[Click eStock] "Korean Air Expected to Deliver 2Q Earnings Surprise"

"The Q3 Performance During the Summer Peak Season Will Be Even Better"

On the 14th, Korea Investment & Securities predicted that Korean Air would record an earnings surprise in the second quarter. They maintained a 'Buy' rating and a target price of 34,000 KRW, stating that the performance in the third quarter, the peak summer season, would be even better.

Choi Go-woon, a researcher at Korea Investment & Securities, said, "We estimate second-quarter sales to increase by 3% from the previous quarter to 3.7 trillion KRW, and operating profit to rise by 2% to 493 billion KRW."

Operating profit was revised upward by 20% within a month and is expected to exceed consensus by 17%. On a separate basis excluding Jin Air, operating profit is projected to increase by 14% compared to the previous quarter.

Researcher Choi explained, "Cargo rates fell by 10% as the benefits from the logistics crisis subsided, but despite it being the off-season, international passenger fares are estimated to have risen compared to the winter peak season."

International passenger numbers for Korean Air also increased by 21%. In contrast, LCCs saw a 2% decrease due to seasonal effects. Choi said, "Accordingly, international passenger revenue is expected to increase by 282 billion KRW, fully offsetting the 151 billion KRW decline in cargo revenue."

Researcher Choi added, "An earnings surprise in the off-season means that the third quarter, the peak season, will have even better results. International passenger fares will rise in the third quarter due to seasonal effects."

Passenger numbers on Korea-US routes have already surpassed 2019 levels, showing strong travel demand regardless of exchange rates or economic cycles. Choi stated, "Cargo rates are declining at a slower pace, and considering the potential recovery in the semiconductor market, air cargo performance is expected to turn around in the second half of the year."

He particularly noted, "Fuel prices are expected to drop by 13% compared to the first quarter," and predicted, "As a result, third-quarter operating profit will reach 633 billion KRW, exceeding consensus by 21% and continuing the earnings surprise."

Unlike other industries, aviation demand is growing beyond economic slowdowns. However, supply is expected to recover to pre-pandemic levels only after 2024 due to market restructuring and a shortage of new aircraft.

Researcher Choi analyzed, "Korean Air's operating profit is expected to approach 2 trillion KRW this year, and even if the cargo tailwind completely disappears next year, it will maintain 1.6 trillion KRW." He added, "As borrowings have been reduced to half of the 2019 level, the discount factor is also expected to be resolved."

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