Korea Investment & Securities Co. said on the 29th that Hyundai Glovis' profitability will steadily trend upward after its governance restructuring, citing a renewed rise in logistics value from global supply chain instability and expectations for a Boston Dynamics listing. It maintained a "Buy" recommendation and a target price of 330,000 won. The previous session's closing price was 233,000 won.
Korea Investment & Securities Co. noted that Hyundai Glovis is set to benefit from rising logistics freight rates, second only to oil prices, as geopolitical uncertainty grows. The more global supply chains are shaken by deglobalization and war, the more important logistics becomes, and demand for urgent transport increases due to unstable procurement of materials and supplies, creating a supplier's market.
Choi O-un, an analyst at Korea Investment & Securities Co., said, "The Shanghai Containerized Freight Index (SCFI) has surged 66% since March, and air cargo rates in April also rose by around 30%, lifting the annual earnings consensus for global tanker operators by more than 40%," adding, "Hyundai Glovis' import-export logistics business, which generates 2 trillion won in annual sales, moves directly in tandem with the SCFI and air cargo rates, and because more than 90% of its revenue comes from global operations, dollar strength is also a positive."
Choi assessed that the boom in finished vehicle ocean transport (PCC) is continuing. Although vessel capacity increased by 24% over the past two years, exports of finished vehicles from China jumped 50% even in the first quarter, absorbing all new vessels and extending the supply shortage, the analyst said.
Average PCC rates are holding at their 2024 peak level, and charter rates have rebounded for the first time in two years. In contrast, the orderbook ratio has been cut in half to 20%, and with only nine newbuild orders last year, supply is expected to drop sharply starting next year.
Choi said, "Hyundai Glovis' share price has corrected 20% since the war," emphasizing, "Even though shipping contributes nearly 40% of earnings and more than 90% of sales come from global operations—making the Middle East–driven logistics disruption and a stronger exchange rate tailwinds—the stock has fallen more than the overall decline in the transport sector (12%), which is a buying opportunity."
Choi also pointed out that Hyundai Glovis is drawing attention in the robotics re-rating tied to expectations for a Boston Dynamics listing. "Until now, doubts about future growth led to a discount on core business earnings," Choi said, "but Hyundai Glovis is expected not only to take charge of robotics-related logistics going forward, it is also deeply involved in the humanoid proof-of-concept phase, which should strengthen its role within the group's value chain."
Choi said attention should also be paid to the potential for a higher payout ratio starting this year. "Because it kept 25% last year, the formal payout ratio guideline for this year is at least 25%," Choi said, adding, "Last year, net profit rose more than 50%, so there was no need to raise the payout ratio."
Choi added, "Free cash flow (FCF) over the next two years is expected to exceed 3 trillion won," while noting, "The current dividend consensus assumes spending only 30% of that, which leaves plenty of share-price support levers and is an important upside factor."