[Click eStock] "Annoying Exchange Rate"... Hyundai Glovis 4Q Operating Profit Expected to Fall 18% YoY

Double-Digit Decline in Sales Across All Business Divisions Except Logistics Sector

[Asia Economy Reporter Minwoo Lee] Hyundai Glovis' fourth-quarter performance last year is expected to fall short of market expectations. This is attributed to the decline in operating profit margin of the CKD (Completely Knocked Down) business division, which accounts for about 40% of total sales, due to the sharp appreciation of the Korean won that began in October last year.

On the 4th, Hi Investment & Securities forecast that Hyundai Glovis would record sales of 4.3503 trillion KRW and operating profit of 187.5 billion KRW in the fourth quarter of last year. Compared to the same period last year, sales are expected to decrease by 9.4% and operating profit by 17.9%, falling short of market expectations. It is analyzed that the sharp decline in the won-dollar exchange rate had a significant impact. At the end of the third quarter last year, the won-dollar exchange rate was 1,170.2 KRW per dollar, dropping 7.2% to 1,086.5 KRW at the end of the fourth quarter.

Sales in the distribution business division, which is most affected by exchange rates, are estimated to have fallen 12.2% year-on-year to 2.2019 trillion KRW. This is attributed to the CKD business division, which accounts for about 40% of total sales and about 75% of distribution business sales, being exposed to exchange rate fluctuations. Ha Junyoung, a researcher at Hi Investment & Securities, said, "The fourth-quarter performance of the CKD business division last year is expected to be 1.6903 trillion KRW, down 11.2% year-on-year, indicating slower-than-expected sales recovery," adding, "Autobiz and other distribution sectors are expected to maintain performance at the previous quarter's level."

The shipping business division saw the largest year-on-year sales decline. Sales are expected to decrease by 19.3% year-on-year to 636.5 billion KRW. However, the rate of sales decline is expected to improve compared to the previous quarter. This is because sales in the PCC (Pure Car Carrier) business division are estimated to have increased by about 23.8% quarter-on-quarter to 472 billion KRW. Researcher Ha explained, "The PCC business began normalizing customers' finished car shipments from the third quarter, and since sales are recognized on an accrual basis, a significant improvement is expected in the fourth quarter compared to the previous quarter," adding, "However, the bulk carrier business division is expected to show similar performance to the third quarter due to its focus on dedicated vessels."

Meanwhile, the logistics business division performed relatively well. Sales are expected to increase by 0.4% year-on-year to 1.5119 trillion KRW. Domestic logistics sales are projected to rise by 3.0% year-on-year, while overseas logistics sales are expected to decline by 0.5%, attributed to the decline in the won-dollar exchange rate.

In other non-operating areas, a foreign currency translation gain of about 82 billion KRW is estimated due to the decline in the won/dollar exchange rate. Hyundai Glovis has about 1.1 trillion KRW in foreign currency borrowings for ship financing and operating funds.

Against this backdrop, Hi Investment & Securities maintained a 'Buy' investment rating and a target price of 220,000 KRW for Hyundai Glovis. The closing price on the previous trading day was 184,000 KRW. Researcher Ha said, "The company has recently formalized its entry into various new businesses, which is expected to significantly increase its valuation," explaining, "It has declared entry into the battery rental business and hydrogen transportation business, and recently participated in Hyundai Motor Group's acquisition of Boston Dynamics, securing a 10% stake."

This content was produced with the assistance of AI translation services.