[Click e-Stock] "Korean Air, Earnings Expectations and Target Price Rise on Merger Outlook"

Sangsangin Raises Target Price from 32,000 Won to 40,000 Won

Sangsangin Securities on July 1 raised its target price for Korean Air from 32,000 won to 40,000 won while maintaining its "Buy" investment rating.

Lee Seoyeon, a researcher at Sangsangin Securities, stated, "We are raising our 2027 earnings forecast for Korean Air, taking into account the decline in oil prices, strong cargo performance, and the expected effects of the upcoming merger."

Lee explained, "Although there is still uncertainty due to ongoing wars, the oil price itself has dropped to 71 dollars per barrel (WTI standard) as of the end of this month. Cargo demand is also experiencing structural growth driven by artificial intelligence (AI), so we can expect a gradual recovery in earnings from the third quarter onward."

There are also expectations for improved profitability from synergy effects following the merger with Asiana Airlines at the end of this year. Lee added, "Through synergy effects such as route optimization from fleet integration, efficient use of Asiana's Belly Cargo, and cost reductions in maintenance expenses, we anticipate that after merger stabilization, annual profit gains of more than 300 billion won are possible."

Korean Air's separate results for the second quarter are expected to surpass market expectations, with revenue of 4.8952 trillion won and operating profit of 126.3 billion won. Lee analyzed, "While it is inevitable that rising costs from war-induced higher oil prices and a stronger KRW-USD exchange rate will weigh on profits, we believe that topline growth in both passenger and cargo segments will offset the extent of profit decline."

Revenue from the international passenger segment is projected to reach 673 billion won, up 18% year-on-year. This figure reflects the growth in international passenger unit prices, higher fares due to increased fuel surcharges, and increased transfer demand resulting from reduced supply by local carriers in the Middle East.

Cargo revenue is expected to reach 1.4917 trillion won during the same period, a 41% increase year-on-year. Lee said, "With global AI-related demand strengthening and increased air cargo demand for semiconductor equipment, Korean Air's cargo mix has improved toward higher-margin products. Considering that it is easier to pass on fuel surcharges to customers and that cargo fares are collected in US dollars, the cargo yield is expected to reach 690 won, up 39% from the same period last year."

This content was produced with the assistance of AI translation services.