CJ Korea Express Summary
Core Content
CJ Korea Express is a logistics company that has been actively pursuing M&A strategies to become a global logistics leader. The company has seen consistent growth in sales and operating profit, with a notable increase in 3Q driven by a 17.3% year-over-year (y-y) rise in sales and a 9.5% y-y increase in operating profit. Despite a decline in parcel delivery ASPs, the company's market share is expected to increase due to mobile shopping growth and terminal automation. The current price of the stock is KRW164,000, with a target price of KRW220,000, indicating a 34.1% upside. The company's market cap is KRW3.7t (USD3.3b), and it has a float of 22,812,344 shares, with a 52-week high of KRW214,000 and a low of KRW152,000. The average daily trading value over 60 days is KRW6.2b (USD5.5m).
Key Points
- M&A Strategy: CJ Korea Express continues its M&A-focused strategy to expand its global presence. On October 10, it announced the acquisition of Gemadept's logistics and shipping units in Vietnam, its third M&A deal of the year, following acquisitions of Darcl in India and IBRAKOM in the UAE.
- Growth Drivers: The company is expected to gain market share in the parcel delivery sector due to increased transaction volume and mobile shopping growth. Contract logistics and global operations are also expected to grow, supported by solid performances in cold chain and consumer goods logistics.
- Valuation Metrics: The company's P/E ratio is projected to decrease from 66.5 in 2016 to 22.0 in 2019, reflecting improved profitability and growth expectations. The P/B ratio is expected to decline from 2.6 in 2016 to 1.9 in 2019, indicating a potential undervaluation.
- Share Price Analysis: The stock has fallen 17.8% since its year-to-date (ytd) high of KRW199,500 on June 2. However, concerns over the 5% stake held by Asiana Airlines appear excessive, as the stock is trading near the price at which the stake was acquired, and the airline would see minimal interest expense cuts by offloading shares.
Financial Highlights
| Metric |
2016 |
2017E |
2018E |
2019E |
| Revenue (KRWb) |
6,082 |
6,905 |
7,933 |
8,898 |
| Net profit (adj) (KRWb) |
68 |
93 |
149 |
207 |
| EPS (adj) (KRW) |
2,465 |
3,356 |
5,360 |
7,452 |
| EPS growth (% y-y) |
1.7 |
36.1 |
59.7 |
39.0 |
| EBITDA margin (%) |
6.1 |
6.3 |
6.6 |
6.7 |
| ROE (%) |
2.7 |
3.3 |
5.1 |
6.7 |
| P/E (adj) (x) |
66.5 |
48.9 |
30.6 |
22.0 |
| P/B (x) |
2.6 |
2.4 |
2.2 |
1.9 |
| EV/EBITDA (x) |
15.1 |
13.0 |
10.6 |
9.1 |
Key Changes
| Metric |
New |
Old |
Diff |
| Recommendation |
BUY |
BUY |
- |
| Target price |
220,000 |
220,000 |
0.0% |
| 2017E EPS |
3,356 |
3,659 |
-8.3% |
| 2018E EPS |
5,360 |
5,421 |
-1.1% |
Forecast Revisions
| Metric |
New 2017E |
New 2018E |
Old 2017E |
Old 2018E |
Chg (%) |
| Sales |
6,905 |
7,933 |
6,942 |
6,942 |
-0.5% |
| Operating profit |
253 |
321 |
268 |
326 |
-5.6% |
| Pre-tax profit |
129 |
199 |
141 |
201 |
-8.3% |
| Net profit |
93 |
149 |
102 |
151 |
-1.1% |
| EBITDA |
433 |
525 |
448 |
530 |
-3.3% |
| EPS (KRW) |
3,356 |
5,360 |
3,659 |
5,421 |
-1.1% |
M&A Activities
| Date |
Country |
Company |
KRWb |
Stake (%) |
Details |
| Apr 2013 |
China |
Smart Cargo |
Unknown |
51.0 (consolidated) |
Nine branches in China, four overseas offices |
| Sep 2015 |
China |
CJ Rokin (Rongqing) |
455 |
71.4 (consolidated) |
48 terminals and 22 logistics centers |
| Jul 2016 |
China |
CJ Speedex |
81.1 |
50.0 (consolidated) |
15 trunk networks, 31 warehouses |
| Aug 2016 |
Malaysia |
Century Logistics |
47.1 |
31.4 (consolidated) |
8 logistics centers, 600 vehicles |
| Jun 2017 |
India |
Darcl Logistics |
57.1 |
50.0 |
210 centers, 15,000 vehicles |
| Jun 2017 |
UAE |
IBRAKOM |
77.3 |
51.0 |
21 offices in 15 countries, 522 vehicles |
| 2017 |
Vietnam |
Gemadept Corporation |
Ongoing |
- |
Acquisition expected to cost KRW200b-300b |
Gemadept Acquisition
- CJ Korea Express is acquiring Gemadept's logistics and shipping units for a combined KRW97.8b, with 70% of the cost provided by CJ Korea Express.
- Gemadept's 2016 sales were KRW194.3b, with logistics and shipping contributing 43% and 21%, respectively.
- The acquisition is expected to boost CJ Korea Express's competitiveness in Vietnam and help establish a broader network in Indochina.
Synergies and Benefits
- CJ Rokin: Acquired in 2015, CJ Rokin is a leading cold chain company in China with 38 branches, 48 logistics terminals, and over 120 outlets. Its operations include a temperature-controlled logistics network and a robust customer base in various sectors.
- Gemadept: The acquisition will provide CJ Korea Express with access to Vietnamese MNC customers and help it establish a presence in Indochina, enhancing its pan-Asia logistics network.
Valuation and Investment Outlook
- Despite the recent share price decline, the analyst maintains a BUY rating and a 12-month target price of KRW220,000, citing continued growth in market share and profitability, as well as M&A-driven top-line growth and ROE improvements.
- The analyst suggests that investors should consider accumulating shares during any price weakness, as the concerns over Asiana Airlines' stake appear to be overblown.
