DSV: Towering ambition vs investor skepticism, with synergy-led margin gains about to kick in

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DSV: Towering ambition vs investor skepticism, with synergy-led margin gains about to kick in

Still the core profit engine. DSV derives 60% of its operating profit from Air & Sea, and investors

understandably continue to focus far more on this business than on the other segments. The size and growth of the air

and sea forwarding industry is mainly a function of global trade, which in turn has historically closely tracked the

development of real GDP. We expect that to remain the case, and for DSV to outgrow the market as it takes share from

smaller, fragmented freight forwarders that lack either the logistics expertise or the technological infrastructure of the

scale players. We also expect some upside to unit gross profits at DSV as it insources logistics value added activity

that DB Schenker historically subcontracted to third parties. Together with the ongoing workforce rightsizing and technology

replatforming, we see the company’s target of a conversion ratio in Air & Sea in the mid-50%s (specifically: >55%) by 2030

as within reach.

• Contract Logistics: How far can labor productivity drive margins? DSV’s Contract Logistics business is already more

profitable than its closest peers, with a c. 9% EBIT margin last year, vs typically a 6-7% range at DHL Supply Chain and

3-4% at GXO. Margins have risen over time, from 4% in 2016, built in part on ongoing improvements in labor productivity.

We see these gains as ongoing, coming on top of at least mid single digit revenue growth from economic activity,

inflation and outsourcing, pushing EBIT above DKK 8bn by 2030 in our view.

• Road: The highest transformation potential. DSV began as a Nordic road freight forwarder, but now derives 60%+ of

its operating profit from Air & Sea.