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photo credit for POSCO Future M |
[Alpha Biz= Paul Lee] This year, research centers from securities firms have been lowering their investment ratings for sectors such as secondary batteries and gaming. Many of these ratings were downgraded to "Hold," a stance that is being viewed by the market as a recommendation for a "conservative approach."
According to financial information provider FnGuide, as of this year, there have been 59 instances where domestic securities firms lowered their investment ratings, compared to 39 where ratings were raised, a figure that's roughly half of the downgrades.
Securities firms typically offer recommendations like "Buy," "Neutral," or "Sell." This year, most reports downgraded ratings to "Neutral" (including "Hold"), totaling 44 instances. Only 3 reports were downgraded to "Sell." Since "Sell" recommendations are rare in the domestic securities industry, "Neutral" is often interpreted as a cautious stance, effectively leaning towards a "Sell" approach.
Looking at specific sectors, most of the downgrades are concentrated in secondary battery stocks such as POSCO Future M (2 downgrades), Samsung SDI (1 downgrade), and EcoPro BM (1 downgrade). The rationale behind these downgrades is the increased fixed costs and the difficulty in improving profitability in the short term.
The gaming sector also faced negative evaluations, as expectations for new releases faded. Meritz Securities lowered their ratings on Nexon Games and Shift Up, reducing their opinions to "Sell" and "Hold," respectively. Shift Up, which had been listed on the stock market for less than a year, is struggling with a lack of hit titles and underperforming existing games, which has held back the stock price.
Research analyst Lee Hyo-jin from Meritz Securities stated, "The lackluster performance of Nexon Games' Personal Descendants update, combined with large-scale hiring and a long wait until the next new release, has led to ongoing revenue decline. To regain attractiveness, a change in staffing decisions or a rebound in existing titles is needed."
In terms of specific stocks, automotive air-conditioning parts company Hanon Systems saw three reports downgrading its investment ratings this year. The reports cite uncertainty about potential U.S. tariffs on automobiles and the impact of the temporary demand stagnation in electric vehicles. Despite the Korean Company Group acquiring the firm and working to strengthen financial stability in January, Hanon Systems’ stock has fallen by 11.87% within a month.
Hotel Shilla and LG Household & Health Care also saw 3 and 2 downgraded reports, respectively. Both companies face inevitable performance declines due to weaker duty-free sales. Hotel Shilla’s struggles are attributed to high exchange rates and weakened consumer spending, making improvement in airport duty-free performance difficult. LG Household & Health Care is expected to face limited growth due to declines in sales from traditional channels like duty-free shops.
For stocks that experienced sharp increases in price over a short period, there were also downgrades. Korea Investment & Securities and LS Securities downgraded Hanwha Ocean from "Buy" to "Hold." As of the end of February, Hanwha Ocean’s stock price had more than doubled from the end of last year, and analysts expect limited further upside.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
