[Click eStock] "Korean Air, Uncertainty in Asiana and LCC... Target Price Down"

On the 9th, Korea Investment & Securities stated regarding Korean Air, "Considering the uncertainties surrounding Asiana Airlines (merged and integrated) and low-cost carriers (LCCs), we are lowering our consolidated operating profit estimates for this year."

Researchers Ko Un Choi and Hyun Jung Hwang of Korea Investment & Securities lowered Korean Air's target stock price by 14% from the previous estimate to 30,000 KRW, making this announcement.

However, they forecast that Korean Air's own performance will remain solid. For the first quarter of this year, Korean Air's standalone revenue is estimated at 3.95 trillion KRW, a 3% increase compared to the same period last year, while operating profit is estimated at 427 billion KRW, a 2% decrease. The researchers stated, "Passenger performance remained robust despite the Muan Airport accident and domestic and international uncertainties, and international fares are expected to fall by only 2%." This is attributed to the lingering reopening deferred demand until the first quarter of last year and the continued effect of declining fuel surcharges. In the cargo sector, although volume is expected to decrease by 6% due to a slowdown in e-commerce demand, freight rates are projected to rise by 10%, partially offsetting the decline. Rising unit costs, including labor costs, were identified as a burden factor.

In the case of Asiana Airlines, operating profit is expected to be only 70 billion KRW, falling short of initial expectations, and accordingly, consolidated operating profit is estimated at 570 billion KRW, a 6% increase compared to the same period last year. This slightly exceeds market consensus.

Nevertheless, they maintained a 'Buy' investment rating, stating that the investment appeal remains strong. The researchers explained, "The stock price has fallen to the lower end of the box range over the past two years, and the expected EV/EBITDA for 2025 is undervalued at below 4 times," adding, "Due to tariff disputes, supply from Chinese airlines on North American routes is shrinking, and the supply of new aircraft is unstable, which could strengthen Korean Air's oligopolistic position." They further added, "If tariff increases and uncertainties related to the Fair Trade Commission are resolved in the first half of the year, demand recovery during the summer peak season in the second half will positively impact the stock price."