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Disappointing Earnings in the Face of Strong Downstream Industry



Hyundai Glovis, despite experiencing an increase in parts and finished vehicle volume, has been unable to take advantage of high freight rates due to its reduced operating PCC fleet. As a result, the company needs to present a concrete roadmap for new businesses in the second half of 2023. While the demand for parts logistics and finished vehicle logistics is rising, Hyundai Glovis is unable to secure high-margin spot cargo contracts due to the decrease in the size of its operating fleet. Additionally, the depreciation of the dollar is affecting the company's profitability. Although Hyundai Glovis shares are trading at a low valuation range, its reliance on its in-house logistics business is limiting its potential for valuation expansion. The company has recently shown interest in a pretreatment business for waste batteries and investing in stakes in related companies, which has raised expectations for new ventures in the second half of 2023. However, a more detailed roadmap is needed to support these new business ambitions.

In the second quarter of 2023, Hyundai Glovis reported sales of W6.53tn, a 4.8% year-on-year decrease, and an operating profit of W412.6bn, an 8.0% year-on-year decrease. The logistics segment contributed sales of W2.26tn and an operating profit of W213.2bn, with improved profitability due to higher overseas local land transportation rates and cost settlement. The shipping segment recorded sales of W1.05tn and an operating profit of W74bn, but the company was unable to capitalize on higher freight rates due to a decrease in the size of its PCC fleet and port congestion. As a result, transportation volume was below expectations. Going forward, Hyundai Glovis will need to renew contracts to benefit from increased freight rates, but this will come with higher costs due to the need for vessel rentals to increase capacity. The distribution arm of the company reported sales of W3.23tn and an operating profit of W125.4bn, with margins being affected by the depreciation of the dollar.

In conclusion, Hyundai Glovis needs to present a concrete roadmap for new businesses in the second half of 2023 to capitalize on the increasing demand for parts logistics and finished vehicle logistics. The company's reduced operating PCC fleet has hindered its ability to take advantage of high freight rates, and the depreciation of the dollar has affected its profitability. While Hyundai Glovis shares are trading at a low valuation range, its reliance on its in-house logistics business limits its potential for valuation expansion. The company has shown interest in new ventures such as a pretreatment business for waste batteries, but a more detailed roadmap is needed to support these ambitions. Overall, Hyundai Glovis needs to address these challenges and present a clear plan for growth in the coming months.

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