[Click eStock] "Korean Air, Operating Profit Expected to Exceed 600 Billion KRW After 8 Quarters... Top Pick in Air Transportation Industry"

Operating Profit Exceeds 600 Billion KRW in Q3 for the First Time in 8 Quarters
Market Outlook Surpasses Expectations Due to Jet Fuel and Exchange Rate Decline
Performance Improvement Expected in Q4 Peak Season and Further Oil Price Drop

Daishin Securities on the 18th expected Korean Air's third-quarter earnings to exceed market forecasts thanks to the dual benefits of falling jet fuel prices and exchange rates. They maintained a 'Buy' investment rating and a target price of 30,000 KRW. Korean Air's closing price on the previous trading day was 22,850 KRW.

Researchers Yang Ji-hwan and Lee Ji-ni of Daishin Securities stated, "In the third quarter, a favorable environment was created due to the decline in jet fuel prices and exchange rates, and notably, the increase in cargo rates driven by the rise in China-originated 'C-commerce' volumes stood out." They added, "As a result, Korean Air is expected to achieve an operating profit exceeding 600 billion KRW." This would mark the first time in eight quarters since the second and third quarters of 2022, when air cargo rates surged due to the COVID-19 special demand, that operating profit surpasses 600 billion KRW.

According to Daishin Securities, Korean Air is projected to record sales of 4.6065 trillion KRW and an operating profit of 614.4 billion KRW in the third quarter of 2024. These figures represent increases of 8.4% and 13.1%, respectively, compared to the same period last year. The results slightly exceed market expectations and are considered favorable.

In the fourth quarter, performance is expected to surpass that of the third quarter due to the peak season for air cargo and further declines in jet fuel prices. In the air cargo sector, the upward trend is expected to continue due to supply constraints and the increase in China-originated 'C-commerce' volumes. Additionally, the average jet fuel price in the fourth quarter is currently $89 per barrel. Considering the lag in airlines' fuel purchasing, the effect of the fuel price decline is expected to be most significant. Korean Air is anticipated to continue its growth momentum in this favorable environment.

Researchers Yang Ji-hwan and Lee Ji-ni said, "Korean Air's stock is currently undervalued with a price-to-earnings ratio (PER) of 5 times and a price-to-book ratio (PBR) of 0.8 times based on the expected earnings over the next 12 months. Due to this earnings improvement, future stock price increases are expected." They added, "Korean Air is recommended as the top pick within the air transportation sector and is expected to establish itself as the second-best pick following Hyundai Glovis."