Despite COVID-19, 'Ttanggil·Badatgil' Transport Industry Expects Earnings Surprise

Hanjin Shipping (Photo by Asia Economy DB)

[Asia Economy Reporter Kum Boryeong] As the impact of the novel coronavirus infection (COVID-19) is expected to be fully reflected in corporate earnings for the second quarter, land and maritime transportation companies are anticipating earnings surprises.

According to the Financial Supervisory Service's electronic disclosure system on the 14th, Hanjin's consolidated sales for the second quarter amounted to 527.1 billion KRW, an increase of 4.1% year-on-year and 8.3% quarter-on-quarter. Operating profit was 27.3 billion KRW, up 24.7% year-on-year and 7.5% quarter-on-quarter.

Hanjin, a leading land transportation company, is expected to continue strong performance in its parcel delivery segment despite the impact of COVID-19. A slight upward trend is also anticipated in the second half of the year. In the cargo handling business, the volume handled in the second half of the year is seasonally higher than in the first half. As the overall market cargo volume increases, the concentration of volume toward the two listed parcel delivery companies operating under a centralized processing system is likely to continue.

CJ Logistics / Photo by Moon Honam munonam@

CJ Logistics, which has invested nearly 100% in facility automation, is aiming to expand its market share. Researcher Eom Kyung-ah of Shin Young Securities stated, "CJ Logistics' consolidated sales for the second quarter are expected to be 2.7434 trillion KRW, an increase of 8.2% year-on-year and 9.1% quarter-on-quarter. The most distinctive point is that it is absorbing the increased parcel volume caused by COVID-19 like a vacuum cleaner. It has smoothly handled a volume increase of over 30% due to the COVID-19 situation. While most competitors are unable to increase market share due to volumes exceeding their processing capacity, CJ Logistics' market share expansion is effective," she analyzed.

With the improvement in shipping market conditions, earnings are also expected to be favorable. According to Shin Young Securities, the dry bulk freight index, which was only 520 points at the beginning of last month, reached 1,054 points on the 16th of the same month. Although it recently did not surpass 2,000, it showed levels in the 1,800s.

As freight rates rise and supply rapidly decreases, the market environment is improving. Researcher Eom said, "Freight rates have entered a range where shipping companies can generate profitability, and at the same time, dismantling is occurring rapidly, so there is no burden of oversupply, which is the most positive aspect. Although China's iron ore inventory slightly increased over 2 to 3 weeks, it still remains below 100 million tons, indicating sufficient import capacity," she said.

She added, "As the earnings stability of shipping companies is highlighted and stock prices are being re-evaluated, the freight market in the second half of the year is also expected to show an upward trend, so I believe shipping companies have the greatest potential for stock price appreciation among transportation companies."