[Click eStock] "Korean Air Falls Short of Earnings Expectations... Target Price Down"

[Asia Economy Reporter Son Sunhee] Korea Investment & Securities announced on the 25th that it is lowering the target price of Korean Air from the previous 39,000 KRW to 34,000 KRW, reflecting the disappointing fourth-quarter results last year and the uncertainty caused by the delay in acquiring Asiana Airlines. However, the investment opinion remains 'Buy' as a rebound in this year's performance is expected.

Korean Air's fourth-quarter revenue last year is estimated at 3.8 trillion KRW, down 2% from the previous quarter, and operating profit is estimated at 516 billion KRW, down 36%. This performance fell significantly short of market expectations, including a 300 billion KRW loss in the cargo sector due to a decline in air cargo freight rates. In the fourth quarter, air cargo freight rates fell by 13%, and cargo volume decreased by 4%, according to estimates.

Additionally, the recent increase in overseas travel demand was concentrated in short-haul regions where low-cost carriers (LCCs) significantly increased flights. Although fuel costs did not change much compared to the previous quarter, labor costs increased, resulting in an estimated 7% rise in operating expenses.

Korea Investment & Securities expects Korean Air's operating profit this year to be around 1.47 trillion KRW, a 48% decrease from last year.

Choi Go-woon, a researcher at Korea Investment & Securities, emphasized, "The decline in freight rates has already been reflected in the stock price for a year, so the profit decline this year is not a problem. What is important is the normal profit capacity that can be earned without benefiting from the logistics crisis." He added, "Since the cargo market basically follows the economic cycle, investor sentiment is concerned about a sharp drop after the unprecedented boom so far. However, amid ongoing logistics uncertainties due to the global supply chain restructuring, the supply of long-haul belly cargo is recovering more slowly than expected, so the bottom of this year's freight rates is expected to exceed the pre-pandemic peak."

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