Hana Securities predicted on the 31st that JIN AIR would report poor first-quarter results due to a decrease in transportation expenses (fares). It maintained a 'buy' investment opinion and adjusted the target stock price down 14% from 14,000 won to 12,000 won. The last trading price of JIN AIR was 9,430 won.
Hana Securities estimated that in the first quarter (January to March) of this year, JIN AIR would record sales of 4,050 won and an operating profit of 607 million won. This marks reductions of 6% and 38%, respectively, compared to the same period last year.
Ahn Do-hyun, a research institute member at Hana Securities, noted, "Despite an increase in international passenger traffic (RPK), international passenger fares were reduced by 10% year-on-year due to the high base from last year and increased competitive pressure."
Additionally, he explained, "In the first quarter, the growth rate of low-cost carrier (LCC) passengers is lower compared to full-service carriers (FSC). The first quarter is a peak season for LCCs, and considering that JIN AIR has generated half of its operating profit in the first quarter over the past two years, the slowdown in first-quarter demand is a burden for the entire LCC sector."
However, Ahn noted that the increase in expenses this year has been limited. He stated, "Last year, total expenses increased by 19% compared to the previous year, particularly with personnel expenses rising by 24% (16% of sales) and airport-related expenses increasing by 34% (15% of sales), leading to an overall increase in expenses."
He predicted, "This year, the reduction in fuel costs could offset the increase in expenses, and the annual operating expense increase is expected to be limited to 2%, meaning profitability will not be significantly harmed despite the fare decline."
The fact that dividends have become possible for the first time since the pandemic is also a positive factor. JIN AIR has decided at this month's shareholder meeting to transfer some of its capital reserves to retained earnings, which is interpreted as a preparatory step for tax-exempt dividends.
Ahn stated, "If retained earnings are used as a source for dividends, tax-exempt dividends could be expected," but also noted, "JIN AIR may manage its cash conservatively due to its upcoming integration with AIR BUSAN and AIR SEOUL within two years."