[Click eStock] "CJ Daehan Tongun, Slowed Sales Growth Due to Weak Domestic Consumption... Target Price Down"

Target Price Revised Downward by 8% Compared to Previous Level

NH Investment & Securities on the 20th downgraded the target price for CJ Logistics from 167,000 KRW to 153,000 KRW, citing a decline in valuation due to slower sales growth caused by sluggish domestic consumption. The investment rating was maintained as 'Buy.'

Researcher Jeong Yeonseung of NH Investment & Securities explained, "The target price downgrade reflects a mid- to long-term target return on equity (ROE) adjustment to 8.5%, down 6% from the previous estimate, due to slower growth in parcel volume caused by weak domestic consumption and a structural decline in parcel unit prices resulting from an increased proportion of small cargo." He added, "However, profit stability is gradually improving based on strengthened cooperation with logistics outsourcing and platform companies."

The analysis indicates that concerns over direct purchase regulations and slowing domestic consumption have led to a decline in valuation. Researcher Jeong said, "The current stock price has fallen to a valuation level with a price-to-earnings ratio (PER) of 7.8 times based on 2024, reflecting diminished expectations. There are concerns related to parcel volume due to weak domestic consumption and direct purchase regulations, and the timing of charging for parcel value-added services has been delayed more than expected, causing a limited decline in parcel unit prices, which also contributes to slower external growth."

However, expectations for profitability improvement in the global business division remain intact. Researcher Jeong stated, "The steady growth in the W&D (warehousing and distribution) segment driven by logistics outsourcing and the expected profitability improvement in the global business division due to restructuring are still valid. The contract with AliExpress was successfully renewed at favorable prices without changes in market share, and new cargo is planned to be attracted from the second half of the year through strengthened cooperation with the Shinsegae Group."

Gradual profitability improvement is expected across all business divisions in the second quarter of this year. Researcher Jeong estimated, "Second-quarter earnings are expected to record sales of 3.0715 trillion KRW, a 3.7% increase year-on-year, and operating profit of 121 billion KRW, up 7.6%. Parcel volume is projected to increase by 4.5% year-on-year, while unit prices are expected to decline by 1.3%, and parcel market share is anticipated to rise to 44.5%." He added, "Within contract logistics (CL), the W&D segment is expected to maintain a high growth rate of around 10%, and the global business division is also expected to see a slight improvement in profitability compared to the previous quarter due to improved forwarding segment performance."