[Click eStock] "Jeju Air to Recover from Q4... Target Price Up 46%"

[Asia Economy Reporter Minji Lee] KB Securities maintained a neutral investment rating on Jeju Air on the 1st and raised the target price by 46% to 22,000 KRW.

Kang Seongchan, a researcher at KB Securities, said, "With the full-scale rollout of COVID-19 vaccinations reducing uncertainties, we removed discount factors from long-term operating profits and raised the target price," adding, "However, the current stock price already reflects sufficient expectations."

This year, Jeju Air is expected to record an operating loss of 278.3 billion KRW, continuing its deficit from last year. However, it is predicted to turn a profit with an operating income of 50.1 billion KRW in 2022. The point at which Jeju Air can show clear signals of operating profit recovery is expected to be the fourth quarter, as the government aims to complete the first dose vaccination for 36 million people, 70% of the population, by September and achieve herd immunity by November.

Researcher Kang said, "Travel restrictions will ease and passenger demand will begin to recover from the fourth quarter," but added, "Jeju Air is expected to require an additional 185 billion KRW in cash financing this year."

In fact, Jeju Air is analyzed to have many risk factors regarding financial stability. It is forecasted to incur a net loss of 160.1 billion KRW between the second and fourth quarters this year. To avoid complete capital erosion, a rights offering is necessary. It also seems possible to supplement capital by issuing new capital securities through government support such as the period industry stabilization fund.

Researcher Kang analyzed, "If liquidity is not secured in a timely manner, financial risks may arise," and "If the COVID-19 situation is prolonged due to variant viruses, the improvement in operating profits will be delayed."

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