[Click eStock] CJ Daehan Tongun, Expected Benefit from Slowed E-commerce Growth... Target Price Down 22%

Korea Investment & Securities Report

[Asia Economy Reporter Minji Lee] Korea Investment & Securities maintained a buy rating on CJ Logistics on the 10th and set the target price at 125,000 KRW, down 22% from the previous level.

In the fourth quarter, sales decreased by 3% from the previous quarter to 3 trillion KRW, while operating profit increased by 4% to 112.3 billion KRW. The operating profit matched the market expectation of 116.4 billion KRW. Looking at operating profit by segment, courier services recorded 53.5 billion KRW and CL 36.4 billion KRW, growing 29% and 19% year-on-year respectively, but the global segment fell 41% to 16.3 billion KRW during the same period. The domestic contract logistics compensated for the sluggish performance overseas.

Courier volume decreased by 7% year-on-year due to demarketing targeting low-profit consignors and the pandemic base effect, but increased by 4% compared to the third quarter. Amid continued freight rate increases and stabilized operations, the operating profit margin rose by 1 percentage point from the previous quarter to 5.6%. In the CL segment, thanks to continuous price increases centered on strategic consignors, the highest profit since 2019 was achieved. On the other hand, due to the decline in freight rates for shipping and air cargo, the forwarding segment's logistics boom benefits diminished, resulting in global sales and operating profit decreasing by 15% and 41% respectively from the previous quarter.

This year, the company is not free from economic slowdown. The growth rate of the e-commerce market is expected to slow to single digits. Excluding companies like Coupang that handle their own delivery, the increase rate of courier volume is projected to be only 1-2%. The global segment is expected to continue growth in emerging markets such as India and Vietnam, but overall sales growth is predicted to be limited due to the decline in forwarding segment freight rates. Researcher Choegoun Woo said, “It is positive that CJ Logistics is focusing on profitability improvement such as price increases, but it will be difficult to expect a premium for growth as in the past.”