[Click eStock] T'way Air, Stock Dilution Effect from RCPS Conversion

Maintaining Target Price Despite Upward Revision of Earnings Estimates

Samsung Securities expects T'way Air's net profit to increase significantly, but anticipates a stock dilution effect due to the conversion of Redeemable Convertible Preferred Shares (RCPS). Accordingly, it has issued a 'Buy' investment rating with a target price of 2,400 KRW.

Kim Young-ho, a researcher at Samsung Securities, stated, "Both fares (Q) and cargo volume (P) significantly exceeded expectations, resulting in international sales reaching a record high of 261.5 billion KRW."

Researcher Kim explained, "This is attributed to the proactive fleet expansion since last year and strong demand on Southeast Asia and Japan routes, which led to robust fare levels."

T'way Air has sequentially introduced three medium-to-large A330-300 aircraft starting from the second quarter. The fleet expanded to 30 aircraft, two more than in 2019. Passenger recovery was also remarkable. In the first quarter, international passengers at all airports totaled approximately 13.94 million, only 60.3% of the same period in 2019, but T'way Air's passengers reached about 1.24 million, recovering to 94% compared to 2019.

T'way Air is expected to see a significant upward revision in earnings estimates, with the 2023 projected valuation increasing by 75.7 billion KRW (+45%).

However, Researcher Kim explained, "We maintained the target price and investment rating by reflecting the conversion of preferred shares to common stock (approximately 11.79 million shares, +6.1%) and the decline in peer P/B multiples of leading global companies (from 2.5x to 2.1x)."

He analyzed, "Slower-than-expected passenger recovery is actually delaying fare normalization," adding, "Additional revenue from the introduction of large aircraft and benefits from route differentiation are expected to continue."

He further added, "With expectations already priced in, the upside potential is limited, and there is a possibility that multiple normalization rather than stock price recovery due to earnings improvement will occur."

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