Still Short on Car Carriers: "Hyundai Glovis Expected to Rebound in Profit in the Second Half"

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Car Exports Surge from China While Ship Shortage Deepens
Charter Rates and Freight Charges Continue to Climb
"Maximizing Profits by Expanding Fleet in the Second Half"

As the global shortage of car carrier vessels intensifies, charter rates and freight charges are rising. There is analysis suggesting that Hyundai Glovis will boost its profits by continuously introducing additional car carriers from the second half of this year through next year.

On July 24, NH Investment & Securities maintained its target share price for Hyundai Glovis at KRW 319,000 and its investment opinion as 'Buy' in light of these circumstances. The previous day's closing price was KRW 204,500.

As China's exports of finished vehicles expand, demand for car carriers has become stronger than expected, further aggravating the supply shortage. Recently, the increase in charter rates has become even steeper.

Hyundai Glovis plans to introduce five large car carriers in the second half of this year, and a further nine in 2027. When converted to 6,500-CEU vessels, its operating fleet is projected to increase from 98 ships at the end of the second quarter to 110 ships by the end of this year, and to 120 ships by 2027.

Second quarter results met the lowered market expectations. Revenue was KRW 8.7054 trillion, up 15.8% year-on-year. Operating profit was KRW 494.5 billion, down 8.2% over the same period. The operating margin was 5.7%. This was due to about KRW 60 billion in costs being reflected early because of the time lag in applying fuel costs. Cost settlement is expected to be possible in the third quarter.

By business segment, the logistics division reported sales of KRW 2.86 trillion and operating profit of KRW 191.8 billion. Although profits declined due to weakness in contractual container freight rates, recovery is expected in the second half thanks to increased North American inland transport volumes and a rebound in container freight rates.

The shipping division posted sales of KRW 1.64 trillion and operating profit of KRW 130.9 billion. Although operating profit declined year-on-year, it is projected that rising car carrier freight rates and fleet expansion in the second half will have a positive effect. The distribution division recorded sales of KRW 4.2 trillion and operating profit of KRW 171.8 billion, with gains from favorable exchange rates positively impacting profitability.

NH Investment & Securities forecasts Hyundai Glovis’s operating profit for the third quarter at KRW 574.9 billion. The company believes that a rebound in container freight rates, increases in car carrier freight charges, and the settlement of costs that were recognized early in the second quarter could combine to deliver a record-high operating profit.

Jung Yeonseung, researcher at NH Investment & Securities, explained, "The shortage of car carriers is more severe than expected," adding, "Based on increased shipping capacity, the company can expand non-affiliate and high-margin spot volumes to maximize operating profit."

This content was produced with the assistance of AI translation services.