Goldman Sachs names the South Korean stocks that could be inflation winners

Published Thu, Jun 10 20217:19 PM EDT

Goldman Sachs has named the South Korean stocks that could benefit — or lose — from rising inflation in the North Asian country. Investors globally are increasingly worried that an acceleration in inflation would raise operating costs and weigh down profit margins. In South Korea, both producer and consumer prices have climbed higher in recent months as the economy recovers from last year's downturn caused by the Covid-19 pandemic. Goldman said that generally, South Korean companies can withstand further increases in prices. Here's the bank's list of stocks that could be winners and losers from rising inflation. The stocks facing the least margin pressure from rising producer prices include: Chemicals manufacturers Capro Corporation , OCI and Cosmo Chemical Engineering firm Doosan Infracore Sam-A Aluminium , a manufacturer of aluminum products Conversely, the following stocks are included in Goldman's list of those facing the most pressure: Battery storage manufacturer Hankook & Company Electronics manufacturer Korea Circuit Logistics firm Hyundai Glovis Paper products maker Daeyoung Packaging Hankook Shell Oil , a producer and distributor of lubricating oil Goldman noted that consumer price inflation in South Korea has been relatively stable compared to increases in producer prices. That indicates that companies have not "meaningfully" passed on higher costs to consumers, the bank said. The latest official data showed the country's producer price index jumping 5.6% in April from a year ago, while the consumer price index rose 2.6% year-on-year in May. But companies absorbing higher costs doesn't mean that margins and profits are hurt, said the Wall Street giant. It added that an improving economy has generally been "the principal driver of corporate profits and profit margins" among South Korean companies. Ability to grow profits Goldman also said that companies with "high operating leverage" are in a better position to grow profits and offset margin pressure from producer price inflation. Operating leverage measures a firm's ability to generate profits by increasing revenue. A company is said to have high operating leverage if it has a large amount of fixed costs to cover and must generate sufficient sales to cover those costs. Such companies usually earn bigger profits after paying off the fixed costs. In South K