[R&E] Earnings Volatility Warning Amid the 'Era of Semiconductors'... Oil Price Shock and Sector-by-Sector Stock Picking in Full Swing

[R&E: Research & Epoch]

This is News Epoch's signature report that provides a prospect of a new era of investment by comprehensively analyzing global financial data and domestic securities firm research.

Global Market Brief

The New York stock market closed higher the previous day, driven by the strength of tech stocks. S&P 500 index recorded 6,886.24 points, up 1.02%, and the NASDAQ index showed 23,183.74 points, rising 1.23%. The Dow Jones Industrial Average also finished trading at 48,218.25 points, up 0.63%. In particular, the Philadelphia Semiconductor Index rose 1.68%, proving the solid trend of the technology sector. This suggests that the demand for AI-related technologies is persisting, as seen by Intel (NASDAQ: INTC) recording a nine-day consecutive upward trend after announcing deals with Google and Elon Musk.

However, international oil prices rose due to geopolitical risks originating from the Middle East, exacerbating global inflation pressures. West Texas Intermediate (WTI) crude recorded $99.08, up 2.60%, and Brent crude reached $99.36, rising 4.37%, surpassing a high of $105 during intraday trading. The conflict involving Iran and the announcement of a blockade of the Strait of Hormuz triggered instability in the energy supply chain, leading to the rise in oil prices. This surge in oil prices is expected to significantly exceed the global inflation rate and act as a factor increasing the cost burden on domestic companies. European stock markets closed lower in the aftermath of the Middle East risks, revealing that the uncertainty of the global economy has deepened.

Domestic Market Overview

On the previous trading day, the domestic stock market showed a mixed trend. The KOSPI closed at 5,808.62 points, down 0.86% from the previous day, influenced by global geopolitical risks and high exchange rate pressures. On the other hand, the KOSDAQ recorded 1,099.84 points, up 0.57%, indicating the strength of some small and medium-sized IT and technology stocks.

The dollar-won exchange rate showed an upward trend, recording 1,489.30 won in the Seoul foreign exchange market on the previous trading day, but today's NDF (1-month) exchange rate is expected to start at 1,478.58 won, down about 5 won from the previous day. High volatility in the exchange rate can have a direct impact on the financial soundness of import and export companies.

A positive signal was captured in export indicators. From April 1 to 10, South Korea's export value reached $25.21 billion, up 36.7% compared to the same period last year, breaking the all-time high. In particular, semiconductor exports recorded $8.57 billion, surging by 152.5% year-on-year, proving to be a key driver of domestic economic recovery. This is in line with Taiwan's monthly export volume surpassing $80 billion for the first time in history, suggesting that the positive impact of increased global AI demand on the East Asian semiconductor industry is significant. The Bank of Korea froze the benchmark interest rate at 2.5% for the 7th consecutive time at the April Monetary Policy Board meeting, but the inflation rate for 2026 is analyzed to be around 2.7~2.8%, significantly exceeding the previous forecast of 2.2%. This proves that the dilemma between inflation and growth is persisting.

Key Industry Issues and Insights

The IT and semiconductor sector has secured a strong growth engine due to the expansion of global AI demand. The fact that semiconductor exports in early April surged by 152.5% year-on-year, breaking the all-time high, clearly shows this trend. In particular, as the cycle of expanding facility investments in the semiconductor industry is confirmed, earnings improvements for related equipment and materials companies are certain. GST, a company specializing in semiconductor gas equipment, is expected to achieve sales of 414.7 billion won (+19% YoY) and an operating profit of 71 billion won (+20% YoY) in 2026. The analysis is that it will continue its solid growth trend by directly benefiting from the expansion of memory facility investments. Exports of PI film, a high value-added material, also increased by 15.2% year-on-year, revealing a recovery in market demand. However, although PI Advanced Materials saw a 5.4% decrease in its first-quarter operating profit compared to the previous year, its annual operating profit for 2026 is highly likely to continue structural growth, increasing by 24.8% to 53.7 billion won. LG Display recorded a first-quarter operating profit of 172.8 billion won, exceeding market expectations by 17% and surging by 416%. This is the result of efforts to streamline the business structure and transition to high value-added products directly leading to earnings improvements.

The car rental market recorded varied earnings by company. Lotte Rental posted a first-quarter operating profit of 79.2 billion won, up 18.2% year-on-year, exceeding market expectations. This is thanks to stable rental car demand and the continuous contribution of used car sales profits. On the other hand, the used car platform K Car recorded a first-quarter operating profit of 21.3 billion won, down 0.9% year-on-year, falling short of market expectations. The main reason is the contraction of the addressable used car market. Accordingly, the target stock price of K Car was downgraded by 26.3% from the previous 19,000 won to 14,000 won. It is evident that even within the rental industry, earnings fortunes are mixed depending on business models and market environments.

The pharmaceutical and biotech sector is exploring growth momentum through new drug development and pipeline expansion. PharmaResearch recorded first-quarter sales of 145.2 billion won and an operating profit of 57.6 billion won, maintaining a solid growth trend, but slightly fell short of the market's high expectations. Chong Kun Dang is expected to meet estimates with a first-quarter operating profit of 15.2 billion won. In particular, as the quarterly sales of the obesity treatment 'Wegovy' reached about 50 billion won, emerging as a new growth engine, its target stock price was upgraded to 110,000 won. The fact that Yuhan's Gaucher disease treatment 'YH35995' was designated as an orphan drug by the US Food and Drug Administration is a factor that increases the value of its pipeline. In addition, the initiation of phase 1 clinical trials for the obesity treatment 'DA-1726' by Metavia, a subsidiary of Dong-A ST, indicates the acceleration of new drug development and reveals that research and development efforts to secure future growth engines are continuing.

Market Signals

• Surge in Semiconductor Exports: Semiconductor exports from April 1 to 10 recorded $8.57 billion, surging by 152.5% year-on-year, breaking the all-time high.

• Oil Prices Exceed $100: Both WTI and Brent crude rose, surpassing the $100 mark due to Middle East geopolitical risks.

• US Stock Market Tech Stock Strength: Philadelphia Semiconductor Index rose 1.68%, demonstrating a solid tech sector driven by sustained AI industry demand.

• Lotte Rental Strong Earnings: First-quarter operating profit reached 79.2 billion won, up 18.2% year-on-year, exceeding market expectations.

• K Car Target Price Downgrade: First-quarter operating profit decreased and target stock price was downgraded by 26.3% due to the contraction of the used car market.

Epoch View: Investment Implications

The global economy is finding strong growth engines in the solid trend of the US stock market and the surge in South Korean semiconductor exports. This is a structural change driven by the development of the AI industry and the expansion of memory facility investments. However, the rise in oil prices due to Middle East geopolitical risks poses the risk of increasing global inflation pressures and passing on cost burdens to domestic companies.

It is judged that the domestic market will continue a highly volatile trend as positive factors such as strong exports centered on semiconductors conflict with the high exchange rate and the stance of freezing interest rates. In this complex environment, careful analysis of the fundamental strength of individual companies and environmental changes even within a sector is essential. Semiconductor materials and equipment companies with certain growth momentum and specific biotech stocks expected to improve earnings are receiving market attention, whereas sectors experiencing industry slowdowns are expected to continue facing a contraction in investor sentiment. At a time when market volatility is expanding, a selective approach comprehensively considering macroeconomic indicators and whether individual companies improve their earnings is effective.

This content was generated through News Epoch's proprietary AI algorithm, which analyzes public data from major domestic securities firm research centers and global financial media in real time. We clarify that this is an objective summary based on collected data and does not constitute an investment solicitation or recommendation for specific stocks.