CJ Logistics, once perceived as a stock market underdog, has been gaining significance recently. (Image courtesy of CJ Logistics)
SEOUL, Dec. 12 (Korea Bizwire) – CJ Logistics, once perceived as a stock market underdog, has been gaining significance recently. The company has been struggling to maintain market share due to the rapid ascent of Coupang, which posed a formidable threat in the retail sector. However, CJ Logistics has experienced a remarkable surge in its stock price this year, rising by nearly 70 percent compared to its low point earlier in the year.
According to the Korea Exchange, CJ Logistics concluded trading at 118,600 won on December 8, marking a 2.68 percent increase from the previous day. What propelled CJ Logistics’ stock price upward was Alibaba Group’s third-quarter earnings announcement. On October 21, Alibaba Group revealed that its global e-commerce revenue had surged by 73 percent year-over-year, amounting to approximately 3.42 trillion won.
Currently, Alibaba’s e-commerce platform, AliExpress, supplies goods to the domestic market through its partnership with CJ Logistics. This collaboration has led to a substantial increase in the volume of parcels handled by CJ Logistics, and a subsequent surge in its share price.
Over the past few years, CJ Logistics has been ceding market share to Coupang. According to the Korea Integrated Logistics Association, as of August of this year, Coupang Logistics Service had increased its market share from 12.7 percent at the end of last year to 24.1 percent, effectively doubling it. Within a year, CLS surpassed competitors like Lotte Logistics and Hanjin Logistics, securing the second position in the industry. During the same period, CJ Logistics’ market share dropped from 40 percent to 33.6 percent.
Nonetheless, the changing landscape in the domestic delivery market, driven by increasing overseas direct purchases from China, may alter the dynamics. CJ Logistics is a prime beneficiary of the surge in small cargo shipments, which constitute 76 percent of the total parcel volume in the delivery market and are associated with online direct purchases.
In response to CJ Logistics’ performance, securities analysts have been revising their target prices upward this month, with improved profitability expected due to the growth of small cargo shipments and e-commerce parcel volume.
Although CJ Logistics’ operating profit margin declined from 5.6 percent in 2021 to 4.9 percent last year, it increased to 6.1 percent on a cumulative basis for the third quarter of this year. According to analyst estimates, CJ Logistics is expected to achieve 12.27 trillion won in revenue and 463.4 billion won in operating profit next year, representing a 4.54 percent increase and a 5.07 percent increase year-over-year, respectively.
Alibaba’s commitment to addressing the issue of counterfeit products is also expected to work in CJ Logistics’ favor. As trust in the quality of products purchased directly from China increases, it is anticipated that this will positively impact CJ Logistics’ bottom line.
Nevertheless, some have expressed concerns that the recent surge in CJ Logistics’ stock price may be excessive. Kim Young-ho, a researcher at Samsung Securities, suggested that “while improvements in global performance seem likely, the stock price already reflects expectations, limiting further upside potential.” As a result, he provided a “neutral” investment recommendation.
Ashley Song (ashley@koreabizwire.com)
