[Click eStock] “Hanjin, Visible Improvement in Second Half Performance Due to Parcel Price Increase”

Expansion of Delivery Facilities and Automation Drive Long-Term Growth
Hi Investment & Securities "Maintain Hanjin Target Price at 56,000 Won"

[Asia Economy Reporter Gong Byung-sun] Hanjin, which experienced losses due to costs incurred in the courier sector, is expected to improve its corporate valuation as the effect of courier price increases is reflected in the second half of this year. Expansion of courier facilities and automation of equipment are also anticipated to drive future growth.

According to Hi Investment & Securities on the 13th, Hanjin's sales in the second quarter of this year rose 12.7% year-on-year to 599.9 billion KRW, while operating profit decreased by 4.8% during the same period to 27.5 billion KRW. Last year, the courier sector accounted for 45.8% of Hanjin's sales and 39.7% of its operating profit, but the courier sector underperformed. Although the courier unit price was raised by 170 KRW in the second quarter, operating profit in the courier sector fell 45.5% year-on-year to 6.6 billion KRW.

The underperformance in the courier sector is due to various costs. Since the beginning of this year, additional expenses have been incurred to improve the working conditions of courier workers, including the deployment of sorting support personnel. Furthermore, because contract amounts vary by client company, even if courier prices are increased, it takes some time for the results to be reflected in performance.

However, the effect of the courier price increase is expected to be reflected from the second half of the year. Lee Sang-heon, a researcher at Hi Investment & Securities, explained, “The effect of the courier price increase will be reflected from the third quarter, making performance improvements visible,” and added, “The courier price increase will lead to a rise in valuation.” With the expansion of the Dong Seoul Hub Terminal, the volume of daily processed parcels is expected to increase, further reducing costs.

In the long term, expansion of courier facilities and automation of equipment are expected to generate growth potential. Hanjin plans to invest a total of 423.4 billion KRW, including 285 billion KRW in the Daejeon Mega Hub Logistics Center. Once the Daejeon Mega Hub Logistics Center is established and fully operational by 2023, the existing daily processing capacity of courier parcels will expand from 1.67 million boxes to 2.6 million boxes. The researcher predicted, “The establishment of the Daejeon Mega Hub Logistics Center will lead to differentiation in courier services through cost reduction and operational efficiency.”

Accordingly, Hi Investment & Securities maintained its investment opinion of “Buy” on Hanjin, with a target stock price of 56,000 KRW. The closing price on the 10th was 39,000 KRW.