Views in the securities industry are split over Korean Air. Strong results are expected even in the off-season thanks to cargo flights and the benefit of China's "Japan travel ban," but forecasts also say results on a consolidation basis will be weak due to the burden of worsening results at Asiana Airlines.
On the same day, KB Securities raised its target price for Korean Air, citing simultaneous improvement in passenger and cargo conditions, while NH Investment & Securities lowered its target price, expressing concern about weak subsidiary results and rising expenses.
On the 16th, KB Securities raised its target price for Korean Air to 31,000 won, up 10.7% from the previous target, and maintained a Buy rating. Considering the previous day's closing price of 23,000 won, there is 34% upside potential.
Kang Seong-jin, an analyst at KB Securities, said, "Korean Air is benefiting at the same time from China's 'Japan travel ban' and increased investment in artificial intelligence (AI)," and added, "With low oil prices holding, the industry is entering an ideal situation where conditions are improving."
Kang assessed that profitability on China routes is recovering as relations between China and Japan worsen and relations between Korea and China improve, and that the air cargo market is gaining momentum as investment related to AI (semiconductors and servers) surges. He then raised this year's and next year's operating profit forecasts by 5.3% and 6.3%, respectively, from the previous outlook.
However, NH Investment & Securities said that despite strong separate-basis sales, results on a consolidation basis are likely to be weak due to slowing subsidiary results and expense burdens. It lowered the target price from 30,000 won to 29,000 won.
Jeong Yeon-seung, an analyst at NH Investment & Securities, noted, "Thanks to peak-season effects, international passenger and air cargo rates are rising and separate-basis results are sound, but depreciation from new fleet additions and labor costs affected by ordinary wages, among other operating expenses, continue to increase."
He continued, "Worsening profitability on Asiana Airlines' long-haul routes and slowing subsidiary results are overhangs," adding, "For the stock to rebound, either a weaker exchange rate or profitability stabilization through integration with Asiana Airlines is needed." He added that integrated operations will be possible from this winter, so it will take time to stabilize profitability.