20171011-三星证券-Chemicals_and_steel_still_preferred_18页_1001kb_1001kb

报告摘要

Samsung Strategy Weekly Summary

Core Content

This report provides an analysis of the Korean stock market and sector performance for the third quarter of 2017. It outlines key market and sector views, including earnings forecasts, valuation metrics, and investment recommendations.

Main Points

3Q Earnings Preview

Kospi 200 operating profit for 3Q is expected to reach KRW45.6t, and net profit is expected to reach KRW32t.
The y-y growth is estimated at 45.8% for operating profit and 49.6% for net profit.
Earnings are expected to be largely flat q-q, indicating the growth is driven by a low base.
Semiconductors are still a key driver of earnings growth.
Earnings gains are also expected in non-semiconductor sectors, with an overall 8.9% y-y increase in net profit.
Consensus estimates for 3Q have declined from end-August levels, but the corporate earnings uptrend remains intact.
4Q forecasts have increased, supporting the view that the earnings trend is ongoing.
Full-year 2017 results are unchanged, while 2018 forecasts have increased steadily.

Market Valuation (12m Fwd)

Kospi P/E is 9.2, P/B is 1.0, and ROE is 10.8.
Kospi 200 has a P/E of 14.7, P/B of 2.2, and ROE of 14.8.

EPS Forecast Changes (12m Fwd)

Kospi EPS growth is estimated at 2.3% in 1M, 6.4% in 3M, and 15.6% in 6M.
Kospi 200 has a 2.2% 1M, 7.4% 3M, and 12.8% 6M forecast change.

Sector Views

Promising Sectors

Chemicals and steel remain preferred due to earnings momentum and historical/relative valuation merit.
Software industry is also significantly attractive, with shares down from 2Q levels.
Market sensitivity to geopolitical risk is easing, offering a good opportunity to accumulate shares.

Sector Changes

Hotel/leisure services have moved from value trap to overweight.
Chemicals and IT hardware have moved from underweight to expensive.
Banking and IT appliances have moved from expensive to underweight.

Kospi Thermometer

Technical Indicators

The Kospi Thermometer has moved to bullishness since September.
Overbought at 10, Bull at 8–9, Neutral at 5–7, Bear at 3–4, Oversold at 0–1.

Fundamental Indicators

Value trap at 0, Bull at 1–3, Expensive at 4, Bear at -1–-3.

Sector VEM Model

Energy sector is expected to show strong EPS growth (80.2% y-y).
Chemicals sector is expected to show 47.1% y-y EPS growth.
Steel sector is expected to show 15.0% y-y EPS growth.
Construction and Machinery are also expected to show positive growth.
Auto and auto parts have the largest forecast cuts, due to China risk and ordinary wages debate.
Display sector also faces significant forecast cuts.

Key Points to Watch for 3Q

Energy and chemical sectors have seen increased contribution to Kospi 200 net profit.
Auto and auto parts and display sectors have seen reduced contribution.
China-related stocks (leisure, cosmetics, autos) have limited contribution to net profit.
Overseas production is a likely cause of the decline in R² between exports and corporate earnings.
Trade protectionism is expected to further reduce R².

Best of Samsung (Sep 27–Oct 10)

Steel/Non-ferrous Metals

OVERWEIGHT due to recovery in demand and industry restructuring.
Posco and Korea Zinc are top picks.
Anemic 2018 outlook offers a good opportunity to accumulate.

Healthcare

OVERWEIGHT due to favorable policy environment.
The government unveiled a 10-year blueprint for biotech, aiming to make Korea a global powerhouse.
Biotech Special Committee will oversee systematic efforts to nurture the industry.
Pharmaceuticals, biotech, and medical device players are expected to benefit.

Chemicals

OVERWEIGHT due to rebounding product prices and spreads.
Lotte Chemical is expected to see largest gains.
China's scrap plastics import ban is expected to impact the sector.
Near-term destocking may drive corrections, offering accumulation opportunities.
Lotte Petrochemical and LG Chem are top picks.

October Samsung Model Portfolio

Energy

SK Innovation is recommended with a target price of KRW500,000.
P/E is 18.4, P/B is 12.0, EV/EBITDA is 1.0.
EPS growth is 17.1%, ROE is 8.7%, Dividend yield is 1.9%.

Materials

Lotte Chemical is recommended with a target price of KRW470,000.
P/E is 27.7, P/B is 15.5, EV/EBITDA is 1.9.
EPS growth is 45.6%, ROE is 13.4%, Dividend yield is 1.4%.
LG Chem is recommended with a target price of KRW415,000.
P/E is 27.6, P/B is 9.7, EV/EBITDA is 0.6.
EPS growth is 108.3%, ROE is 6.6%, Dividend yield is 1.1%.
Posco is recommended with a target price of KRW590,000.
P/E is 9.4, P/B is 12.5, EV/EBITDA is 1.4.
EPS growth is 26.8%, ROE is 12.9%, Dividend yield is 2.0%.

Industrials

LS Industrial Systems is recommended with a target price of KRW71,000.
P/E is 1.6, P/B is 13.7, EV/EBITDA is 1.4.
EPS growth is 46.4%, ROE is 10.6%, Dividend yield is 2.2%.
LIG Nex1 is recommended with a target price of KRW90,000.
P/E is 1.6, P/B is 16.1, EV/EBITDA is 2.3.
EPS growth is 29.3%, ROE is 14.9%, Dividend yield is 1.3%.
Doosan Bobcat is recommended with a target price of KRW46,000.
P/E is 3.7, P/B is 16.9, EV/EBITDA is 1.1.
EPS growth is 21.3%, ROE is 6.3%, Dividend yield is 2.2%.
Hyundai Mipo Dockyard is recommended with a target price of KRW134,000.
P/E is 1.9, P/B is 9.7, EV/EBITDA is 0.7.
EPS growth is 463.5%, ROE is 8.3%, Dividend yield is 0.0%.
Jeju Air is recommended with a target price of KRW47,000.
P/E is 0.9, P/B is 11.0, EV/EBITDA is 2.8.
EPS growth is 60.1%, ROE is 28.2%, Dividend yield is 1.4%.

Consumer Discretionary

Hyundai Motor is recommended with a target price of KRW175,000.
P/E is 33.2, P/B is 10.7, EV/EBITDA is 0.6.
EPS growth is 25.9%, ROE is 5.8%, Dividend yield is 2.0%.
Hanon Systems is recommended with a target price of KRW14,000.
P/E is 6.7, P/B is 22.0, EV/EBITDA is 3.4.
EPS growth is 4.9%, ROE is 16.1%, Dividend yield is 0.6%.
Woory Industrial is recommended with a target price of KRW37,000.
P/E is 0.3, P/B is 25.4, EV/EBITDA is 4.3.
EPS growth is 1.1%, ROE is 18.2%, Dividend yield is 0.1%.
Hankook Tire is recommended with a target price of KRW75,000.
P/E is 7.5, P/B is 9.1, EV/EBITDA is 1.1.
EPS growth is -6.0%, ROE is 13.0%, Dividend yield is 0.7%.
Loen Entertainment is recommended with a target price of KRW100,000.
P/E is 2.2, P/B is 28.8, EV/EBITDA is 6.4.
EPS growth is 22.7%, ROE is 24.2%, Dividend yield is 1.2%.
Lotte Himart is recommended with a target price of KRW90,000.
P/E is 1.6, P/B is 10.2, EV/EBITDA is 0.8.
EPS growth is 25.7%, ROE is 7.8%, Dividend yield is 0.8%.

Consumer Staples

KT&G is recommended with a target price of KRW140,000.
P/E is 14.5, P/B is 13.7, EV/EBITDA is 1.7.
EPS growth is -14.4%, ROE is 14.3%, Dividend yield is 3.6%.
LG H & H is recommended with a target price of KRW1,210,000.
P/E is 14.6, P/B is 24.2, EV/EBITDA is 5.1.
EPS growth is -14.4%, ROE is 14.3%, Dividend yield is 3.6%.

Financials

Banks are recommended with a target price of KRW25.0%.
P/E is 33.2, P/B is 10.7, EV/EBITDA is 0.6.
EPS growth is -25.9%, ROE is 5.8%, Dividend yield is 2.0%.
Securities are recommended with a target price of KRW14.3%.
P/E is 6.7, P/B is 22.0, EV/EBITDA is 3.4.
EPS growth is -4.2%, ROE is 16.1%, Dividend yield is 0.6%.
Insurance is recommended with a target price of KRW18.1%.
P/E is 3.7, P/B is 15.5, EV/EBITDA is 3.6.
EPS growth is -15.5%, ROE is 361.3%, Dividend yield is 8.8%.

IT

Software is recommended with a target price of KRW500,000.
P/E is 13.0, P/B is 5.6, EV/EBITDA is 1.1.
EPS growth is 25.7%, ROE is 22.1%, Dividend yield is 1.1%.
Hardware is recommended with a target price of KRW140,000.
P/E is 1.6, P/B is 13.7, EV/EBITDA is 1.4.
EPS growth is -17.8%, ROE is 10.4%, Dividend yield is 6.9%.
Semiconductor is recommended with a target price of KRW393,757.
P/E is 1.6, P/B is 13.7, EV/EBITDA is 1.4.
EPS growth is -17.8%, ROE is 10.4%, Dividend yield is 6.9%.
Appliances is recommended with a target price of KRW27,134.
P/E is 1.6, P/B is 13.7, EV/EBITDA is 1.4.
EPS growth is -17.8%, ROE is 10.4%, Dividend yield is 6.9%.
Display is recommended with a target price of KRW11,322.
P/E is 0.7, P/B is 13.7, EV/EBITDA is 1.4.
EPS growth is -17.8%, ROE is 10.4%, Dividend yield is 6.9%.

Telecom Services

Target price is KRW34,030.
P/E is 8.7, P/B is 0.9, EV/EBITDA is -0.5.
EPS growth is -4.3%, ROE is -0.8%, Dividend yield is 1.4%.

Utilities

Target price is KRW31,480.
P/E is 6.4, P/B is 0.4, EV/EBITDA is -1.9.
EPS growth is -17.1%, ROE is -13.5%, Dividend yield is 0.1%.

Key Notes

Geopolitical risk remains high, but investors should focus more on fundamentals.
Kospi Thermometer is bullish due to earnings improvement in non-IT and non-banking sectors.
R² between exports and corporate earnings has declined, due to increased overseas production.
China-related stocks are expected to have limited contribution to net profit.
Software and IT hardware are attractive due to low valuations and high growth potential.
Steel and chemicals are preferred due to strong fundamentals and potential for earnings growth.