Profit forecasts for the chemicals, construction and insurance sectors have been raised for both this year and next. Analysts say stocks in sectors backed by improving earnings outlooks and profitability could keep outperforming even as growth in overall market profits slows.
Of the 22 KOSPI sectors, 14 saw net profit forecasts for both 2026 and 2027 revised upward over the past month, according to FnGuide data released on the 8th.
Chemicals stood out. Net profit forecasts for the sector came to 14.6378 trillion won for this year and 15.6428 trillion won for next year, up 7.92% and 8.32%, respectively, from a month earlier — the third- and second-largest increases among the 22 sectors. Naphtha prices fell 15.9% last month while prices of key products including low- and high-density polyethylene (LDPE and HDPE) rose 5% to 11%, lifting expectations for better margins. "We believe chemical companies' earnings will improve more than initially forecast as the burden from negative lagging — losses stemming from the time gap between when crude is purchased and when products are sold — eases more than expected," said Baek Young-chan, head of the research center at Sangsangininvestment&Securities.
The upward revisions were larger for insurance. The forecast for this year rose 9.02%, second-largest among all sectors, while next year's forecast climbed 13.30%, the largest. The figures stand at 10.0496 trillion won and 13.5026 trillion won, respectively. Analysts attribute the revisions to better investment returns from rising long-term interest rates and expectations that the burden of indemnity insurance payouts will ease. In construction, net profit forecasts rose 2.87% and 0.96% to 2.61 trillion won and 3.2328 trillion won, helped by expanded housing supply and increased investment in artificial intelligence data centers and power grids. The government's 2027 budget proposal, which allocates 21.3 trillion won for three mega-projects and AI-related spending, also contributed.
Elsewhere, machinery and equipment was lifted by expectations for more orders in nuclear power, gas turbines and power infrastructure, while electrical and electronics benefited from demand and rising prices for AI server memory. Metals were supported by expanded power grid investment, strong copper prices and expectations of steel output cuts in China.
Still, the year-on-year growth rate for the KOSPI's 12-month forward net profit has fallen 8 percentage points from its peak of 328% last month. The rate for semiconductors also declined to 918% from 1,032% over the same period. Hana Securities said that since 2007, the KOSPI has fallen an average of 2.9% in the three months after profit growth peaked, while sectors whose net profit growth rate rose from the previous month gained an average of 3.9%. "It looks difficult for the level of (KOSPI) profit growth to rise further as base effects fade," said Lee Jae-man, an analyst at Hana Securities. "Profitability indicators will become an important variable in singling out sectors and companies."
