CJ Logistics Achieves Record-High Performance... "What About the Stock Price?"

CJ Logistics has shown rapid growth with sales tripling and operating profit increasing sixfold over 10 years since its integration with CJ Group in 2013, but its stock price remains at historically low levels.

CJ Logistics recently marked the 10th anniversary since its merger with CJ Group’s logistics affiliates in April 2013, forming an integrated corporation. Over the past decade, CJ Logistics’ sales increased from 3.7 trillion KRW in 2013 to 12.1 trillion KRW in 2022, an increase of over 8 trillion KRW. Operating profit also rose from 64.1 billion KRW to 411.8 billion KRW, an increase of about 350 billion KRW. Both sales and operating profit set new records every year.

The business structure has also evolved in line with industrial structure and consumer trends. From being the ‘strongest player in land transportation,’ it has recently transformed into a CBE operator handling deliveries for global online shopping malls such as Amazon, AliExpress, and iHerb. It is also focusing on expanding overseas operations centered on growth countries such as the United States, India, and Vietnam. In fact, in the U.S., sales have grown 13 times compared to 10 years ago through mergers and acquisitions. The company appears to be restructuring its operations around highly profitable and growth-oriented businesses.

It is also evaluated positively in terms of stability, which is increasingly valued amid domestic and international economic uncertainties. It has maintained an increase in operating profit for eight consecutive quarters compared to the same period last year. In February, it conducted a cash dividend for the first time in 26 years since 1997. The debt ratio is 140.3%, below the typical benchmark of 200%, and considering about a 10 percentage point buffer for proactive funding based on stable liquidity, the actual debt burden is even lower.

However, the stock price is at a historic low. Recently, the price-to-book ratio (PBR) has been pointed out as excessively low at 0.45 times. The price-to-book ratio is an indicator showing how much shareholders would receive per share if the company’s assets were all sold. For example, a PBR of 1 means shareholders would receive assets equivalent to the value of one share. A PBR below 1 means the stock price is lower than the company’s asset value, indicating undervaluation.

CJ Logistics’ stock price peaked in June 2016 at 234,000 KRW. That year, sales were 6 trillion KRW, and operating profit was about 230 billion KRW.

By the end of December 2022, the closing stock price was 93,700 KRW, only about 40% of the 2016 peak. Meanwhile, sales increased to 12.1 trillion KRW and operating profit to about 410 billion KRW, roughly doubling. Despite doubling performance, the stock price has fallen to about one-third.

The securities industry analyzes that the current stock price level is too undervalued compared to performance and logistics competitiveness. Choi Gyo-woon, a researcher at Korea Investment & Securities, recently stated in a report, “The expected PBR of 0.5 times in 2023 is a result of excessive neglect in the stock market.”

There is also an opinion that the value as a traditional defensive stock should be considered. Stocks in telecommunications, transportation, and healthcare sectors tend to perform well during economic downturns. Recently, the Bank of Korea has kept interest rates unchanged for two consecutive months amid growing concerns about a recession. The International Monetary Fund (IMF) also lowered South Korea’s economic growth forecast for this year from 1.7% in January to 1.5%, supporting this view.

Researcher Choi maintained a buy recommendation, stating, “Considering the unchanged logistics competitiveness, the value as a defensive stock remains valid,” with a target price of 125,000 KRW and a buy (BUY) investment opinion.

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