3Q22E OP of KRW463.9bn (+47.3% YoY)
The author is an analyst of KB Securities. He can be reached at seongjin.kang@kbfg.com. -- Ed.
Maintain BUY and TP of KRW230,000
We maintain BUY and TP of KRW230,000 for Hyundai Glovis. We leave our TP unchanged despite the rise in the discount rate (WACC) following interest rate hikes as we believe industry conditions for all divisions are likely to be much better than expected. We have revised up 2022E and 2023E OP by 69.8% and 45.4%, respectively. Derived using the DCF model (9.4% WACC; 3.3% TGR), our TP implies 7.3x 12m fwd P/E and 1.11x P/B, and offers 40.2% potential upside (vs. Sept 28 close).
3Q22E OP of KRW463.9bn (+47.3% YoY), 9.3% above consensus
We project 3Q22E OP at KRW463.9bn (+47.3% YoY, +3.4% QoQ), 9.3% and 73.0% above market consensus and our previous forecast, respectively. USD appreciation should bear positive impact on earnings for all divisions. Despite a slowdown in the market for bulk carrier shipping, strong demand for PCTC shipping (which accounts for the majority portion) should push up Shipping OP by 60.5% YoY to KRW105.6bn. OP for Distribution (i.e., CKD) should increase 77.0% YoY to KRW196.1bn thanks to improvements in HMG’s production activity, and that of Logistics (i.e., forwarding) by 17.3% YoY to KRW162.2bn.
Recent slowdown in logistics industry (i.e., ocean freight rates) to bear minimal impact on Hyundai Glovis
The recent slowdown in the ocean freight industry should have minimal impact on Hyundai Glovis since its focus is in automobile-related cargo (finished cars and parts) rather than general cargo. As production and sales of finished cars at HMG have normalized and such activities at other clients should also improve, demand for Hyundai Glovis is unlikely to be compromised for some time. A decline in air and sea freight rates may lead to cuts in unit price for forwarding, but margin deterioration is unlikely, given the nature of the forwarding business.