[R&E] AI Infrastructure Enters Physical Investment Cycle... Picking the Winners in K-Defense and Beauty Proven by 'Numbers' is Essential

[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

Yesterday, the New York stock market closed higher as bargain hunting flowed in based on solid economic indicators. The three major indices, including the Dow Jones Industrial Average (0.26%), S&P 500 (0.56%), and Nasdaq (0.78%), all drew an upward curve. In particular, the news that Meta (NASDAQ: META) is introducing millions of AI chips from Nvidia (NASDAQ: NVDA) and adopting the Grace CPU led the index rally, driven by the big tech and semiconductor sectors. However, strong industrial production and housing indicators in January pushed the 10-year US Treasury yield up to 4.083%, which is a factor stimulating uncertainty in monetary policy.

The domestic stock market, which was closed for the Lunar New Year holiday on the previous trading day, is expected to show volatility today by reflecting external variables. With the USD/KRW 1-month Non-Deliverable Forward (NDF) exchange rate recording 1,450.7 won, an upward start is expected compared to the previous day, so it is necessary to keep an eye on changes in supply and demand due to exchange rate fluctuations. The strength of US manufacturing indicators and the judgment of eased employment concerns in the Federal Open Market Committee (FOMC) minutes support a strong dollar, which is highly likely to act as a pressure limiting the upside of the domestic stock market today. However, it is analyzed that the strong earnings momentum of the AI and defense sectors will support the downside.

Key Industry Issues and Insights

The semiconductor and IT parts sector shows a distinct fundamental improvement due to the explosive surge in demand for AI servers. Samsung Electro-Mechanics (KOSPI: 009150) has raised its capacity utilization rate to the 90~95% level, and it is certain to benefit from an improved product mix following hints of price increases by Murata, a global leading company. In particular, Sunic System (KOSDAQ: 171090) drew market attention as its operating profit soared 1,597% year-on-year based on the recognition of orders for BOE's 8th generation OLED evaporation equipment. Japan's Union Tool (TYO: 6278) is also increasing its capital expenditure by 83% to respond to the demand for printed circuit board (PCB) drill bits for AI servers, indicating an intensifying supply shortage phase.

For the heavy industry and defense sectors, it is necessary to focus on the massive order backlog rather than short-term earnings volatility. LIG Nex1 (KOSPI: 079550) saw its fourth-quarter operating profit decrease by 31.8% due to the reflection of one-off losses, but secured a record order backlog amounting to 26.2 trillion won, preempting the next six years of work. Doosan Bobcat (KOSPI: 241560) is also highly likely to expand shareholder returns based on its 2 trillion won in cash and cash equivalents, despite concerns about an economic slowdown in North America. In the automotive sector, Hyundai Motor Company (KOSPI: 005380) surpassed 1 million units in cumulative sales of eco-friendly vehicles in the US, proving its solid market dominance centered on hybrids.

The consumer goods and bio sectors are undergoing strict differentiation based on earnings. Classys (KOSDAQ: 214150) expanded its overseas sales portion, including Brazil and the US, to 70.4%, surpassing 50 billion won in operating profit for the first time in a quarter. The fact that K-Beauty's exports to the UK surged by 117% year-on-year in January suggests that the growth momentum of the cosmetics sector is spreading across non-English-speaking regions. C&C International (KOSDAQ: 352480) underperformed in profitability due to the reflection of one-off costs, but its Chinese sales grew highly by 190%, ensuring top-line growth following the expansion of production capacity.

Market Signals

• Overwhelming Earnings Visibility: Sunic System (KOSDAQ: 171090) recorded a fourth-quarter operating profit of 53.6 billion won, a 1,597% increase year-on-year, driven by the order effect of its 8th generation OLED evaporation equipment, significantly exceeding market expectations.

• Six Years of Work for K-Defense: LIG Nex1 (KOSPI: 079550) secured an order backlog of 26.2 trillion won thanks to the expansion of exports to the UAE and Saudi Arabia, which is judged to have firmly solidified the foundation for mid-to-long-term earnings growth.

• K-Beauty Territory Expansion: January cosmetics exports to the UK surged by 117% year-on-year, proving through numbers the market share expansion of Korean brands centered on new channels such as TikTok Shop.

Epoch View: Investment Implications

The current market has entered the early stages of the AI J-curve, and it is time to focus on the physical investment cycle that goes beyond simple software and leads to infrastructure, power, and industrial materials. The solidness of US manufacturing indicators and aggressive capital expenditure (CAPEX) expansion by big tech are key drivers supporting the stock price momentum of semiconductor parts and equipment stocks. For the domestic stock market, along with the revaluation centered on financial stocks under the Corporate Value-up Program, a streamlining strategy focusing on the defense and medical device sectors with secured earnings visibility is effective.

As global geopolitical risks and US Treasury yield volatility persist, it is essential to build a defensive portfolio centered on companies rich in cash and cash equivalents while simultaneously pursuing a risk diversification strategy through precious metals such as gold and silver. In particular, large-cap stocks that have declared share buybacks and enhanced shareholder return rates are analyzed to provide strong downward rigidity during a stock market decline. In conclusion, a selective response focusing on sectors that prove solid earnings numbers even amidst macroeconomic uncertainty is the only way to increase the winning rate.

This content was created through News Epoch's proprietary AI algorithm, which tracks and analyzes public data from the research centers of major domestic securities firms in real time.
Please note that this is an objective summary based on collected data, and it is not an investment solicitation or recommendation for specific stocks.