[Click eStock] "Decline in Cargo Volume Due to Economic Recession"… HMM Target Price Down

[Asia Economy Reporter Ji Yeon-jin] Heungkuk Securities announced on the 18th that it is lowering the target price for HMM to 33,000 KRW, citing an expected decrease in cargo volume due to the economic recession.

Researcher Lee Byung-geun of Heungkuk Securities explained, "Despite the third quarter being the peak season, cargo volume is expected to continue declining due to weakened consumer sentiment caused by inflation," adding, "We believe the decrease in cargo volume will persist unless consumer sentiment improves in HMM's major routes to the US and Europe."

The average Shanghai Containerized Freight Index (SCFI) for the second quarter was 4,217 points, down 12.9% from the previous quarter. The adjustment in freight rates was significant on the US and Europe routes, and based on the World Container Index (WCI), the second quarter West Coast US freight rate was 8,530 USD per 1 TEU (one 6-meter container), down 19% from the previous quarter, while European freight rates fell 23% to 9,961 USD.

Researcher Lee stated, "Although spot freight rates declined, the increase in Service Contract (SC) freight rates on the US and Europe routes likely caused the average freight rate in the second quarter to rise by 3.1% compared to the previous quarter," and forecasted, "In the second half of the year, freight rates will continue to fall due to cargo volume decreases caused by eased port congestion and the global economic slowdown."

On the 14th, HMM announced plans to invest 15 trillion KRW over the next five years to strengthen its competitiveness as a shipping company. To enhance its capabilities, it plans to increase its container fleet from the current 820,000 TEU to 1.2 million TEU, and to maintain balance between container and bulk businesses, it will expand its bulk fleet from the current 29 vessels (19 Dry Bulk, 10 Wet Bulk) to 55 vessels (30 Dry Bulk, 25 Wet Bulk). Researcher Lee added, "There is no information regarding dividends at this time."