KOSPI earnings at a glance:Resilient earnings ahead for 1Q16

Event

1Q16 earnings season started with Samsung Electronics’ preliminary resultsannounced on 7th Apr. The latest consensus revisions indicate there aregrowing expectations for resilient 1Q16 earnings for KOSPI 100 corporations.

Impact

Growing expectations for 1Q16 and 2016 earnings: Consensus estimatesfor 1Q16E EPS of KOSPI 100 have rapidly risen and are up 13.2% in the pastmonth. Given positive seasonality in 1Q and recent consensus revisions, weexpect 1Q16 corporate earnings would be relatively solid. Meanwhile,consensus 2016 EPS estimates are also up 5.2% in the past month.

Notable upward revisions were led by Energy/Industrials/IT sectors

+61.5% revisions to Energy were mainly driven by oil refineries (S-Oil, SKInnovation, GS Holdings) on the back of rising oil prices

+38.9% revisions to Industrials: most of sub-sectors (especiallytransportation/construction/shipbuilding) enjoyed significant upwardrevisions, except for Aerospace and Defence sectors.

+26.2% revisions to IT sector: Solid upward revisions were driven bygrowing earnings expectations for Samsung Electronics 1Q16 earningsand electronic part companies.

Downward revisions made only to Consumer Discretionary andSecurities sector

-5.3% downward revisions were led by Automobile (-5.5%), Hotel &Leisure (-9.9%), Media (-9.4%), Retailing (-5.3%). Among sectors,Consumer Durables (-1.6%) was the only relative outperformer.

-16.6% to securities firms: While consensus revisions for banks werequite small at +0.2%, -16.6% negative revisions were made to brokersdue to sluggish market turnover and an unfavourable macro environment.

Strong foreign inflow of Won2trn vs. domestic outflow W2.8trn

While most sectors enjoyed strong foreign inflow over the last 1M, theintensity strongest for cyclical sectors such as Energy (27bp, net-buy tototal market cap) /Materials (43bp) /Industrials (28bp), which were in linewith the positive upward earnings revisions.

However, foreign flow turned negative over the last 1 week by as muchas Won438bn, mainly led by the IT sector.

Meanwhile, domestic institutions net sold Won2.8trn over the last 1M andWon0.5trn over the last 1W.

Outlook

Considering positive seasonality in 1Q and notable upward consensusrevisions over the last 1 month, we think 1Q16 earnings would be relativelyresilient for KOSPI 100 companies. Although it is premature to expect astructural earnings turnaround, positive revisions for 2016E EPS would bepositive for investor sentiment.