[Click eStock] "Jeju Air's Deficit Reduced but Losses Continue"... Maintain Sell Investment Opinion

[Asia Economy Reporter Lee Myunghwan] Mirae Asset Securities maintained a sell rating on Jeju Air, citing the need for demand recovery amid rising cost pressures. However, the target price was raised from 12,500 KRW to 18,000 KRW to reflect a reduction in losses.

Jeju Air's sales in the fourth quarter of last year reached 87.9 billion KRW, a 68.4% increase compared to the previous year, but it recorded an operating loss of 67.3 billion KRW. Domestic passenger volume grew by 30.1% year-on-year, achieving top-line growth. Despite the continued large-scale operating losses, Mirae Asset Securities assessed that the deficit was reduced. As of the end of last year, the company held 294.3 billion KRW in cash, and it is analyzed that the company has relatively abundant cash due to a paid-in capital increase last year.

Mirae Asset Securities expects international routes to recover in the second half of the year. Researcher Ryu Jae-hyun of Mirae Asset Securities said, "There is hope for international route recovery due to the easing of quarantine regulations on some routes such as Vietnam," but added, "The burden of PCR testing and the need to further ease regulations on unvaccinated passengers remain." Rising oil prices also pose a burden, with quarterly costs estimated to increase by 300 million KRW for every 1 USD rise in jet fuel prices.

Regarding domestic routes, it was analyzed that there is potential for revenue improvement by focusing on domestic flights recently, with domestic supply in the first quarter of this year increasing by 90% compared to January 2019 before COVID-19.

Researcher Ryu noted, "Jeju Air's monthly cash loss is around 20 to 30 billion KRW, and if the current situation continues, additional funding will be needed in the third quarter of this year," emphasizing, "In a phase of rising cost pressures such as oil prices and exchange rates, a rapid demand recovery is necessary."

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