[Click eStock] "Jeju Air, Peak-Out Concerns... Target Price Down"

On the 12th, Samsung Securities announced that it would lower the target price for Jeju Air from the previous 13,659 KRW to 12,000 KRW. The investment rating was maintained at 'Hold'. This reflects the recent downward trend in the stock price during the adjustment phase due to concerns over peak out (a phenomenon where growth slows after reaching a performance peak) following the record-breaking performance in the first quarter.

Jeju Air, which recorded strong results in the first quarter, saw both demand and yield decline as it entered April, a traditional off-season. Although there was a rebound last month thanks to holidays and a good reservation rate has continued into this month, it is expected to be difficult to surpass the first quarter's business volume.

Although the third quarter is considered the peak season of the year, the base effect from the first quarter's performance remains a burden. However, with the scheduled introduction of two leased aircraft in the second quarter and two purchased aircraft in the third quarter, supply capacity will expand, maintaining expectations for a recovery in yields.

In particular, the recovery of passengers on China routes has been slow due to delays in the Chinese government's approval of group tour visas. The market expects routes and flights to resume around the third quarter.

The merger issue of Korea's two major airlines, Korean Air and Asiana Airlines, is also drawing attention. If the merger is approved by the European Union (EU), the United States, and Japan, the low-cost carrier (LCC) subsidiaries of both airlines?Jin Air, Air Seoul, and Air Busan?will also merge, becoming the largest LCC in Korea. Based on 2019 data before the COVID-19 pandemic, the combined international passenger volume of these three airlines was 5.21 million, surpassing Jeju Air's 4.2 million. From Jeju Air's perspective, competition with a super-large LCC is inevitably burdensome.

Kim Young-ho, a researcher at Samsung Securities, said, "Despite announcing record quarterly results in May, the company's stock price has fallen by nearly 8% over the past month," adding, "The cause is the entry into the traditional off-season and concerns over the first quarter peak out." He continued, "Although the stock price has adjusted about 24% from the previous high this year, reducing valuation pressure, the upside remains limited. However, it is encouraging that, contrary to initial expectations, international yields are showing a steady trend and passenger demand is gradually but steadily increasing."

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