A time has arrived for investors to unearth South Korean value stocks as the second-quarter earnings season for the country’s listed companies is approaching with Samsung Electronics Co.’s second-quarter earnings guidance slated for Thursday. In particular, market experts recommend keeping an eye on those companies that are expected to return from losses to profits such as Hyundai Heavy Industries Co., Hanwha Techwin Co. and Samsung Heavy Industries Co.

According to market data provider FnGuide on Sunday, 13 of 238 listed companies are expected to swing to profit in the second quarter ended June from losses in the same period of last year. Hyundai Heavy Industries is forecast to post 186.2 billion won ($162 million) in operating profit in the second quarter, returning from an operating loss of 170.9 billion won a year ago. Its second-quarter operating profit margin has also improved 4.8 percent over recent one month.

“The shipbuilder is less likely to suffer from liquidity constrains, and its price-to-book ratio (PBR) is a mere 0.5,” meaning the company is undervalued compared to its peers, said Lee Jae-won, an analyst of Yuanta Securities Korea Co. But Lee cited slow order momentum for container ships and liquified natural gas (LNG) carriers as risks.

Hanwha Techwin is projected to swing to a 34.2 billion won surplus in the second quarter of this year from a 79.2 billion won deficit in the same period of last year, mainly driven by an increase in exports of its defense products and cuts in expenses, said Park Won-jae, an analyst at Mirae Asset Daewoo Co., expecting additional profitability improvement in the upcoming quarters.

Samsung Heavy Industries Co. is another company that is expected to turn around. It is forecast to report 24.7 billion won in operating profit in the second quarter, returning from a 1.55 trillion won operating loss a year ago. If the company achieves an operating surplus in the second quarter, it would be a fourth quarter in a row for it to report operating surplus. But it is too early to say the company has completely recovered as its operating profit still hovers below 20 billion won despite sales of more than 2 trillion won.

Meanwhile, Daewoo Shipbuilding & Marine Engineering Co. is predicted to report 18.4 billion won in operating loss in the second quarter, a sharp drop from a whopping 3.04 trillion won deficit in the same period of last year. Earlier this year, many securities firms projected the company would return to profit in the second quarter, but the prolonged slump in the shipbuilding industry has delayed the company’s recovery.

The country’s flag carriers, Korean Air Lines Co. and Asiana Airlines Inc. are also expected to return to profit, according to FnGuide data.

By Noh Hyun and Kim Tae-joon

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