Passenger and cargo businesses both strong... Korean Air target price raised 21%—LS

[Financial News] LS Securities forecast that Korean Air's third-quarter performance will exceed market expectations, driven by strong results in both its passenger and cargo businesses. The brokerage raised its target price from 33,000 won to 40,000 won, an increase of 21.2%, while maintaining its "Buy" rating.
Lee Jae-hyuk, an analyst at LS Securities, said on the 2nd, "Despite concerns over high oil prices and high interest rates, we are seeing a decline in the won–U.S. dollar exchange rate and confirming an overwhelming ability to defend profits. As costs stabilize following future declines in international oil prices and refining margins, and synergies from the merger of Korean Air and Asiana Airlines emerge, the company could secure further room for an increase in corporate value."
Korean Air's third-quarter revenue was forecast at 5.1487 trillion won, while operating profit was projected at 538.4 billion won. The figures represent year-on-year increases of 26.9% and 43.1%, respectively. Operating profit is expected to be approximately 10% above the market forecast of 489.4 billion won.
In the passenger business, the July–August peak-season effect, an earlier-than-usual Chuseok holiday, and an increase in foreign tourists, particularly from China and Japan, were expected to support earnings. Strong transfer demand, especially on trans-Pacific routes, was also viewed positively.
In the cargo business, increased investment in artificial intelligence (AI) data centers has emerged as a new source of demand. Alongside global supply-chain bottlenecks, demand for high-tech cargo such as servers and network equipment is expected to rise. E-commerce volumes from the Far East to the United States and Europe are also expected to remain solid.
Lee said, "Through July this year, global high-tech air cargo totaled about 3 million tons, up 22% from the same period last year and surpassing the 2.8 million tons of China-origin e-commerce cargo. Trans-Pacific cargo volumes are surging as demand for servers and network equipment expands."
The analyst also expected the decline in the exchange rate to support profitability. The quarterly average won–U.S. dollar exchange rate fell by 77 won, from 1,501 won in the second quarter to 1,424 won in the third quarter.
Lee stated, "With strong passenger demand and robust air cargo performance supplemented by the currency effect, we will be able to confirm the ability to defend profits even in a high oil-price environment. It is also worth noting that merger synergies between Korean Air and Asiana Airlines are gradually taking concrete shape."
[email protected] Bae Han-geul Reporter