[Click eStock] "Aseajeji, Sales Volume Increase Expected to Improve Performance This Year"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment on the 7th forecasted that Aseajaeji will continue its performance improvement this year due to an increase in sales volume.

Aseajaeji, established in 1958 and incorporated into the Asea Group in 1985, is a manufacturer and seller of corrugated cardboard. The company has achieved vertical integration in the corrugated cardboard production industry through a total of five subsidiaries, including Gyeongsan Paper. Its main business areas are broadly divided into the paper division, corrugated cardboard division, and others (collection of paper resources, waste transportation). As of the third quarter, the sales ratio was paper division (54%), corrugated cardboard division (44.3%), and others (1.8%).

Last year, the company’s sales amounted to 945.8 billion KRW, and operating profit was 93.9 billion KRW, growing by 29.3% and 42.9% respectively compared to the same period the previous year. The increase in corrugated cardboard sales volume is analyzed as the main factor behind the significant performance improvement.

This year’s expected sales are 998.4 billion KRW, and operating profit is forecasted at 104.8 billion KRW, representing increases of 5.6% and 11.6% respectively compared to last year. Doohyun Kim, a researcher at Hana Financial Investment, explained, “Considering the supply and demand situation of corrugated cardboard, sales volume increase is possible this year as well, and through sales price pass-through, flexible response to cost volatility will be feasible. If the price of corrugated cardboard waste stabilizes, improvement in operating profit margin through cost reduction will also be possible.”

Corrugated cardboard production goes through three stages: corrugated base paper, corrugated medium, and corrugated boxes. Aseajaeji is a company that has vertically integrated all stages of the process, enabling cost reduction. Additionally, the domestic base paper market is an oligopoly where four companies including Aseajaeji accounted for over 70% of the market share as of 2020, so strong performance is expected from these companies as well.

The continuous sharp rise in the price of waste paper, the raw material for corrugated base paper, is a burden. However, since October last year, prices have shown a trend of stabilizing compared to the past, and even if costs rise again, sales price pass-through is easy, so it is predicted that it will not have a significant impact on performance. Researcher Doohyun Kim said, “With the ongoing spread of the COVID-19 Omicron variant, parcel delivery volumes are expected to remain high. The expansion of demand for corrugated cardboard will have a positive effect on the future performance not only of Aseajaeji but also of other corrugated cardboard companies.”