[Click eStock] Korean Air, Earnings Surprise Expected Led by Air Cargo

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 8th that it maintains a buy rating and a target price of 43,000 KRW for Korean Air. This is because the operating profit for Q4 2021 is expected to reach a record high of 538.3 billion KRW on a consolidated basis.

While the normalization of international passenger flights remains distant due to the emergence of COVID-19 variants, the cargo peak season has begun, and the cargo boom continues thanks to strong exports of semiconductors, mobile phones, and other products.

According to IATA data, compared to the pre-COVID-19 period in 2019, air cargo supply decreased by about 8%, while demand increased by about 10% (resulting in a supply shortage of approximately 18%). However, with the Delta variant followed by Omicron and the uncertainty of future variants, it is difficult to predict when international flights will return to normal.

Yang Ji-hwan, a researcher at Daishin Securities, stated, "Despite expectations of a vague passenger recovery and concerns over falling cargo rates due to increased belly capacity, the stock price has not reflected the record-high Q4 performance forecast. We believe that international passenger normalization will remain difficult in 2022, and accordingly, the air cargo market is likely to continue its boom."

Korean Air's Q4 2021 results are expected to significantly exceed market expectations, with sales of 2.7059 trillion KRW (+42.1% yoy) and operating profit of 538.3 billion KRW (+346.2% yoy). Incheon Airport's cargo handling volume from October to November was 5.726 million tons (+9.9% yoy), and Korean Air's cargo handling volume for the same period was 2.687 million tons (+10.3% yoy). Looking at major export items in Korea for November (yoy), semiconductors (+40.1%), wireless communication (+16.5%), computers (+73.5%), and textiles (+17%) contributed to the increase in air cargo volume. Due to tight supply and demand, Korean Air's Q4 cargo yield is expected to reach 724.3 KRW/kg (+31.3% yoy).

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