Could Korean Air Spread Its Wings for a Rebound on a Stronger Won? Target Price Raised

[Financial News] Korean Air is expected to return to profitability in the third quarter, buoyed by the stronger Korean won and improving passenger and cargo demand. With its merger with Asiana Airlines scheduled for completion at the end of the year, analysts say a weaker exchange rate and integration synergies could support a rebound in the stock price.
On the 8th, Mirae Asset Securities raised its target price for Korean Air from 33,000 won to 37,000 won while maintaining its “Buy” rating.
Ryu Jae-hyun, an analyst at Mirae Asset Securities, forecast Korean Air’s consolidated revenue for the third quarter at 7.2595 trillion won and operating profit at 488.7 billion won. These figures represent year-on-year increases of 20.5% and 210.2%, respectively. Operating profit is expected to swing to a profit from a loss of 207.1 billion won in the second quarter.
In the passenger segment, the summer peak season is expected to drive an improvement in results. International revenue passenger kilometers (RPK), calculated by multiplying the number of paying passengers by the distance traveled, are estimated to rise 8.3% year on year in the third quarter, while yield, a passenger-fare indicator, is projected to increase 9.1%. International cargo volume is forecast to grow 4.4% over the same period. Analysts cited strong transfer demand stemming from wars and high-value cargo demand centered on semiconductors and artificial intelligence (AI)-related industrial materials as key factors.
The stronger Korean won was also identified as a factor supporting improved profitability. The won-dollar exchange rate fell from 1,542 won at the end of the second quarter to 1,346 won on the 4th. Ryu Jae-hyun analyzed that “the decline in the exchange rate could lead to increased overseas travel demand among Korean nationals and ease the burden of fuel costs, lease payments and interest.” The analyst added, “Net income and book value are also expected to increase as foreign-currency translation gains and losses improve,” and assessed that “although oil prices remain a burden, the decline in the exchange rate will partially offset it.”
Expectations surrounding the integration were also presented as an investment point. The report projected that expectations would grow ahead of the completion of the merger process with Asiana Airlines, scheduled for December this year. Beginning in the fourth quarter, work to create synergies—including the streamlining of overlapping routes, aircraft redeployment and mileage integration—is expected to proceed in stages.

[email protected] Choi Doo-sun Reporter