[Click eStock] "Hanjin, Normalization of Delivery Division is the Key to Stock Price Increase"

Hi Investment & Securities Report

Hi Investment & Securities maintained a buy rating on Hanjin on the 6th but lowered the target price by 25% from the previous level to 27,000 KRW. This was due to the continued sluggish stock price trend, but the stock price is expected to rise if normalization in the parcel delivery sector occurs.

This year, Hanjin is expected to record sales of 3.0351 trillion KRW and operating profit of 131.8 billion KRW, representing increases of 6.5% and 15.3% respectively compared to the same period last year. This is based on the judgment that profitability will improve with the normalization of the parcel delivery sector.

Since mid-June last year, Coupang has shifted a significant portion of the parcel volume it had outsourced to the company to its own delivery service. As a result, the number of boxes outsourced monthly from Coupang decreased from 7.2 to 7.4 million to 3.7 million.

Lee Sangheon, a researcher at Hi Investment & Securities, said, “Due to decreased sales, additional operating costs, and increased fixed costs such as safety-related expenses, the operating profit of the parcel delivery sector sharply declined to 800 million KRW and -100 million KRW in the second and third quarters of last year, respectively,” adding, “This year, profitability in the parcel delivery sector is expected to improve due to volume recovery and price increase effects.”

The company is expected to push for a 70 to 80 KRW increase in parcel delivery unit prices this year. The average parcel delivery unit price was raised from 2,228 KRW in 2021 to 2,418 KRW in 2022. Researcher Lee analyzed, “Expansion of same-day parcel delivery and short-distance delivery services will also raise the average unit price.” Additionally, in the fourth quarter of last year, the company significantly recovered the reduced Coupang outsourced volume due to expansion of existing customers (11st, Fasto) and acquisition of new customers (Amore, Gongyeong Home Shopping, etc.).

However, the logistics sector is expected to see a decrease in profits. This is because the volume of cargo has been declining since the second half of last year at container terminals such as Busan Port. The researcher explained, “This is due to overlapping domestic and international conditions such as global economic slowdown and prolonged Ukraine war,” adding, “The decline in cargo volume is expected to continue this year, resulting in decreased profits compared to the previous year.”