Hyundai Glovis: Beneficiary of Global Logistics Disruption

Maintain BUY; Raise TP by 4.0% to KRW260,000

We maintain BUY on Hyundai Glovis as we have raised our TP by 4.0% to KRW260,000 (a 30.7% upside to the Jul 20 closing price). We revised up our 2021E OP forecast by 7.1%. Derived using the discounted cash flow model (7.0% WACC; 2.2% TGR), TP equates to 14.3x 12m fwd P/E and 1.66x P/B.

2Q21E OP of KRW254.7bn (+95.0% YoY), 5.7% above consensus

We lifted our 2Q21E OP estimate by 13.1% (KRW29.5bn) to KRW254.7bn, which is 5.7% (KRW13.7bn) above consensus and equates to 95.0% (KRW124.1bn) YoY growth. We revised up our outlook as the company benefits from disruptions in global logistics in 2Q21 in the aftermath of the Suez Canal blockage at end-March. The incident has aggravated shipping bottlenecks on major maritime routes. As a result, shippers that had failed to secure freight vessels appear to have resorted to more expensive air cargo. Increased demand to expedite freight shipping demand is believed to have a positive impact on Hyundai Glovis’ unit sales for international freight forwarding and CKD.

Investment points

Major investment points include the following:

(1) Shipping demand from Hyundai Motor Group (HMG) should expand on the normalization of semiconductor supply-demand conditions and improved competitiveness in internal combustion engine models.

(2) Shares still reflect excessive concerns over corporate governance changes (controlling shareholders’ stake disposal).

(3) New businesses may catalyze shares upward.

Risks

Risks are as follows:

(1) If the controlling shareholders’ lower their stake before the market gains sufficient confidence in the company’s future growth engines, shares may retreat.

(2) A 1% fall in KRW/USD rate may reduce annual OP by KRW14.5bn.
Source: KB Securities