[Click eStock] "LCC, Q4 Travel Demand Sparks Earnings Surprise Expectations"

On the 25th, Korea Investment & Securities stated that low-cost carriers (LCCs) are expected to record an earnings surprise in the fourth quarter, driven by overseas travel demand. They recommended an 'overweight' rating for the airline sector, naming Jin Air and T'way Air as their top picks.

Researcher Choi Goun said, "The transportation sector's fourth-quarter performance is better than expected," adding, "With increased overseas travel demand, LCCs are expected to post surprise profits, while CJ Logistics is projected to achieve its highest-ever operating profit."

Choi noted, "Although Korean Air and Hyundai Glovis, the top two profit earners in the transportation sector, showed weakness across the entire transportation infrastructure due to temporary factors such as performance bonuses, there is actually growth momentum surpassing the economic cycle in all areas of land, sea, and air transportation."

He continued, "Especially in the airline sector, despite the fourth quarter being the off-season, demand is better than expected," adding, "In the winter peak season of the first quarter, record-high operating profits are anticipated."

He also emphasized, "Moreover, the shipping industry is expected to see the largest upward revision in profit consensus thanks to the windfall gains from the Suez Canal transit suspension," stressing, "Given the generally weak fourth-quarter performance expected across industrial sectors, it is a time to pay more attention to the transportation sector."

Among airlines, the top picks are Jin Air and T'way Air. Researcher Choi said, "Jin Air ranked third among LCCs in international passenger numbers in 2023 but secured first place in operating profit. It has the lowest debt ratio and reliance on borrowings, and is expected to turn to net cash this year."

He added, "T'way Air has an attractive growth story. In February, the European Union (EU) is likely to grant conditional approval for Korean Air's acquisition of Asiana Airlines, with one of the conditions being T'way Air's launch of European routes," noting, "If Korean Air provides large aircraft, T'way Air would instantly become the largest by scale."

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