[Click eStock] "CJ Daehan Tongun, 2Q Earnings Exceed Expectations... Low Concerns Over Earnings Decline in Second Half"

[Asia Economy Reporter Lee Jung-yoon] Daishin Securities maintained a buy rating and a target price of 160,000 KRW for CJ Logistics on the 10th, stating that the company's Q2 earnings this year slightly exceeded market expectations with solid performance.

CJ Logistics reported Q2 sales of 3.1 trillion KRW, up 14.2% year-on-year, and operating profit of 116.1 billion KRW. By business segment, contract logistics (CL) sales increased by 1.7% to 689.5 billion KRW, with operating profit rising 8.3% to 27.3 billion KRW. The parcel delivery segment recorded sales of 923.9 billion KRW, up 6.7%, and operating profit increased 9% to 57.1 billion KRW.

The strong performance of CJ Logistics was attributed to the parcel delivery division’s profit margin improvement due to leverage effects from volume recovery, and the global segment showing sales and profit growth exceeding expectations.

Although the CL business segment saw sales growth compared to the previous quarter, operating profit slightly decreased from 29.7 billion KRW to 27.3 billion KRW, due to a 7.5 billion KRW payment for property and comprehensive real estate taxes. Excluding this, operating profit would have reached 34.8 billion KRW, marking the best performance since Q4 2019.

The parcel delivery division processed 420 million boxes with an average unit price of 2,200 KRW, meeting estimates. Due to volume recovery and price increases, the operating profit margin for Q2 recorded an all-time high. Further improvement in operating profit margin is expected in the second half of the year with additional volume recovery and continued price increase trends.

The global business segment, which showed improvement from Q1 this year, also demonstrated sales and profit growth in Q2. Sales increased 29% year-on-year to 1.3629 trillion KRW, and operating profit surged 158.3% to 29.7 billion KRW.

Yang Ji-hwan, a researcher at Daishin Securities, explained, "The improvement in the global segment is due to increased CL sales in the US, India, and Vietnam, as well as favorable forwarding market conditions." He added, "Although there are concerns about a slowdown in the forwarding segment in the second half, growth in the CL segment is expected." He further stated, "Among transportation sector stocks, this is the company with the least risk of earnings decline in the second half, and it is expected that the stock price will also show an upward trend along with improved earnings."