COVID-19 Reopening Leading Stocks... Earnings Recovering, Stock Prices Still Lagging

[Asia Economy Reporter Park So-yeon] Korea Investment & Securities maintained a target price of 390,000 KRW and a buy rating for Korean Air.

On the 17th, Korea Investment & Securities forecasted that Korean Air's sales for the second quarter of this year would increase by 62% year-on-year to 3.3 trillion KRW, and operating profit would surge by 234% to 646 billion KRW.

Operating profit is expected to decrease compared to the first quarter due to rising fuel costs, but it is anticipated to exceed the consensus by about 25%, supported by the recovery of international passenger traffic. Cargo sales, which had driven earnings surprises so far, are expected to decline by 1% quarter-on-quarter to 2.1 trillion KRW. Although freight rates slightly increased, the volume of cargo decreased.

The better-than-expected strong performance is expected to come from international passengers. Supply increased by only 18% compared to the previous quarter, but the load factor is estimated to have surged from 40% to 70%. Accordingly, sales are projected to more than double, reaching 600 billion KRW. Meanwhile, fuel costs are expected to rise by 56% to 1 trillion KRW due to higher oil prices, but most of this will be offset by increased passenger sales.

Korean Air's profits have exceeded consensus by more than 25% for four consecutive quarters. During this period, it broke its record for the highest quarterly operating profit twice. Nevertheless, the stock price remains sluggish. Choi Gyo-woon, a researcher at Korea Investment & Securities, explained, "Among domestic airlines, Korean Air has the fastest passenger recovery," adding, "In June, while international passenger numbers for LCCs recovered 6% compared to 2019, Korean Air's recovery reached 21%." Accordingly, the buy rating and target price of 390,000 KRW were maintained.

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