Hanwha Investment Sets 2027 Kospi Target at 8,500; Broker Views Diverge on Chip Earnings

Hanwha Investment & Securities has set a 2027 target of 8,500 for the Kospi, arguing that stronger profitability at South Korean companies has yet to be fully reflected in share prices. BNK Investment & Securities, by contrast, put the index's fair value at 6,700, citing the concentration of earnings in semiconductors and the burden of rising supply.

In its "2027 Equity Outlook" report released on Oct. 22, Hanwha projected the Kospi in a range of 6,000 to 9,300. Its 8,500 target is based on a 12-month forward price-to-book ratio, or PBR, of 1.32 times. Rather than assuming earnings growth will keep accelerating sharply, the firm focused on improved return on equity, or ROE, being reflected in valuations.

Ha Jang-kwon, an analyst at Hanwha Investment & Securities, wrote that the market-implied ROE embedded in current share prices is about 11%, well below the trailing 12-month figure of 16% and the 12-month forward estimate of 26%. Recognition through PBR that matches the higher ROE level would be sufficient, he added. He also pointed to long-term memory supply contracts and next year's negotiations over high-bandwidth memory, or HBM, prices as factors that could improve earnings visibility.

Hanwha also factored the burden of high interest rates into its rebound path. The firm said tight policy and shrinking liquidity would continue through the first quarter of 2027, but lower share prices should improve valuations enough to support a rebound. It expects the Kospi to establish itself above 8,000 in the fourth quarter of 2027.

DB Financial Investment also presented a base-case scenario of 8,150 for the Kospi in 2027. Still, it capped the upper end of its target price-to-earnings ratio, or PER, at 6.6 times to reflect the concentration of profits in semiconductors.

BNK Investment & Securities applied more conservative assumptions to future profitability. It estimated the Kospi's fair value at 6,700 based on a view that ROE will decline to 21% in 2028. Only in its most optimistic scenario would the index recover the 8,000 level.

BNK estimated that semiconductors will account for 80.9% of controlling shareholders' net profit in the Kospi 200 next year. Kim Sung-no, an analyst at the firm, cited supply pressure from increased semiconductor capital expenditure, slowing global liquidity and outflows from domestic equity funds as risk factors.

Seol Tae-hyun, an analyst at DB Financial Investment, said investors need to consider when to rebalance during the year, given the possibility of a slowdown in the semiconductor earnings cycle.