[Click eStock] "CJ Daehan Tongun, Delivery Sector as Expected Underperforms"

KTB Investment & Securities "Maintain CJ Daehan Tongun Target Price at 200,000 Won"
Global and Construction Sectors' Performance Also Falls Short of Expectations

[Asia Economy Reporter Gong Byung-sun] CJ Logistics' parcel delivery division has shown sluggish performance despite increased volume and price hikes. Although a recovery is expected, the volume growth rate in the second half of the year is still likely to slow down. On the 10th, KTB Investment & Securities maintained a target price of 200,000 KRW and a 'Hold' investment rating for CJ Logistics.

In the first quarter of this year, CJ Logistics' parcel delivery division posted an operating profit of 16.9 billion KRW, down 54% compared to the same period last year. Despite increased volume and price hikes, profits decreased by approximately 19 billion KRW year-on-year. The parcel delivery price was 1,999 KRW, up 1.1% from the same period last year, and from the 1st of last month, price increases of about 200 KRW have been pursued with shippers handling more than 90,000 parcels. Researcher Lee Han-jun of KTB Investment & Securities stated, “It is estimated that the initial cost of 3.1 billion KRW related to the establishment of the e-commerce division, as well as trunk line costs and sorting labor input costs, were higher than expected,” adding, “Last year was a period of strong profitability, so the base was relatively high.”

The global division is also in a sluggish state. Global division sales reached 1.1 trillion KRW, a 13.5% increase from the same period last year, meeting expectations. However, operating profit was 10.1 billion KRW, showing poor performance. As of the first quarter of this year, except for the mergers and acquisitions (M&A) subsidiaries in China, Malaysia, and Vietnam, the rest still appear to be underperforming. The researcher explained, “The Chinese subsidiary, which accounts for 33% of M&A subsidiary profits, will be excluded from consolidated results starting in the second half of the year, and a large-scale capital gain will occur,” adding, “A capital gain of 250 billion KRW is expected in the second quarter.”

The construction division also fell short of expectations. Construction division sales were 95.5 billion KRW, down 37% year-on-year, and operating loss was 2.2 billion KRW. The researcher said, “Recovery is expected from the second quarter when resort visitors increase, but due to delays in orders, future estimates are being broadly revised downward.” KTB Investment & Securities lowered CJ Logistics' sales forecasts for the second, third, and fourth quarters of this year by 2.5%, 1%, and 1.2%, respectively, compared to previous estimates.