[Click eStock] "T'way Air, Profit Turnaround Expected This Year... Severely Undervalued"

Average Selling Price of Japan Routes More Than Doubled

[Asia Economy Reporter Hwang Yoon-joo] Leading Investment & Securities forecasted on the 10th that T'way Air's average unit price on its main route to Japan has more than doubled, expecting a return to profitability this year.

Researcher Yoo Sung-man of Leading Investment & Securities stated, "Sales in 2023 are expected to increase by 123.3% year-on-year to 1.1347 trillion KRW, and operating profit is expected to turn positive at 81.4 billion KRW."

Researcher Yoo explained, "With the normalization of overseas travel, expansion of fleet size, and increase in average selling price (ASP), sales growth and significant performance improvement are anticipated."

The basis for the performance improvement is the shortage of seat supply due to the surge in air travel demand. Since the third quarter of last year, T'way Air has been aggressively increasing international flight supply faster than other low-cost carriers (LCCs).

Researcher Yoo analyzed, "Due to the shortage of airline seats, the ASP on the Japan route has risen by about twice or more. With the resumption of major Southeast Asian routes (Vietnam, Thailand, Taiwan, Hong Kong, etc.), the overall ASP in 2023 has increased by about 1.5 times compared to previous years."

[Image source=Yonhap News]

In particular, the fact that there are no issues regarding capital erosion resolution or additional capital procurement is also positive. T'way Air's fourth-quarter 2022 performance is expected to be close to the break-even point (BEP).

Researcher Yoo said, "The biggest current issue for T'way Air is the 'concern over capital erosion,' but if it records performance close to the BEP in the fourth quarter of last year, concerns over capital erosion will be resolved, and it will be free from additional capital procurement issues. Although losses were large in the third quarter due to early international route expansion compared to competitors, the deficit is expected to improve significantly in the fourth quarter."

He continued, "T'way Air (market cap 450 billion KRW) is undervalued compared to the market capitalization of major listed LCCs. Considering the number of aircraft owned (30 units) compared to competitors (Jeju Air about 38 units, Jin Air about 26 units, Air Busan about 20 units) and this year's performance improvement, the market capitalization has upside potential to about 850 billion KRW to 1.1 trillion KRW."