[R&E] Semiconductor Exports Achieve +33.9% Feat, Heavy Industries Enter 20% Margin Big Cycle

[R&E: Research & Epoch]

This is News Epoch's signature report that analyzes vast market data to overview a new era of investment.

Market Overview: Key Indicators and Trends

Last weekend, the US stock market closed lower, led by technology stocks, as concerns over hawkish monetary policy resurfaced. Along with rumors of Kevin Warsh being nominated as the next Fed Chair, the core Producer Price Index (PPI) for December recorded +0.7%, significantly exceeding the market consensus of 0.2%, which stimulated concerns about liquidity tightening. Consequently, the S&P 500 (NYSE: SPX) index fell by -0.43%, and the Nasdaq (NASDAQ: IXIC) index dropped by -0.94%. The yield on the US 10-year Treasury note is under upward pressure, centered on long-term bonds, suggesting it will not be easy to break below the 4% threshold in the first quarter.

Despite global tightening risks, the domestic stock market is maintaining a solid trend based on the strength of technology stocks. January export data surged +33.9% year-on-year, recording eight consecutive months of growth and raising the market's fundamental expectations. In particular, semiconductor exports accounted for 31.2% of the total, demonstrating an overwhelming concentration. This indicates that the expansion of high-value-added memory demand driven by AI infrastructure expansion is leading structural changes. Today, the domestic stock market will be partially affected by the weakness of tech stocks in New York, but it is analyzed that the acceleration of memory price increases and the earnings surprise momentum of key industries will provide downward rigidity. In the absence of interest rate hike factors, the buying area based on the carry strategy of high-quality bonds remains valid, and it is certain that liquidity will be concentrated around core sectors that have secured long-term growth visibility.

Core Industry Issues and Insights

As we enter the AI infrastructure expansion phase, the pace of improvement in the memory semiconductor industry is proceeding faster than expected. The increases in DRAM exports by +176% and NAND exports by +366% confirmed in the January export data show that the growth of high-value memory is simultaneously accelerating in terms of both price and volume. This is the background behind semiconductor equipment companies like KLA (NASDAQ: KLAC) breaking their all-time high revenue records for three consecutive quarters, and it adds weight to the analysis that the growth rate of the DRAM sector in wafer fab equipment (WFE) spending will surpass the foundry and logic sectors in 2026. However, in the IT end-consumer goods market, an adjustment of earnings expectations is essential, as Apple (NASDAQ: AAPL) faces supply constraints for the 3nm process and a trend of strengthened cost management by client companies.

Korea's high-value-added heavy industries, such as shipbuilding, power equipment, and defense, have secured new market leadership by recording overwhelming profitability. In the shipbuilding sector, Samsung Heavy Industries (KRX: 010140) achieved an operating profit margin of 10.4% in the fourth quarter. It is expected to continue top-line growth and profitability improvement through the effect of selective high-priced orders in the commercial vessel sector in addition to FLNG. In the power equipment sector, Hyosung Heavy Industries (KRX: 004800) announced its highest-ever performance, recording a 20.2% operating profit margin in the heavy industry division thanks to the temporary effect of delivering high-margin North American volumes. As a result of a significantly improved backlog composition, with North America accounting for 38% of its 12.0 trillion won order backlog, it is highly likely to re-enter the 20% margin level in the second half of the year. In the defense sector, Hyundai Rotem (KRX: 064350) fell short of expectations for its fourth-quarter earnings due to the reflection of temporary costs, but it secured long-term growth visibility based on an order backlog of 10.5 trillion won, with the operating profit margin for defense solution exports reaching 35%.

The financial sector is highlighting its undervaluation appeal through solid capital management and proactive shareholder return policies. Hana Financial Group (KRX: 086790) met market expectations for its fourth-quarter controlling interest net income, and while maintaining its Common Equity Tier 1 (CET1) ratio at 13.37%, it pre-emptively announced a share buyback of 200 billion won in 2026, raising expectations of achieving a 50% total shareholder return rate. On the other hand, in the pharmaceutical and bio sector, ABL Bio (KRX: 298380) saw its stock price plummet by about 19.5% following Sanofi's adjustment of development priorities, with the uncertainty of its technology export contract acting as a risk factor.

Market Signals

• Korea's January Export Growth Rate: Surged by +33.9% year-on-year, recording eight consecutive months of growth. Semiconductor exports acted as the main driver of overall growth, deepening concentration in the tech industry.

• Hyosung Heavy Industries' Heavy Industry Division Profit Margin: Achieved a quarterly high of 20.2% due to the effect of delivering high-margin North American volumes. The order backlog is 12.0 trillion won, up +29.9% year-on-year.

• Hana Financial Group CET1 Ratio: Recorded 13.37%, proving solid capital management capabilities. The total shareholder return yield for 2026 is estimated at 7.8%.

Epoch View: Investment Implications

As AI infrastructure expansion establishes itself as a structural trend, capital concentration in semiconductors and high-value-added industries is expected to deepen. Rather than short-term momentum, focus should be placed on companies that have secured long-term profitability through order backlogs and technical entry barriers. In particular, heavy industries such as shipbuilding, defense, and power infrastructure are in a phase of structuring significantly higher profit margins compared to the past as the delivery of high-margin overseas volumes begins in earnest. A strategy of expanding weighting in companies that have secured high order backlogs and margin rates in the 20% range remains valid.

In a situation where macroeconomic uncertainty has increased, the financial sector, which has clarified its commitment to shareholder returns based on solid capital ratios, is suitable as an alternative investment destination. On the other hand, for areas where earnings uncertainty or contract delay risks have been highlighted, such as secondary batteries and some bio sectors, a cautious wait-and-see strategy is required until the visibility of earnings recovery in the second half of the year is secured.