[Click eStock] Korean Air, Three Consecutive Quarters of 'Surprise Earnings'... Unchanged Target Price

Operating Profit Increased by 91% in Q3 This Year
"Increased Travel Demand Due to Eased Quarantine" vs "Economic Downturn Uncertainty"
Securities Firms Uniformly 'Maintain' Target Prices on the 4th

[Asia Economy Reporter Ji Yeon-jin] Korean Air announced earnings that exceeded market expectations for the third quarter of this year. This marks the third consecutive quarter of earnings surprises this year. However, securities firms maintained their target stock prices, citing concerns that inflation and economic slowdown could dampen travel demand, leading to high volatility in future earnings.

According to the financial investment industry on the 4th, Korean Air's separate sales and operating profit for the third quarter of this year were 3.7 trillion KRW and 839.2 billion KRW, respectively, soaring 64.7% and 91.3% compared to the same period last year. Globally, with the easing of entry bans and quarantine measures, demand for overseas travel has fully recovered, and Korean Air's international passenger transport has rebounded to 46.0% of the level in the third quarter of 2019. Operating profit significantly exceeded the market consensus of 638.6 billion KRW as costs increased only moderately compared to the pace of international supply growth.

Outlooks on Korean Air's future performance are mixed. Kang Sung-jin, a researcher at KB Securities, said, "Korean Air's third-quarter operating profit, which exceeded market expectations, may have a positive impact on the stock price for now, but it is unlikely to dispel investors' concerns about potential changes in the business environment." He added, "Due to economic slowdown and inflation effects, consumers' travel expenditure plans are shrinking, so the pace of growth in overseas travel demand may slow down."

On the other hand, Park Sung-bong, a researcher at Hana Securities, expressed optimism, stating, "From October, COVID-19 testing for overseas arrivals was abolished, and overseas travel demand is expected to expand more sharply in the fourth quarter." He added, "For the Americas routes, the load factor is expected to exceed 80% in the fourth quarter, and Southeast Asian routes including Bangkok are currently recording high reservation rates. Recently, Japan has allowed visa-free entry for 68 countries including Korea, leading to a surge in ticket sales to Japan."

Target stock prices were uniformly maintained. Researcher Park said, "After three consecutive quarters of earnings surprises, good operating results are expected in the fourth quarter as well. The current stock price is at a price-to-earnings ratio (PER) of 10 times and a price-to-book ratio (PBR) of 1.0 times, so valuation pressure is limited," maintaining a buy rating and a target price of 37,000 KRW.

Researcher Jeong Yeon-seung of NH Investment & Securities also maintained a buy rating and a target price of 31,000 KRW. Researcher Lee Byung-geun of Heungkuk Securities said, "The company's earnings volatility is expected to increase depending on the pace of cargo market slowdown and passenger recovery," maintaining a buy rating and a target price of 36,000 KRW. Samsung Securities and Daishin Securities also maintained target prices of 36,000 KRW and 33,000 KRW, respectively.

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