Rumors of Price Increases...Will Courier Stocks Soar?

Increased Workload but
Low Profitability Holds Back
Price Drops Due to Fierce Competition Among Companies
Fell Below 2,000 Won Last Year

For Better Courier Treatment
Price Increase and Social Consensus
Expecting Growth and Profitability Improvement

[Asia Economy Reporter Park Jihwan] As the possibility of parcel delivery fee increases rises this year, expectations for a rebound in parcel delivery stocks are growing. Due to overheated volume competition among parcel delivery companies, parcel delivery unit prices have remained in the 2,000 won range for over 10 years, and recently, as issues regarding the treatment of parcel delivery drivers have surfaced, the atmosphere for price increases is becoming visible. Attention is focused on whether the parcel delivery industry, which achieved over 20% sales growth last year due to increased volume from the novel coronavirus infection (COVID-19), can also secure profitability.

According to the Korea Exchange on the 20th, from the beginning of last year until the day before, the stock prices of major parcel delivery companies such as CJ Logistics and Hanjin rose by an average of 30.8%. Considering that the KOSPI rose by 42.18% during this period, this is somewhat below the market growth rate. Stock prices have also shown sluggish performance since the new year. On the first trading day of this year, CJ Logistics closed at 168,500 won, but by the day before, it closed at 165,000 won, down 2.08%. Hanjin also recorded 45,950 won, down 3.26% from 47,500 won during the same period.

Parcel delivery companies enjoyed a boom last year due to the impact of COVID-19 more than ever. However, despite the increased workload, low profitability has been a drag, leading to sluggish stock price trends. The operating profit margin of the parcel delivery sector of domestic logistics companies was around 3-4% on average last year, less than half of the 7-9% range of global companies. This is the result of steadily falling parcel delivery unit prices due to overheated competition among companies. The domestic parcel delivery unit price fell from an average of 2,807 won per item in 2006 to 2,269 won in 2019, and dropped below 2,000 won last year.

According to Hanwha Investment & Securities, CJ Logistics' parcel delivery sales last year are expected to increase by 644 billion won (25.74%) to 3.146 trillion won compared to the previous year. However, as the average parcel delivery unit price fell to 1,987 won, the total operating profit is expected to increase by 29 billion won. In the case of Hanjin, although parcel delivery sales increased by 187 billion won during the same period, total operating profit is expected to increase by only 19 billion won.

This year, the possibility of unit price increases, which have the greatest impact on improving profitability for parcel delivery companies, is anticipated. It is analyzed that the benefits of the untact consumption trend caused by COVID-19 will extend from external growth of parcel delivery companies to profitability. In particular, as the issue of parcel delivery driver treatment has recently become a social problem, the government is showing a sympathetic attitude toward normalizing the price system in the parcel delivery industry to improve the treatment of parcel delivery workers. CJ Logistics, which took the lead in improving treatment, is also expected to fully enjoy the effects of unit price increases. If the parcel delivery unit price is raised by 100 won (5.0%), additional sales of about 180 billion won will occur, and even considering the cost of treatment improvement, it is diagnosed that the profit-increasing trend will continue.

Kim Yuhyuk, a researcher at Hanwha Investment & Securities, said, "Considering that there is a social consensus on unit price increases to improve the treatment of parcel delivery drivers, it is expected that overall unit price increases will occur in the parcel delivery industry this year," and added, "It is time to focus on the momentum of performance improvement due to structural unit price increases by parcel delivery companies."

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