[Click eStock] Jeju Air, Slow Demand Recovery and Possible Capital Increase... Target Price Lowered to 18,000 Won

[Asia Economy Reporter Hwang Yoon-joo] NH Investment & Securities maintained its 'Hold' rating on Jeju Air on the 4th, citing continued liquidity depletion due to slow demand recovery and the possibility of a rights offering, while lowering the target price from 24,000 KRW to 18,000 KRW.

Jeong Yeon-seung, a researcher at NH Investment & Securities, stated, "Considering slower-than-expected demand recovery and rising fuel costs, we have lowered the operating profit estimate for 2023, the base year for target price calculation, by 6% compared to the previous estimate."

Researcher Jeong also analyzed, "Taking into account the possibility of additional capital increases within 2022, we reflected an increase in the number of shares. The expected size of the rights offering incorporated into the estimate is 132 billion KRW (issuance of 12 million new shares, expected issuance price of 11,000 KRW, assuming a 24.1% increase compared to the number of shares at the end of 2021)."

Jeju Air received support of 150 billion KRW (30 billion KRW in perpetual convertible bonds and 120 billion KRW from the Industrial Stabilization Fund) through the Korea Development Bank at the end of last year; however, liquidity depletion continues as air passenger demand recovery has been delayed due to the spread of the Omicron variant.

Researcher Jeong evaluated, "Passenger demand is expected to gradually recover from the end of 2022, and profitability is expected to improve due to rising passenger fares, but additional capital increases will likely be necessary to endure the liquidity depletion period until demand recovers."

He added, "Following the integration of Korean Air and Asiana Airlines, there is a possibility of a restructuring of the low-cost carrier competition centered on competitor Jin Air. For Jeju Air, which was the leading operator among low-cost carriers, this acts as an uncertainty factor."

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