[Click eStock] "Jin Air Achieves Record High Operating Profit... No.1 Among LCCs"

Korea Investment & Securities on the 10th issued a 'Buy' investment rating and a target price of 22,000 KRW for Jin Air.

Jin Air's first-quarter earnings recorded an earnings surprise. Revenue increased by 57% quarter-on-quarter to 352.5 billion KRW, and operating profit rose sevenfold to 84.9 billion KRW. The operating profit exceeded market expectations and Korea Investment & Securities' estimates by 71% and 22%, respectively. It is 60% higher than the previous record high in the first quarter of 2018. The operating margin also reached 24%, marking the first time it has exceeded 20% in a quarter.

Although detailed results have not yet been disclosed, they are estimated to be similar to those previously announced by T'way Air. Jin Air and T'way have become similar in supply scale, and the number of passengers in the first quarter also shows little difference. T'way's revenue was 2% higher due to increased ancillary sales such as cargo, but Jin Air, which had an advantage in cost efficiency even before the pandemic, had an operating margin 1 percentage point higher. Accordingly, Jin Air is expected to rank first among domestic low-cost carriers (LCCs) in operating profit for the first quarter.

The background for the strong first-quarter performance was that international passenger fares exceeded expectations. International supply (ASK) is estimated to have remained below 90% of the 2019 level. In the overall aviation market, supply has recovered less than this. While international flight increases were slower than expected, overseas travel demand exploded, causing fares to rise by about 30%, driving the surprise earnings.

Choi Go-woon, a researcher at Korea Investment & Securities, said, "Airline stocks have rather declined since mid-April, and the first-quarter surprise is already reflected in the stock price," adding, "However, due to a shortage of personnel and infrastructure, increasing short-haul flights is difficult, and the shortage of leased aircraft is even more severe, so the total number of LCC aircraft is expected to remain below the 2018 level even by the end of the year."

He continued, "Concerns about oversupply are excessive given that the fare trend, which is more than 20% higher than in 2019, will continue this year," and said, "We maintain a Buy rating on Jin Air."

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