May 11, 2017 6:00 pm JST

One country's slump isn't ruining the Asia300 profit party

Indian earnings are on the rise, and Southeast Asian majors are going strong

KENJI KAWASE, Nikkei deputy editor

A man walks along a wall overlooking the central Mumbai's financial district skyline. © Reuters

HONG KONG -- The Asia300 -- Nikkei's curated selection of listed corporate standouts from across the region, excluding Japan -- took another knock last year, when its members' combined net profit suffered its first back-to-back decline in two decades. But remove Chinese companies from the equation and a decidedly more upbeat picture emerges.

A prime example is India, whose companies are in the midst of announcing their earnings for the year ended in March. Including market-consensus figures compiled by QUICK-FactSet, profit for the period at Indian companies in the Asia300 likely grew 18% on the year. Compare that to the 10% fall seen for the Chinese constituents.

Maruti Suzuki India, the country's largest automaker, on April 27 reported that its profit attributable to shareholders for the year ended in March came in at 75.09 billion rupees ($1.16 billion), up 37%. Its unit sales, meanwhile, rose 10% to 1.56 million cars. Chief financial officer Ajay Seth said the company "is on course to achieve its goal of 2 million vehicle sales in the year 2020."

Growth stories

"We still believe in the India story," Ayaz Ebrahim, head of the Asia-Pacific core team at J.P. Morgan Asset Management in Hong Kong, told the Nikkei Asian Review. Ebrahim said that even with all the uncertainty hanging over the country's information technology service companies -- including Tata Consultancy Services, Infosys and Wipro -- due to changes in U.S. visa policy under President Donald Trump, the outlook for India "wouldn't be influenced," because the country's growth narrative "is a domestically driven story."

Another bright spot is Southeast Asia, where companies have begun disclosing their results for the first quarter, which ended in March. Net profit for the period at Indonesia's largest food company, Indofood Sukses Makmur, rose 11% on the year to 1.2 trillion rupiah ($90.3 million), with revenue expanding 8% to 17.83 trillion rupiah. Profit at the company's core consumer products division, which includes instant noodles, milk, snacks and seasonings, climbed 16%. Citing its decision to divest from a Chinese vegetable processor, Nomura reiterated its "buy" rating for the company on May 4.

Southeast Asia's banking sector is also faring relatively well. The four largest Thai banks by assets -- Bangkok Bank, Krung Thai Bank, Siam Commercial Bank and Kasikornbank -- saw their combined net profit for the first quarter increase 8% to 38.91 billion baht ($1.12 billion), marking the third straight quarter of growth. Trimming their provisions for future defaults helped fuel the improvement.

Northern lights

In North Asia, too, companies are reporting stronger growth, especially in the high-tech sector. South Korea's Samsung Electronics on April 27 said its operating profit for the three months ended March totaled 9.9 trillion won ($8.73 billion), its highest quarterly profit since the third quarter of 2013. It attributed the strong performance to a robust semiconductor business. Its smaller domestic chip rival, SK Hynix, saw operating profit jump 339% to 2.5 trillion won.

Another South Korean powerhouse, LG Display, boosted its net profit to 679 billion won for the quarter ended March, up from just 1 billion won a year earlier, thanks to high demand for organic light-emitting-diode panels. Expecting demand for OLED, rather than liquid crystal display, panels to keep growing, Chief Financial Officer Kim Sang-don said in an April 26 conference call that the company will "invest 70% of our capital expenditure in big OLED panels and plastic OLED."

Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, stayed on a solid growth path for the first quarter ended March, with net profit increasing 35% to 87.62 billion New Taiwan dollars ($2.9 billion), and revenue climbing 14.9% to NT$233.91 billion. According to co-CEO Mark Liu, the quarter through June is expected to yield smaller numbers due to a "severe inventory adjustment from our customers, particularly in the smartphone and PC markets." However, he said the supply chain correction would end by June. For all of 2017, the company is sticking with its previous projection of 5% to 10% revenue growth in U.S. dollar terms.

"We have seen one of the strongest earnings revisions in Asia ... in years," said Tuan Huynh, managing director and chief investment officer for the Asia-Pacific region at Deutsche Bank Wealth Management. "Asia as a whole, from both a political and economic standpoint, is the most stable it has been in 20 years."

The Asia300 stock index reflects this upbeat outlook. On May 9, the gauge hit a year-to-date high of 1,206.79, approaching its all-time high of 1,241.72, reached on April 28, 2015. The indexes for South Korea and Taiwan are powering along, with both climbing to new heights in the second week of May.

Beijing's anger

As ever, of course, risks abound. In addition to the geopolitical tensions and a sharper-than-expected rise in U.S. interest rates, Ebrahim of J.P. Morgan Asset cited China as an area of concern. The softening of the Chinese economy is "well priced in, but if 'softer' becomes 'harder' that would be a risk for the whole region."

Ebrahim is not alone in worrying about the China effect. Nomura analyst Angela Hong on May 2 downgraded the 2017 and 2018 earnings outlooks for South Korean automotive parts maker Hyundai Mobis due to "deepening concerns on Chinese sales."

South Korean businesses are being squeezed in China due to retaliation over Seoul's decision to deploy a U.S. anti-missile system. Mobis' major clients Hyundai Motor and Kia Motors have already seen their sales in China take a hit. Assuming the negative repercussions will not end anytime soon, Hong expects Mobis' utilization of its Chinese plants to remain low, putting pressure on its earnings.

Asia300

Maruti Suzuki India Ltd.

India

Market(Ticker): BOM(532500)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 31,356.08M
Shares: 302.08M
Asia300

Tata Consultancy Services Ltd.

India

Market(Ticker): BOM(532540)
Sector:
Industry:
Technology Services
Information Technology Services
Market cap(USD): 77,217.38M
Shares: 1,970.42M
Asia300

Infosys Ltd.

India

Market(Ticker): BOM(500209)
Sector:
Industry:
Technology Services
Information Technology Services
Market cap(USD): 34,155.67M
Shares: 2,296.94M
Asia300

Wipro Ltd.

India

Market(Ticker): BOM(507685)
Sector:
Industry:
Technology Services
Information Technology Services
Market cap(USD): 19,623.76M
Shares: 2,432.43M
Asia300

PT Indofood Sukses Makmur Tbk

Indonesia

Market(Ticker): JKT(INDF)
Sector:
Industry:
Consumer Non-Durables
Food: Specialty/Candy
Market cap(USD): 5,742.50M
Shares: 8,780.42M
Asia300

Bangkok Bank Public Co. Ltd.

Thailand

Market(Ticker): BKK(BBL)
Sector:
Industry:
Finance
Regional Banks
Market cap(USD): 10,011.50M
Shares: 1,908.84M
Asia300

Krung Thai Bank Public Co., Ltd.

Thailand

Market(Ticker): BKK(KTB)
Sector:
Industry:
Finance
Regional Banks
Market cap(USD): 7,837.79M
Shares: 13,976.06M
Asia300

The Siam Commercial Bank Public Co. Ltd.

Thailand

Market(Ticker): BKK(SCB)
Sector:
Industry:
Finance
Regional Banks
Market cap(USD): 15,242.99M
Shares: 3,395.39M
Asia300

Kasikornbank Public Co. Ltd.

Thailand

Market(Ticker): BKK(KBANK)
Sector:
Industry:
Finance
Regional Banks
Market cap(USD): 13,247.58M
Shares: 2,393.26M
Asia300

Samsung Electronics Co., Ltd.

South Korea

Market(Ticker): KRX(005930)
Sector:
Industry:
Electronic Technology
Telecommunications Equipment
Market cap(USD): 313,375.19M
Shares: 159.91M
Asia300

SK hynix, Inc.

South Korea

Market(Ticker): KRX(000660)
Sector:
Industry:
Electronic Technology
Semiconductors
Market cap(USD): 36,447.29M
Shares: 728.00M
Asia300

LG Display Co., Ltd.

South Korea

Market(Ticker): KRX(034220)
Sector:
Industry:
Distribution Services
Electronics Distributors
Market cap(USD): 9,356.85M
Shares: 357.81M
Asia300

Taiwan Semiconductor Manufacturing Co., Ltd.

Taiwan

Market(Ticker): TAI(2330)
Sector:
Industry:
Electronic Technology
Semiconductors
Market cap(USD): 176,990.35M
Shares: 25,930.38M
Asia300

Hyundai Mobis Co., Ltd.

South Korea

Market(Ticker): KRX(012330)
Sector:
Industry:
Producer Manufacturing
Industrial Machinery
Market cap(USD): 23,888.86M
Shares: 97.34M
Asia300

Hyundai Motor Co., Ltd.

South Korea

Market(Ticker): KRX(005380)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 39,866.17M
Shares: 285.47M
Asia300

Kia Motors Corp.

South Korea

Market(Ticker): KRX(000270)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 14,151.74M
Shares: 405.36M

Get Insights on Asia In Your Inbox

To read the full story, Subscribe or Log in

Get your first month for $0.99

Redeemable only through the Subscribe button below

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.

To read the full story, Subscribe or Log in

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.