"3Q Profit Slows for CJ Logistics, But Parcel Volume Grows"[Click e-Stock]

CJ Logistics is expected to see a year-on-year decline in operating profit for the third quarter of this year due to weak overseas performance. However, there are forecasts that the company could rebound as parcel delivery volume returns to year-on-year growth for the first time in three quarters.

On October 2, iM Securities maintained its target price for CJ Logistics at 120,000 won and its investment rating at "Buy," citing these factors. The previous day's closing price was 83,800 won.

The company’s estimated results for the third quarter are sales of 3.054 trillion won and operating profit of 139 billion won. While sales are expected to increase by 2.6% year-on-year, operating profit is projected to decline by 1.8%. The performance of the parcel delivery and contract logistics (CL) divisions is expected to be solid, but a slump in global forwarding is anticipated to reduce operating profit.

The parcel delivery business is projected to perform well, with sales of 917.2 billion won and operating profit of 59.5 billion won, representing increases of 2.1% and 10.1% year-on-year, respectively. This is attributed to the government’s domestic consumption stimulus policies, such as coupon programs in July, and the stronger-than-usual holiday season effect.

In particular, parcel delivery volume is expected to rise by about 4% during the same period. This marks a return to year-on-year growth for the first time in three quarters since the fourth quarter of last year. Although industry competition is expected to drive the average parcel delivery price down by around 2.0% year-on-year, the increase in volume is expected to offset this effect.

The CL business is forecast to see sales of 846.4 billion won and operating profit of 54.8 billion won, up 10.1% and 7.1%, respectively. The warehouse and distribution (W&D) segment is expected to achieve double-digit sales growth thanks to securing major clients such as Shinsegae Group. In contrast, the port and distribution (P&D) segment appears to have seen a decline in sales, excluding the integration effect of "Theunban," due to reduced port cargo volume stemming from customs uncertainties.

Global sales are estimated to have been somewhat weak, with sales of 1.1 trillion won and operating profit of 20.3 billion won, down 2.7% and 28.0% year-on-year, respectively. This is believed to be due to a sharp decline in ocean freight rates and a reduction in battery logistics, resulting in a significant decrease in sales.

The increase in parcel delivery volume is highlighted as a key point. Growth is expected to resume, driven by the stabilization of seven-day-a-week delivery and the expansion of fulfillment services. While there is a risk of unit price decline, the larger scale is anticipated to generate operating profit leverage effects.

Bae Seho, a researcher at iM Securities, stated, "In the mid- to long-term, we can expect overseas subsidiary sales growth from the listing of the India subsidiary and the completion of the U.S. logistics center, as well as strengthened shareholder return policies." He added, "CJ Logistics holds a 12.57% treasury share ratio, and options such as share cancellation or equity swaps with major e-commerce companies may be considered."

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