[Click eStock] "Jeju Air, Strong Performance This Year Due to Demand Improvement... Target Price Up"

Target Price Raised by 8% to 13,000 Won

NH Investment & Securities on the 7th raised the target price for Jeju Air from 12,000 KRW to 13,000 KRW, expecting a favorable performance this year due to strong demand on short-haul routes. The investment rating was maintained at 'Hold.'

Researcher Jeong Yeonseung of NH Investment & Securities explained, "Based on strong demand on short-haul routes, we raised the fare level and upwardly revised this year's earnings estimates, increasing the target price by 8%. However, due to the medium- to long-term earnings decline trend and concerns over overhang or supply-demand issues, we maintain a neutral investment rating."

Jeju Air recorded solid results in the fourth quarter of last year despite operating cost burdens. On a consolidated basis, Q4 sales reached 481.9 billion KRW, up 61% year-on-year, and operating profit was 26.3 billion KRW, increasing by 41%. Researcher Jeong analyzed, "Sales performed well as demand for Japan routes remained steady and demand for Southeast Asia routes recovered faster than the usual peak season. Operating expenses rose to 455.5 billion KRW from 392.5 billion KRW in the previous quarter, likely reflecting increased variable costs due to higher business volume and rising labor costs such as incentive payments." He added, "Strong performance is expected in Q1 due to the peak season effect."

Improved demand on short-haul routes is expected to drive strong performance this year. Researcher Jeong stated, "Jeju Air's fleet is expected to expand to 44 aircraft by the end of this year. Despite increased operating expenses such as fuel consumption and labor costs due to fleet expansion, a profit leverage effect from increased sales is anticipated, leading us to raise this year's operating profit estimate by 45% to 131.8 billion KRW compared to previous forecasts."

However, medium- to long-term earnings decline trends and overhang remain concerns. Researcher Jeong pointed out, "Although the pace is slower than expected, concerns over operating profit decline due to long-term fare reductions still exist. There are also concerns about equity dilution or overhang from convertible bonds (36.4 billion KRW) and AK Holdings' exchangeable bonds (125 billion KRW), so resolving dilution concerns through redemption is necessary."

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