[Click eStock] "Jin Air, Undervalued Despite Profit Growth and Financial Improvement... Buy Recommendation"

"Vague Peak-Out Concerns...
Undervalued Despite Profit Growth and Financial Improvement Achievements"

Korea Investment & Securities maintained a buy rating and a target price of 17,000 KRW for Jin Air on the 9th, stating, "Based on the competitiveness of the B777 wide-body aircraft and the synergy with the Korean Air Group, Jin Air is showing a differentiated profit growth even among low-cost carriers (LCCs)."

On the same day, Choi Goeun, a researcher at Korea Investment & Securities, said, "I recommend Jin Air as the top pick in the airline industry. There is a need to re-evaluate the low-cost carrier sector, which grows alongside overseas travel demand, breaking away from the limitations of cyclical industries."

In the first quarter, Jin Air achieved record-high performance. Revenue increased by 22% year-on-year to 430.3 billion KRW, and operating profit rose by 16% to 98.5 billion KRW. Researcher Choi said, "Operating profit exceeded market expectations by 10%. It has been five quarters since the airline market reopened last year, and including this quarter, this is the third profit surprise."

International passenger fares are also estimated to have risen compared to the same period last year. Researcher Choi explained, "Last year's first quarter was the first winter peak season after reopening, so deferred demand, especially to Japan, exploded, but the overall pace of flight increases in the airline industry was slow. Therefore, there were many evaluations that 'international fares overshot (short-term surge).' There were also peak-out concerns that the record-high operating profits of LCCs would not be sustainable."

He added, "Nevertheless, fares rose this year, breaking the record for the highest operating profit once again. This shows that overseas travel demand is not the type to be dampened by external economic factors, and that competition in airline supply is also limited."

Jin Air is expected to maintain its position as the top LCC in operating profit this year as well, following last year. Researcher Choi added, "With record-breaking performance continuing, the financial status has also quickly normalized. Considering profit growth and financial soundness, it would not be surprising for Jin Air to receive a premium. The expected price-to-earnings ratio (PER) for this year is only 5 times, the lowest in the airline industry except for Air Busan."