[Click eStock] "Hanjin, Profitability Declines Due to Labor Cost Burden"

Daishin Securities Report
Target Price Down 10%

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating on Hanjin on the 11th, while lowering the target price by 10.4% from the previous level to 43,000 KRW. This decision was based on the assessment that profitability has declined due to labor cost burdens.

Hanjin recorded sales of 700.9 billion KRW and operating profit of 31.5 billion KRW in the fourth quarter of last year, representing growth of 16% and 34% respectively compared to the same period last year. Sales exceeded market estimates, but operating profit slightly missed the estimates.

The increase in sales was influenced by △ price hikes and volume growth in the parcel delivery sector △ rate increases and ancillary revenue growth in the port stevedoring sector △ strong performance in the land transportation business. The company’s parcel delivery volume in October-November last year rose approximately 12.2% year-on-year to 95.2 million boxes, with an estimated volume increase of over 10% in December as well. The parcel delivery price per box is estimated to have risen 4.2% year-on-year to 2,291 KRW, with the average price in October-November reaching 2,296 KRW, a 4% increase compared to the same period last year.

The port stevedoring sector benefited positively from the change in cost burden, where the shipping companies, not the terminal, now bear the costs related to container handling and transportation. Yang Ji-hwan, a researcher at Daishin Securities, said, “Sales increased significantly due to the effect of costs being converted into revenue and the rise in ancillary storage fees,” adding, “The land transportation business reflected the effect of securing long-term contracts with large retailers.”

However, despite the increase in sales, the additional labor costs from hiring more parcel sorting personnel have lowered profitability. Researcher Yang said, “To improve profitability, a price increase is necessary due to the hiring of 2,000 additional parcel sorting workers this year and increased depreciation expenses from investment in automatic sorting machines,” and added, “To offset the monthly cost increase of about 2.5 billion KRW and annual increase of 30 billion KRW, a price hike of around 60 KRW per box is needed.”

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