[Click eStock] "CJ Daehan Tongun, Beneficiary of Parcel Delivery 'Social Agreement'"

Korea Investment & Securities Report

[Asia Economy Reporter Minji Lee] Korea Investment & Securities on the 28th expressed the opinion that CJ Logistics will be recognized as the biggest beneficiary of the social agreement between courier companies and the government. The investment rating was maintained at "Buy," and the target price was kept at 230,000 KRW.

Last week, the social agreement body involving courier labor and management and the government officially announced the second agreement on measures to prevent overwork for courier drivers. This final conclusion was reached about seven months after courier companies and the government first promised to improve working conditions in November last year. Choi Gyo-woon, a researcher at Korea Investment & Securities, explained, "The main contentious issues between labor and management were the timing of excluding courier drivers from sorting tasks and whether fees would be compensated for reduced working hours. Hanjin and Lotte Courier reached a consensus to increase sorting personnel from the existing 1,000 to 3,000?4,000," adding, "Furthermore, by actively reflecting the necessary cost increases for improving working conditions in courier fees, significant changes are expected."

The increase in courier fees is expected to continue until 2022. The three companies that already account for 77% of the total courier volume raised their unit prices by more than 10% starting in April, and shippers are also accepting these changes. Courier companies are moving away from excessive price competition, demanding fair compensation for services from shippers, and expanding investments in logistics infrastructure and working condition improvements for sustainable growth. Researcher Choi said, "Since physical supply capacity has become insufficient, courier companies will focus on profitability improvement through price normalization," adding, "Considering the demands of labor unions and the government, additional increases are expected next year."

As CJ Logistics has been the most proactive in investing in working conditions, additional expenditures to improve logistics infrastructure compared to other competitors are limited. Researcher Choi stated, "Although we have lowered the second-quarter operating profit forecast by about 7% considering the impact of strikes, it is expected to increase further in the second half," and added, "The changes in the e-commerce market, including strengthened cooperation with Naver, should be noted as additional catalysts for the stock price."

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