Disappointing Samsung Earnings Drag 'S7' Stocks Into Plunge

Leading 'S'-group large-cap stocks on the Kospi plunged in unison on the 7th. This followed Samsung Electronics' preliminary second-quarter performance falling short of market expectations. As of 12:54 PM today, Samsung Electronics was trading down 8.73% from the previous session. SK Hynix fell 9.22%. SK Square recorded the steepest decline with a drop of 12.78%. Samsung Electronics Preferred dropped 7.81%, Samsung Electro-Mechanics 10.50%, Samsung Life Insurance 7.50%, and Samsung C&T 6.45%.

These seven companies, known as 'S7', are directly or indirectly linked through shareholdings and business operations, creating a structure where a shake-up in one stock triggers chain reactions in the others. Specifically, SK Square, a mid-tier holding company with stakes in SK Hynix, moves in tandem with the semiconductor blue chip.

Samsung Electronics disclosed preliminary consolidated second-quarter results of 171 trillion won in sales and 89.4 trillion won in operating profit. This represents a record high, surging 129.31% in sales and 1810.26% in operating profit year-on-year. The performance-based bonus reserve for this quarter is estimated at approximately 20 trillion won. Factoring this deduction from operating profit suggests the actual scale of profit generation surpassed 100 trillion won.

Driven by expectations of a memory super-cycle and expanding demand for High Bandwidth Memory (HBM), market forecasts had projected operating profit between 90 trillion and 100 trillion won. This significantly surpassed the consensus estimate (84.98 trillion won). The brokerage sector interpreted the released preliminary figures, which fell short of these figures, as a 'sell the news' pattern, where profit-taking emerged after stock prices rose on expectations of earnings improvements. Samsung Electronics has seen repeated instances of its stock price falling on the day of preliminary earnings announcements over the past two years.

Meanwhile, upside factors such as expanded investment in artificial intelligence (AI) servers and improving market conditions remain intact in the semiconductor market.