South Korean companies face profit pressure amid regional delays and investment costs

South Korean firms Taekwang and CJ Logistics are facing downward revisions in profit forecasts due to external delays and increased operational spending.

Taekwang’s target price has been lowered by 16.1% to 47,000 KRW by Korea Investment & Securities. The adjustment follows delays in the expected end of conflicts in the Middle East, which has pushed back the recognition of revenue from short-term orders. While US-based orders for LNG terminals are expected to provide some support, the delay in Middle Eastern contracts is projected to lower operating profit margins through the first half of next year.

CJ Logistics is also seeing a projected decline in third-quarter operating profits. Despite a 9% increase in revenue to 3.3 trillion KRW, operating profit is expected to drop by 22% to 116 billion KRW. Analysts attribute this to high costs associated with infrastructure investment and service differentiation aimed at maintaining its position as the leading parcel delivery provider. Despite the short-term margin pressure, analysts have maintained a ‘buy’ rating, noting that the company's valuation has reached a low point.