CJ Logistics on the Rise, Operating Profit Nears 100 Billion Won Recovery

Net Income Expected to Reach Highest Level Since 2011
Continued Growth in Parcel Volume Key... "Sufficient Future Growth Potential in Parcel Fulfillment"

[Asia Economy Reporter Minwoo Lee] CJ Logistics' performance is rapidly improving. While recovering operating profit to 100 billion KRW, net income is expected to reach the highest level since 2011.

According to financial information firm FnGuide on the 7th, CJ Logistics' Q3 consolidated earnings consensus is sales of 2.7988 trillion KRW and operating profit of 97.2 billion KRW. Compared to the same period last year, sales increased by 6.75% and operating profit rose by 9.60%. Some expect that surpassing 100 billion KRW in operating profit will not be difficult. Mirae Asset Daewoo forecasted CJ Logistics' Q3 operating profit at 101.3 billion KRW, predicting a recovery above the 100 billion KRW mark since Q4 last year. This is a steep growth compared to 58.2 billion KRW recorded in Q1 this year. Net income is expected to be 38.9 billion KRW, similar to 38.6 billion KRW in Q4 2011.

The sustained increase in parcel volume is evaluated as a key factor. In the first half of this year, CJ Logistics' parcel handling volume increased by 29.0% compared to the same period last year. It is estimated that Q3 volume also rose by 26.5% compared to Q3 last year. Despite the implementation of 'No Parcel Day' on August 14 and the traditional vacation season, parcel volume steadily increased. This was due to increased parcel use amid the re-spread of COVID-19 and the implementation of social distancing level 2.5. Researcher Yang Jihwan of Daishin Securities analyzed, "Although the average unit price decline continued due to the increase in small parcel cargo, profitability improved due to leverage effects from volume growth and enhanced efficiency by introducing the 'Multi-Point System' that efficiently sorts small items accounting for 90% of total volume."

The Contract Logistics (CL) division was somewhat sluggish. Sales are estimated at 673 billion KRW, down 0.6% compared to the same period last year. The global division, which had been sluggish due to COVID-19, is recovering to a normal trajectory. Sales reached 1.132 trillion KRW, a 1.5% decrease compared to the same period last year. Since Q2, sales have recovered to the 1 trillion KRW level, showing steady growth.

The stock price has also been rising since the 24th of last month. As of 9:50 AM on that day, it recorded 182,500 KRW, up 1.96% from the previous day. This is close to the 52-week high of 185,000 KRW recorded on the 16th of last month. This contrasts with other parcel and logistics-related stocks such as Hanjin and Dongbang, which continue to decline. Researcher Yang said, "We are also expecting additional collaboration with Naver regarding the fulfillment business that manages the entire process from product procurement to order and delivery," adding, "Differentiation from second-tier operators will be possible through warehouse leasing and multi-point investment expansion for the fulfillment business."