[R&E] ISU PETASYS and Shinheung SEC Improve Earnings Amid KOSPI's 1.55% Drop, Hit by Rising US Treasury Yields

[R&E: Research & Epoch] This is News Epoch's signature report that integrates and analyzes global financial data and domestic securities firm research to shed light on a new era of investment.

Global Market Brief

As the upward trend in long-term US Treasury yields prolongs, the valuation burden on the global asset market has intensified. In the New York stock market the previous day, the tech-heavy NASDAQ Composite closed at 26,289.71 points, down 1.33% from the previous day. The large-cap S&P 500 index also slipped 0.69% from the previous day to 7,691.76 points, and the blue-chip Dow Jones Industrial Average dropped 0.22% to 53,343.40 points, recording a synchronized weakness. In particular, the Philadelphia Semiconductor Index plunged 4.98%, highlighting a prominent sell-off to realize profits in the semiconductor sector, which had shown recent strength.

The 30-year US Treasury yield surpassed 5.33% during intraday trading, reaching its highest level since 2007, which stimulated risk aversion. Although US import prices in July, an indicator of inflation slowdown, fell 0.4% from the previous month to mark the lowest level in 14 months, it was not enough to prevent a "tantrum" in interest rates. Furthermore, West Texas Intermediate (WTI) crude oil futures prices rose 0.52% from the previous day to $84.94 per barrel, supporting concerns over rising energy costs. The macroeconomic environment where high interest rates and high oil prices intersect increased the pressure for global funds to exit emerging markets, placing heavy downward pressure on the domestic stock market as well.

Domestic Market Overview

As the high interest rate shock from overseas was fully absorbed, the domestic stock market surrendered its intraday gains and turned bearish the previous day. The KOSPI index closed at 6,869.83 points, down 1.55% from the previous day. Supported by the semiconductor strength in the New York stock market just before the alternative holiday, the index touched the 7,200 level in early trading, but returned its gains due to profit-taking sell-offs. The KOSDAQ index also dropped 3.52% from the previous day to 834.20 points, with sell-offs concentrated on small and medium-sized stocks.

In the Seoul foreign exchange market, the USD/KRW exchange rate closed at 1,411.6 won, down 5.4 won from the previous day, slightly easing the strong dollar pressure. On the supply and demand side, continued net selling by institutions led the index decline. For today's regular market, as of 9:10 AM before the market opens, it is analyzed that it will be difficult to avoid a contraction in investor sentiment due to the previous day's plunge in tech stocks. In particular, while early-trading volatility expands for large-cap stocks such as semiconductors and secondary batteries, there is a high possibility of a thoroughly differentiated market unfolding based on the Q2 earnings report cards of individual companies.

Key Industry Issues and Insights

Semiconductor Equipment and Substrates: Earnings Differentiation Accelerates Amid Continued Big Tech Infrastructure Investment
The global demand for artificial intelligence (AI) infrastructure construction is driving an upward trend in the earnings of South Korean semiconductor substrate and inspection equipment companies. ISU PETASYS (KOSPI: 007660) posted Q2 consolidated sales of 379.9 billion won, up 57.4% year-on-year, and operating profit rose 83.3% to 77.1 billion won (OPM 20.3%), exceeding the market consensus. As the effects of capacity expansion materialized, the headquarters' average monthly sales expanded from 99.1 billion won in Q1 to a higher figure in Q2. Additionally, the company significantly benefited from price hike effects as the demand for Multi-Lam substrates continued to exceed supply. TLB (KOSDAQ: 356860) also renewed its record high with a Q2 order backlog of 131.8 billion won, significantly increased from Q1 (53.9 billion won). This suggests that shipments of high-value-added products, such as next-generation SOCAMM, will be concentrated in the second half of the year, leading to improved profit margins.

Semiconductor front-end process and inspection equipment companies also showed solid trends. YC (KOSDAQ: 232140) posted a Q2 operating profit of 15.1 billion won, exceeding the market consensus by 51%. The forecast for expanded wafer tester demand in line with the clients' DRAM capacity expansion in 2027 played a key role. TES (KOSDAQ: 095610) recorded Q2 sales of 123.7 billion won, growing 51% year-on-year, and its operating profit increased by 28% to 26 billion won. PSK (KOSDAQ: 319660) and TCK (KOSDAQ: 064760) also reported operating profits of 50.3 billion won and 26.8 billion won, respectively, meeting or holding up well against market expectations. The strengthened bargaining power of parts and equipment suppliers during the transition process of high-spec memory semiconductor processing was proven through earnings.

Secondary Battery and BESS Components: Seeking a Breakthrough with Battery Energy Storage Systems (BESS) Amid EV Stagnation
Amid concerns over short-term demand stagnation in the electric vehicle (EV) market, domestic secondary battery component and material companies are finding breakthroughs by expanding their supply chains for utility-scale battery energy storage systems (BESS). Foosung (KOSPI: 093370) achieved Q2 consolidated sales of 188.2 billion won and an operating profit of 23.4 billion won. It successfully turned a profit from an operating loss (-3.4 billion won, excluding Hantec) in the same period last year, recovering its earnings stamina. The rise in selling prices of semiconductor specialty gases and refrigerants, along with the normalization of lithium hexafluorophosphate (LiPF6) production volume, led the earnings rebound.

The earnings growth of small giant companies within the BESS component supply chain also stood out. Sangsin EDP (KOSDAQ: 091580) posted a Q2 operating profit of 6.4 billion won, surging year-on-year. The company secured mid-to-long-term growth momentum by deciding to install four additional prismatic can manufacturing lines for BESS in the US by the first half of next year, up from the current six. Shinheung SEC (KOSDAQ: 243840) also reported Q2 sales of 131.6 billion won, growing 28% year-on-year, while its operating profit skyrocketed 143% year-on-year to 5.2 billion won. Sales of cylindrical CIDs, driven by increased demand for battery backup units (BBUs) for data centers, supported the earnings. On the other hand, COWINTECH (KOSDAQ: 282880), a company specializing in automated facilities, recorded Q2 sales of 58.4 billion won, an increase of 21.4% from the same period last year, but continued its deficit by posting an operating loss of 7.4 billion won. This is analyzed as the result of the overlapping effects of rising cost burdens and delays in revenue recognition for some projects.

Market Signals

• 30-Year US Treasury Yield Hits Highest Since 2007: The 30-year US Treasury bond yield surpassed 5.33% during intraday trading, reaching its highest level since 2007, demonstrating long-term inflation and fiscal burdens.

• US July Import Prices Slow Down: US import prices in July fell 0.4% month-on-month, recording the lowest level in 14 months, with declining import fuel prices leading the inflation slowdown.

• ISU PETASYS AI Substrate Strong Earnings: ISU PETASYS's Q2 operating profit increased by 83.3% year-on-year to 77.1 billion won, beating the consensus and proving the strong demand for multi-layer MLBs.

• Surge in Big Tech Fundraising: The corporate bond issuance by US hyperscalers and big tech companies surged to approximately $220 billion, amplifying the supply burden of long-term government bonds.

Epoch View: Investment Implications

Although downward pressure on valuations due to rising global bond yields is spreading across the board, the fundamentals of South Korean parts and equipment companies with solid physical earnings remain unshaken. The profit reliability of the substrate and packaging value chains, which directly benefit from AI infrastructure expansion, such as ISU PETASYS and TLB, has further increased. Even within the secondary battery sector, companies like Sangsin EDP and Shinheung SEC, which successfully targeted the US BESS market beyond simple EV component supply, have proven the fruits of portfolio diversification through their earnings. For the time being, macroeconomic volatility will act as downward pressure on stock prices, but market attention will inevitably shift toward the pricing power and order backlogs of individual companies verified by numbers. A selective approach centering on parts companies that maintain robust earnings amid the restructuring of global supply chains is required.

This content was generated by News Epoch's proprietary AI algorithm, which tracks and analyzes public data from research centers of major domestic securities firms and global financial media in real-time. It is an objective summary based on collected data, and it is clarified that this does not constitute an investment solicitation or recommendation for any specific stock.