[Click eStock] "Falling Exchange Rate to Drive Stock Price... Korean Air Target Price Maintained"

On December 30, Hana Securities maintained its "Buy" investment rating and a target price of 28,000 won for Korean Air, stating, "The recent decline in the USD/KRW exchange rate will serve as a driving force for the stock price, which has been under pressure."

On the same day, Hana Securities researcher Ahn Dohyun commented, "A lower exchange rate is a positive factor for airline stocks. More than 50% of Korean Air's costs are linked to the US dollar, and a 10-won change in the exchange rate results in approximately 48 billion won in foreign currency valuation gains or losses."

Korean Air's standalone sales for the fourth quarter are projected to reach 4.315 trillion won, up 7% year-on-year, while operating profit is expected to decrease by 7% to 405.5 billion won. However, operating expenses are forecast to increase by 9% compared to the same period last year. Depreciation costs are expected to rise by 26%, and fuel costs are also projected to increase by 4% due to the impact of the higher exchange rate.

Researcher Ahn explained, "The passenger business division is expected to post sales of 2.508 trillion won in the fourth quarter, up 6% year-on-year, as the impact of the Chuseok holiday in October was deferred. Demand for routes to China and Japan was strong." He added, "For the cargo business division, sales are expected to increase by 6% and freight rates by 4% due to year-end seasonal demand, which will drive overall profitability."

The main points to watch next year include: ▲ Full-scale implementation of the premium strategy following the completion of the merger ▲ Growth of the aerospace business division.

Researcher Ahn stated, "If the integration with Asiana Airlines is smoothly completed, Korean Air will fully implement its 'premium strategy' to boost profitability and attract transfer demand. In addition, the aerospace business division, another growth driver, is expected to achieve sales of 850 billion won next year, up 30% year-on-year, on the back of new orders for low-observable unmanned aerial vehicles, UH-60 performance upgrades, and electronic warfare equipment."