[Click e Stocks] The Crisis and Opportunity of Korean Air

Beyond the Korean Air Cargo Terminal at Incheon International Airport, the eventful year of 2020 is coming to an end. In the new year of 2021, we hope that the novel coronavirus disease (COVID-19) will disappear and the skies will open wide. / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Junho Hwang] Daishin Securities raised the target price of Korean Air to 31,000 KRW on the 26th, an increase of 34.8%.

This target price is based on applying a target PBR of 1.44 times to this year's estimated BPS of 21,678 KRW (applying a 30% premium to the 10-year historical average). Daishin Securities raised its earnings estimates for this year, expecting the fourth-quarter results last year to exceed market expectations, and increased the target price reflecting optimism about the launch of an integrated airline following the acquisition of Asiana Airlines.

Daishin Securities estimated that Korean Air's total equity was 3.28 trillion KRW in the third quarter of last year and expected it to increase to 4.55 trillion KRW by the end of last year. Considering a paid-in capital increase of 3.3 trillion KRW, the total equity by the end of this year is expected to reach 7.92 trillion KRW. In particular, if the current stock price is maintained after the new shares are listed on March 24, it is projected to become a mega airline with a market capitalization exceeding 10 trillion KRW.

They especially judged that the COVID-19 pandemic served as an opportunity for Korean Air to strengthen its capital, acquire competitors, improve its financial structure, and secure stable management rights, thereby transforming the company's fundamentals. If the acquisition of Asiana Airlines is completed and a positive business environment develops following COVID-19 vaccinations, they believe additional premiums could be granted.