CJ Logistics Sees Increased Parcel Volume but Declining Unit Prices

2Q Performance Held Up Well but Cannot Be Assured Due to Unit Price Decline
Recovery of Overseas Segment Sales Is Crucial

[Asia Economy Reporter Minwoo Lee] It is premature to say that CJ Logistics' performance has fully entered an improvement phase. Although the growth rate of parcel volume led to a solid performance in the second quarter, the effect was partially offset by a corresponding drop in unit prices. The recovery of overseas segment sales is expected to be a key factor going forward.

On the 9th, KTB Investment & Securities maintained a 'Hold' rating and a target price of 165,000 KRW for CJ Logistics, considering these factors. Despite the solid results in the second quarter of this year, it is deemed too early to be reassured. The closing price the previous day was 150,500 KRW.

CJ Logistics recorded sales of 2.65 trillion KRW and an operating profit of 83.9 billion KRW in the second quarter of this year, representing increases of 4.5% and 16.8% respectively compared to the same period last year. The parcel volume growth rate was higher than expected, and profitability was also favorable. It is interpreted that the positive spillover effect from the COVID-19 pandemic continued through the second quarter.

Hanjoon Lee, a researcher at KTB Investment & Securities, explained, "The growth rate in the second quarter was 32%, higher than the 26% growth rate in the first quarter," adding, "This was due to a lower base compared to last year, the effect of the number of business days in June, and the formation of a second peak during the domestic COVID-19 resurgence period, which led to competitors' insufficient capacity to handle the rapidly increasing volume."

However, the larger-than-expected decline in parcel unit prices was negative. According to management accounting standards, unit prices fell by 3.9%. This was because the rapidly increasing volume was mainly low-priced small-sized e-commerce parcels rather than high-priced customer-to-customer (C2C) or home shopping parcels. Additionally, since price increases began in March last year, the average selling price (ASP) base was elevated, which also played a role.

The overseas segment recorded sales of 1 trillion KRW and gross profit of 90.8 billion KRW, down 1.7% and 3% respectively compared to the same period last year. Forwarding sales also decreased by 13%. The increase in combined sales from new affiliates was only 1.4%. Although CJ Lokin in China grew by 15%, regions such as India and the Middle East showed sluggish performance. The researcher projected, "Assuming recovery in the second half, overseas segment sales could grow by about 3% in the third quarter and 9% in the fourth quarter."