[Click eStock] "Korean Air, Strong 3Q Cargo Business... 4Q International Flights Expected to Recover"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Myunghwan] Hana Securities announced on the 19th that it maintains a buy rating and a target price of 37,000 KRW for Korean Air. This is due to strong sales in the cargo sector and the expected recovery in international flight demand.

Hana Securities forecasts that Korean Air's revenue for the third quarter of this year will reach 3.7 trillion KRW, a 58.5% increase compared to the same period last year. Operating profit is expected to grow by 43.8% year-on-year to 604.1 billion KRW. The operating profit is also anticipated to exceed the market consensus of 544.9 billion KRW.

According to Hana Securities' analysis, Korean Air's international passenger transport (RPK) in the third quarter is expected to recover to 45.6% of the level seen in the third quarter of 2019, before the COVID-19 pandemic. This is attributed to the global implementation of relaxed entry restrictions and quarantine measures, which have revived overseas travel demand. The international flight load factor (L/F) is also estimated to have risen to 81.8%. However, cargo sales are expected to decrease by 329.6 billion KRW compared to the previous quarter, as both transport volume (FTK) and freight rates declined by 8.2% and 13.2%, respectively.

Hana Securities expects the recovery in international flight demand to continue into the fourth quarter. This is due to the lifting of slot restrictions (number of aircraft arrivals per hour) and curfews (flight ban hours) since June, as well as the removal of COVID-19 testing requirements for overseas arrivals starting in October. Consequently, overseas travel demand is projected to improve more sharply in the fourth quarter. For the transpacific routes, the load factor is expected to remain above 80% in the fourth quarter, while visa-free entry to Japan for 68 countries, including Korea, has led to a surge in ticket sales for flights to Japan.

However, cargo sales are expected to decline slightly in the fourth quarter. This is attributed to the global economic slowdown, reduced demand for container ships, and falling freight rates. Hana Securities pointed out that spot freight rates for container ships have fallen for 17 consecutive weeks, remaining at 35.5% of the peak level seen earlier this year.

Researcher Park Seongbong of Hana Securities stated, "Although cargo sales are expected to decrease compared to the first half of the year, they will still remain at a high level in the second half, alongside the anticipated full-scale recovery in international flight demand. The current stock price is at a price-to-book ratio (PBR) of about 1.0, so valuation pressure is limited."

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