[Click eStock] "Jin Air, Increase in Japanese Passenger Demand... Expecting Profit in Q4"

Korea Investment & Securities Report

[Asia Economy Reporter Minji Lee] Korea Investment & Securities maintained its buy rating on Jin Air on the 14th but lowered the target price by 5% to 20,000 KRW. This adjustment reflects a slight downward revision of next year's earnings estimates due to negative external factors such as rising exchange rates and interest rates.

In the third quarter, Jin Air's sales are expected to increase by 33% from the previous quarter to 168 billion KRW. The operating loss is projected to decrease by 12.9 billion KRW to 2.2 billion KRW during the same period. Although fuel costs are expected to rise by about 45% to 21 billion KRW due to the delayed impact of higher oil prices, international passenger revenue is forecasted to surge by 277% to 53 billion KRW, offsetting the increase. International passengers increased by 263%.

Attention should be paid to the increase in travel demand to Japan due to the weak yen, which outweighs foreign exchange losses caused by the strong dollar. Deferred demand for Japan has accumulated for over three years, considering the 2019 boycott demand. Airlines' increased flight schedules have not kept pace with this retaliatory consumption, leading to rising fares. Choi Gyo-woon, a researcher at Korea Investment & Securities, said, “The low-cost carrier industry, which focuses on short-haul passengers, is expected to benefit beyond macroeconomic uncertainties,” adding, “With the resumption of visa-free tourism to Japan, international passengers in the fourth quarter are expected to recover by more than 40%, turning profitable for the first time in 15 quarters.”

However, concerns about financial soundness are considered excessive. Researcher Choi explained, “Although partial capital impairment is expected as of the end of the third quarter, this is due to a temporary timing gap during the refinancing of hybrid capital securities issued last year,” and added, “Foreign currency liabilities are not expected to exceed 300 billion KRW.”

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