Concerns over overvaluation are emerging as the price-to-book ratio (PBR) of Samsung Electronics, SK hynix, and Hyundai Motor—key stocks driving the recent rally in Korea's stock market—has rapidly surged past historical highs. While the prevailing view is that traditional metrics cannot fully capture these companies given their significantly improved profit margins due to artificial intelligence (AI), analysts caution that short-term corrections remain possible following the rapid gains.
Samsung Electronics (005930.KS) shares rose 0.27% from the previous trading day to close at 149,300 won on January 19, hitting a record high, according to Korea Exchange. The stock briefly touched the 150,000 won mark during intraday trading. The company's PBR reached 2.58 times, far exceeding its six-year average of 1.54 times since 2020. The stock continues its upward trajectory after breaking through the 2.2 times level traditionally considered Samsung Electronics' PBR ceiling.
SK hynix (000660.KS) also reached a record high of 764,000 won, pushing its PBR to 7.12 times—well above its six-year average of 1.84 times since 2020. Hyundai Motor (005380.KS), long considered severely undervalued, saw its PBR climb to 1.16 times, surpassing 1.0 for the first time in five years since January 2021.
Despite PBR entering new territory, price-to-earnings ratios (PER) based on past earnings remain low. Samsung Electronics' PER stands at 30.1 times, lower than the 41.2 times recorded on July 9 last year when shares traded at 87,800 won. SK hynix's PER slightly exceeds 26 times, well below the 43.9 times seen on January 2, 2024, when shares were at 142,400 won. As stock prices rapidly reflect future earnings, backward-looking PER has become less meaningful.
This explains why analysis based on 12-month forward PER, which incorporates future earnings forecasts, suggests these stocks remain undervalued. According to financial data provider FnGuide, Samsung Electronics and SK hynix have 12-month forward PERs of 9.84 times and 7.27 times, respectively. Micron, which trades at a relative premium on U.S. markets, has a 12-month forward PER of 8.61 to 11.45 times. Given that Korean memory chipmakers' valuations tend to follow Micron with a time lag, and that these levels remain far below big tech names like Nvidia (24 times) and Alphabet (29 times), analysts see room for further gains.
Upward revisions to earnings forecasts for large-cap sectors beyond semiconductors across the broader KOSPI market also provide support. While semiconductors showed the largest earnings revision over the past week at 3.0%, healthcare (2.8%), securities (2.7%), shipbuilding (1.5%), and power and cables (1.4%) are also rising rapidly. "The concentration in semiconductors intensified through year-end, but strength is now spreading to surrounding sectors this year," said Kim Jae-seung, a researcher at Hyundai Motor Securities. "The overall KOSPI market is trending upward amid favorable fund flows including foreign net buying and retail money movement."
However, some voices urge caution given that KOSPI has risen every single trading day this year. Daishin Securities diagnosed that overvaluation is deepening based on stock price changes relative to earnings over the past month. Since December 16, stock price changes relative to forward earnings per share (EPS) changes have been rapid in autos (27.1%), capital goods (26.8%), construction (13.6%), and semiconductors (9.3%). "KOSPI has shifted into overvalued territory amid consecutive gains," said Lee Kyung-min, a researcher at Daishin Securities. "As we enter the full-scale fourth-quarter earnings season, an adjustment process to reconcile the gap between major sectors and leading stocks' earnings and reality is inevitable."