Focus on Specific Industries

From September until the end of November, the stock market drove down values in several business sectors and equities. The volatility of market profits during a period of major market changes, such as the current one, makes appraising "expensive" or "cheap" stocks based on P/E ratios less objective. This is especially true for the market's cyclical businesses. As a result, P/B may be utilized to evaluate the values of industry sectors.

In general, current market values based on P/B are near the low end of the historical valuation range from 2016 to the present. Some industries, such as real estate, chemicals, and personal care and household goods, are trading at historically low levels. In contrast, the Travel and Entertainment and Basic Resources sectors are now trading at historically high values, indicating their optimistic outlook in recent and forthcoming quarters.

However, the allure of market attention is not limit ed to low-valued industry areas. FIDT analyzed the scenarios of Q4/2022 and the prospects of Q4/2023 and Q1/2024 for Real Estate, Banking, Financial Services (Securities), Food and Beverage, taking into account the predicted profit recovery narrative from a low base and the existing values of market sectors.

The following are the reasons for focusing on these industry sectors: first, high market capitalization, which accounts for a significant portion of the index; second, significant profit declines in Q4/2022 (providing a low base for the expected strong growth in Q4/2023); and third, representative nature, which aids in assessing the overall economic picture (from production to investment to credit).

Valuations of some industries

Real estate stocks have generally recovered significantly since the Q4/2022 low, although current values are still regarded low in comparison to historical levels. Currently, real estate-related groups are collecting money owing to predictions of the impact of interest rate cuts and legal policy relaxing, which would aid in the gradual recovery of the real estate market. According to FIDT, the business results of many real estate firms, particularly those with big market capitalizations, would rebound significantly in 2024. However, the market will take some time to fully recover from the catastrophe.

VHM makes a substantial contribution to the residential real estate group, with the greatest market capitalization in the industry. VHM now has a relatively low valuation, reflecting the company's troubles and investor opinion impacted by the VinFast tale (part of the same ecosystem as VHM). NVL and other firms in the industry experiencing unsolved issues are also trading at a low valuation, much below the historical average from 2016 to the present.

In terms of Industrial Zone Real Estate (IZRE), this sector has had less of an influence on company success in recent years. Furthermore, the IZRE group is demonstrating investment potential with numerous new tales, although the profitability of various enterprises in the industry will still differ significantly. Potential stocks have partially demonstrated the industry's long-term potential and are currently priced relatively high, whereas Industrial Zone Real Estate - Rubber group stocks such as GVR, PHR, DPR, with uncertain prospects due to the transition of land use from forestry to industrial zones, are currently priced quite low.

Banking: When the current P/B value is compared to the average from 2016 to the present, most banking companies are around the bottom, highlighting the industry's dangers. FIDT believes that this industry's business performance will improve in the near future, but there will be differentiation, and market cash flow is insufficient to support the banking industry.

Securities: The P/B valuation of securities is typically high and greater than the industry's historical average (from 2016 to the present). Based on KRX upgrade predictions, the securities group has been one of the fastest-growing industries in the market from the beginning of 2023. This has resulted in a quick increase in P/B for securities businesses, with many companies having P/B ratios that are greater than the industry's historical norm. It may be claimed that the current stock values of the Securities business somewhat reflect most future predictions.