Korea Investment & Securities noted on the 17th that CJ Logistics' second-quarter (April to June) performance is expected to slightly fall short of market expectations, but the company could gain upward momentum from domestic stimulus policies in the second half. Korea Investment & Securities maintained a 'buy' rating on CJ Logistics with a target price of 130,000 won.
Choi, a researcher at Korea Investment & Securities, estimated that CJ Logistics recorded sales of 3.1357 trillion won and an operating profit of 111.2 billion won in the second quarter. While sales increased by 3% compared to the same period last year, operating profit decreased by 11%.
The researcher stated, “Due to the slow recovery in e-commerce demand, the volume of parcel deliveries is estimated to have decreased by 4% compared to the same period last year,” adding, “The effect of price hikes is also expected to be less aggressive at 1%.”
The researcher emphasized the need to focus on the future rather than the past second quarter. The volume of parcel deliveries rebounded in June, showing its first increase compared to the previous year, which the researcher explained is expected to continue throughout the second half.
He noted, “CJ Logistics' efforts to strengthen collaborations with Shinsegae and Alibaba were delayed due to a turbulent domestic consumption environment, but the synergies remain valid,” adding, “If C-commerce (Chinese e-commerce) companies directly enter Korea, the biggest beneficiary will be CJ Logistics.”
However, the researcher pointed out that CJ Logistics has challenges to overcome in order to recover a valuation premium that surpasses market returns. This includes preventing the outflow of parcel delivery demand to Coupang through differentiated services such as seven-day delivery and early morning delivery, as well as strengthening dominance in the third-party logistics market.
The researcher also stated, “CJ Logistics holds the largest percentage of its own shares in the transportation sector at 12.6%,” and noted, “As the plan for the disposal of its own shares becomes more concrete, a reevaluation is expected to be accelerated.”