On the 21st, Korea Investment & Securities maintained a Buy rating and a target price of 125,000 KRW for CJ Logistics, stating that its value as a defensive stock remains valid in light of its consistent logistics competitiveness.
CJ Logistics' first-quarter performance this year is expected to meet forecasts. Sales are estimated to have increased by 2% year-on-year to 2.9 trillion KRW, and operating profit is projected to have risen by 23% to 93 billion KRW. Despite continued external economic uncertainties, operating profit is expected to be about 4% below consensus estimates due to fare increases and cost efficiency measures.
Operating profit by business segment is anticipated to be 48 billion KRW for parcel delivery, 31 billion KRW for contract logistics, and 13 billion KRW for global operations. In parcel delivery, operating profit is expected to increase by 71% due to the base effect from last year’s first-quarter strike. However, with an additional 5% price increase this year, first-quarter volume is estimated to have grown by only 3%. Global operating profit is expected to decline by 3% year-on-year due to a downturn in forwarding performance caused by falling logistics freight rates.
Choi Go-woon, a researcher at Korea Investment & Securities, explained, "This will mark the eighth consecutive quarter of year-on-year profit growth through the first quarter. Operating profit for this year is expected to increase by 6% to 438 billion KRW. The average annual growth rate over the past five years has reached 13%, and the operating profit margin is projected to rise from 2.6% to 3.6%."
He added, "Despite record-breaking performance, the stock price has fallen to its lowest level in the past decade. Even considering that it is difficult to expect benefits from e-commerce growth or a premium as the number one parcel delivery company as before, the projected 2023 price-to-book ratio (PBR) of 0.5 times is judged to be an excessively neglected result in the stock market."
Researcher Choi also noted, "Now, market share is more important than freight rates in investment decisions. Prices are expected to continue trending upward in line with inflation. However, caution is needed as market share is being lost to e-commerce companies like Coupang that have internalized delivery this year."
He further stated, "CJ Logistics maintains a profitability-focused strategic stance, so parcel delivery volume growth is expected to be only 1% this year. If this market share decline is settled in the future, it is expected to lead to a reevaluation of e-commerce logistics competitiveness, such as fulfillment."
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