Hyundai Glovis: Core Business Growth Secured Even Before Robotics Momentum [Click e-Stock]

PCC Division Drives Growth Despite Sluggish Logistics
Boston Dynamics Stake Draws Attention

Hyundai Glovis demonstrated solid growth in its core business last year by achieving record-high profits. This year, the automobile carrier (PCC) business is also expected to maintain steady growth. In addition, considering Hyundai Motor Group's governance structure and Hyundai Glovis's stake in Boston Dynamics, there is considerable potential for further stock price appreciation.

On January 30, Korea Investment & Securities maintained its target price for Hyundai Glovis at 330,000 won and kept its investment rating at "Buy," citing these factors. The previous day's closing price was 255,500 won.

In the fourth quarter of last year, revenue reached 7.472 trillion won and operating profit was 508.2 billion won, up 2.5% and 10.5% year-on-year, respectively. Although operating profit fell short of market expectations (consensus) by about 4%, net profit, which is directly linked to dividends, exceeded expectations by 11%. This was attributed to improvements in non-operating income and the benefits of reduced shipping tonnage tax.

By segment, the logistics division posted revenue of 2.5336 trillion won and operating profit of 164.6 billion won. Compared to the same period last year, revenue declined by 3.4% and operating profit fell by 30.0%. The weakened container market in the fourth quarter of last year is believed to have negatively impacted profitability.

The shipping division recorded revenue of 1.4616 trillion won and operating profit of 212.3 billion won, up 8.0% and 119.3% year-on-year, respectively. Despite some one-off costs (port entry fees), profits surged thanks to increased non-affiliate demand and improved fleet operation efficiency.

In the distribution division, revenue was 3.4768 trillion won and operating profit was 131.3 billion won, up 5.0% and 2.8% year-on-year, respectively. The expansion of contract logistics (CKD) export volumes to emerging markets was cited as a key factor.

Overall, while logistics and CKD performance was sluggish due to production adjustments at overseas finished vehicle plants, the shipping division-including PCC-achieved an all-time high in operating profit, offsetting the weaker segments.

Hyundai Glovis has promised profit growth this year even under conservative exchange rate assumptions. The PCC division is expected to drive growth again in 2024. Hyundai Glovis is ranked third or fourth globally in total shipping capacity, but holds the top market share in the rapidly growing Chinese market. Among the top 10 shipping companies, it is the only one that operates as a 2PL provider and also handles inland transportation. With cost improvements and operational efficiencies from the introduction of ultra-large PCCs, operating profit is projected to grow by more than 9% year-on-year, generating over 1 trillion won in free cash flow (FCF) this year.

Choi Goun, a researcher at Korea Investment & Securities, stated, "Even if the robotics momentum slows in the future, Hyundai Glovis still has much to offer, such as PCC growth and increased dividends. Its stake in Boston Dynamics is about twice as high as its market capitalization, and it is the only affiliate to hold the stake directly. Therefore, as Hyundai Motor is revalued, the upward momentum for Hyundai Glovis's stock price will only increase."