Korean Air Draws Attention with 'AI Cargo' as Broker Target Prices Rise

[Financial News] As Korean Air reported second-quarter results that far exceeded market expectations, brokerage firms have been raising their target prices one after another. Analysts said strong air cargo demand driven by expanded investment in Artificial Intelligence (AI), along with solid international passenger demand, offset the burden of surging oil prices. With cargo rates expected to remain firm in the second half, full-year earnings estimates are also being revised upward.
According to FnGuide on the 17th, five brokerages, including Hana Securities, Mirae Asset Securities, and Shinhan Investment Corp., have raised their target prices for Korean Air this month. The new targets range from 33,000 won to 41,000 won.
However, the stock has not escaped the recent market slump despite the earnings outlook. Korean Air fell 18.9% this month through the previous day, a decline steeper than the KOSPI (Korea Composite Stock Price Index). It rebounded 6.27% after the earnings release on the 15th, but dropped again by 8.77% the following day amid the broader market selloff.
The reason brokers have lifted their expectations is the unexpectedly strong second-quarter performance. Korean Air posted operating profit of 261.8 billion won in the second quarter, down 34.4% from a year earlier, but still well above market forecasts. Analysts said international passenger and air cargo businesses offset the cost burden, even as fuel expenses more than doubled from a year earlier due to the surge in global oil prices.
In particular, analysts said the strong air cargo business driven by expanded AI investment led the results. Cargo revenue in the second quarter rose 46.1% year on year to 1.5419 trillion won, while cargo rates climbed 41.8% to 703 won per kilometer.
Kang Sung-jin, a researcher at KB Securities, said, "The air cargo market, fueled by the AI investment boom, is showing exceptional strength that is even surpassing earlier optimistic expectations." He added, "Korean Air's operating profit this year is expected to be twice the market consensus."
International passenger traffic also supported earnings improvement. Revenue from international routes came to 2.7274 trillion won, up 19.9% from a year earlier. Although fares rose 11.3%, passenger volume still increased 7.7%. Analysts said strong demand on short-haul routes such as Japan and China, as well as on routes to the Americas, allowed the company to pass on higher fuel costs quickly through fares.
In the second half, fuel cost pressure is expected to ease, while cargo rates are likely to remain elevated. Demand for air cargo is outpacing capacity growth as global AI investment expands and e-commerce volumes increase.
Expectations for third-quarter results are also rising. Passenger demand on routes to the Americas is expected to remain strong, and AI-related cargo projects already secured are likely to be reflected in earnings.
Bae Se-ho, a researcher at iM Securities, said, "We plan to maintain Americas route capacity in the third quarter at a level similar to the second quarter, and given solid business demand and rising transfer demand amid geopolitical risks, strong results are expected." He added, "In cargo as well, AI-related projects have already been secured in advance, so both volume and rates are expected to improve from a year earlier."

koreanbae@fnnews.com Bae Han-geul Reporter