[Click e Stocks] Hyundai Glovis, Earnings Are Promising but...

[Asia Economy Reporter Junho Hwang] Hana Financial Investment raised the target price of Hyundai Glovis to 230,000 KRW on the 26th. The investment rating was also changed from neutral to buy. However, concerns remain regarding the possibility of the major shareholder selling shares to avoid regulations on internal transactions.

The reason for raising the target price was the first-quarter performance that exceeded market expectations. Sales reached 5.06 trillion KRW, an 8% increase compared to the same period last year, and operating profit grew by 7% to 209.3 billion KRW. As production and sales volume of finished vehicles increased, logistics sales grew by 18% compared to last year. Domestic and overseas logistics expanded by 14% and 19%, respectively. CKD sales in distribution increased by 11% due to the rise in overseas production of finished vehicles. Used car auction sales also showed strong performance both domestically and internationally, increasing by 33%. Other distribution sales decreased by 16% (YoY) due to a reduction in low-profit non-ferrous trading. Meanwhile, shipping sales declined by 11%. Marine transportation (PCTC) decreased by 6% compared to the previous year due to the negative impact of exchange rate depreciation despite increased cargo volume, and bulk shipping dropped by 23% following a strategy to reduce low-profit spot volume. The operating profit margin remained the same as the previous year at 4.1%.

Hana Financial Investment stated that performance improvement is expected in the second quarter of this year as well. They anticipate significant growth in the finished vehicle marine transportation sector after the second quarter due to an increase in the number of operating vessels, growth in shipment volume since March, freight rate hikes reflecting rising fuel costs, and the disappearance of negative exchange rate effects. Hyundai Glovis mentioned in a recent conference call that "since the second half of last year, container freight rates have surged due to instability in the global logistics network, leading to increased transportation costs, and there may be some reduction in shipment volume due to a shortage of automotive semiconductors."

Researcher Seonjae Song of Hana Financial Investment Research Center analyzed, "The short-term profitability decline caused by exchange rate depreciation is coming to an end, and logistics benefits are expected as domestic and international cargo volumes increase with the rise in finished vehicle production and the operation of new plants." He added, "Although there are concerns about the possibility of the major shareholder selling shares (10% stake) to avoid internal transaction regulations under the amended Fair Trade Act, it is judged that there will be no unreasonable methods that damage Hyundai Glovis's corporate value."

Meanwhile, Hyundai Glovis's annual Capex is 800 billion KRW, of which 200 billion KRW will be used for acquiring shares in Boston Dynamics (100 billion KRW) and strategic equity investments. Three hundred billion KRW will be spent on vessel purchases, and another 300 billion KRW will be used for domestic and overseas facility investments. Hyundai Glovis will reclassify transportation costs, which were previously categorized as selling and administrative expenses, as cost of sales starting from the first quarter. The selling and administrative expense ratio changed from 2.9% in the same period last year to 1.5%, and the cost of sales ratio shifted from 92.9% to 94.3%.

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