7.5 trillion won, which is similar to annual sales of Samsung Heavy Industries (8.094 trillion won in 2023). A securities company official pointed out, “As the United States punishes Russia for starting a war against Ukraine, Samsung Heavy Industries’ contract may be called into question.”
[문일호 기자]
#Ants #eating #spiky #semiconductors #Hyundai #Rotem #Nchem #Samsung #Heavy #Industries #hints #foreigners #shopping #carts
