[Click eStock] "Jin Air, Biggest Beneficiary of LCC Market Restructuring... Target Price Up 21%"

[Image source=Yonhap News]

[Asia Economy Reporter Ji-hwan Park] Hi Investment & Securities maintained a 'Buy' rating on Jin Air on the 6th, stating that it will be the biggest beneficiary of the restructuring of the domestic low-cost carrier (LCC) market, and raised the target price by 21.4% from the previous 14,000 KRW to 17,000 KRW.

Researcher Junyoung Ha of Hi Investment & Securities said, "The fourth quarter of last year is expected to fall short of market expectations with sales of 56.1 billion KRW and an operating loss of 47.3 billion KRW due to the third wave of the novel coronavirus (COVID-19)," adding, "Passenger demand recovered mainly on domestic routes until November, but sharply declined in December."

Regarding international routes, although recovery is expected compared to the third quarter, it is still evaluated that meaningful sales have not been generated due to COVID-19. For domestic routes, demand increased mainly on the Gimpo-Jeju route in October and November, but from the end of November, COVID-19 rapidly resurged, and domestic demand is estimated to have significantly contracted in December.

However, Jin Air is cited as the biggest beneficiary of the LCC market restructuring. This is because the Korea Development Bank proposed the integration of Jin Air, Air Busan, and Air Seoul as part of Korean Air's acquisition of Asiana Airlines. Researcher Ha believes that if the three companies merge, it is highly likely that the integration will be centered around Jin Air, which is the largest in scale.

Researcher Ha analyzed, "If the three companies integrate centered on Jin Air, they will hold 38.5% of the LCC international market based on 2019 data," adding, "Considering that Eastar Jet's market share of 11.3% will also be taken by surviving companies, the company's LCC international market share is likely to exceed 40%."

He forecasted, "With the distribution of vaccines and the end of the COVID-19 crisis, when deferred air passenger demand appears, Jin Air is expected to have the highest potential for profit growth."