Kerry Logistics Network Earnings: Second-Half Profit Will Be Stronger Sequentially; Valuation Intact

We think Kerry Logistics Network’s, or KLN’s, 10% year-on-year increase in revenue and 11% growth in operating profit (excluding fair value change of investment) in the first half are on track to meet our full-year estimates, as we expect second-half results to grow further sequentially. We find management’s outlook encouraging. As such, we maintain KLN’s fair value estimate at HKD 10.80 per share, representing a 10.6 times 2024 price/earnings ratio. We think KLN remains undervalued at a price/earnings ratio of 7.5 times as of Aug. 28 versus above 10 times from 2015 to 2020 before the large jump in market valuation due to covid-19 logistics shortages.