[Click eStock] "Korean Air: Exchange Rate Falls Ahead of Merger, Target Price Up"

Mirae Asset Securities Raises Target Price for Korean Air to 37,000 Won

Mirae Asset Securities announced on September 8 that it has raised its target price for Korean Air from 33,000 won to 37,000 won ahead of the December merger with Asiana Airlines, citing improving external factors such as a decline in exchange rates. The firm maintained a ‘Buy’ investment rating.

Mirae Asset Securities forecasts Korean Air’s consolidated revenue for the third quarter to reach 7.2595 trillion won, up 20.5% year-on-year, and operating profit to be 488.7 billion won, a 210.2% increase. The operating margin is expected to be 6.7%, an improvement of 4.1 percentage points compared to the same period last year (2.6%) and 9.6 percentage points higher than the previous quarter (-2.9%). This performance is seen as a significant turnaround compared to the operating loss of 207.1 billion won recorded in the second quarter.

Due to the strong summer travel season, Revenue Passenger Kilometer (RPK) for international routes is expected to increase by 8.3% year-on-year, with average ticket prices also predicted to rise by 9.1%. Cargo is forecast to grow by 4.4% compared to the same period last year, further improving from the previous quarter. Jae Hyun Ryu, an analyst at Mirae Asset Securities, explained, "Strong connecting traffic due to ongoing wars and high-value demand focused on the semiconductor and AI materials industries are converging."

External variables are also improving ahead of the merger with Asiana Airlines scheduled for December. The KRW-USD exchange rate has declined from 1,542 won at the end of the second quarter to 1,346 won as of September 4. Analyst Ryu noted, "A stronger won could lead to increased outbound passenger demand and reduced costs (fuel, leases, interest). This, in turn, could improve net income and book value due to gains in foreign currency translation." He added, "While fuel prices remain a burden, the decline in exchange rates is expected to offset this to some extent."

From the fourth quarter onwards, synergy benefits such as rationalizing overlapping routes, redeploying aircraft, and integrating mileage programs are expected to materialize sequentially. Analyst Ryu stated, "In addition to momentum from a stabilized exchange rate and high cargo season, expectations surrounding the official launch of a mega carrier are becoming more pronounced, which could drive further gains in the share price," explaining the rationale behind the upward revision of the target price.

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