Shinhan Investment Corp. said on the 15th that Korean Air Lines(003490) posted standout strong results within the industry even by global standards thanks to the uniqueness of its cargo business and its geographic conditions. It maintained a Buy rating and raised the target price by 9% to 38,000 won. Korean Air Lines' previous closing price was 26,500 won.
Korean Air Lines posted second-quarter standalone revenue of 5.0199 trillion won and operating profit of 261.8 billion won this year. Revenue rose 25.9% from a year earlier, while operating profit fell 34.4%.
In particular, cargo institutional sector revenue grew sharply, up 46.1% from a year earlier.
Senior researcher Choi Min-gi at Shinhan Investment Corp. analyzed, "Robust cargo demand from artificial intelligence (AI) capital expenditure (capex) drove fare increases beyond the rise in fuel costs, leading to strong top-line growth."
Profitability deterioration was inevitable due to the surge in fuel costs, but compared with concerns at the outbreak of the Middle East war, the results are seen as stable. In particular, because cargo market rates did not fall as much as the drop in jet fuel prices, it said expectations for second-half cargo results need to be revised upward.
Passenger institutional sector revenue saw outbound demand slow due to higher fuel surcharges, but as foreign carriers cut capacity, it captured transfer demand. In addition, with the rise in the exchange rate, inbound demand was solid, the assessment said.
Researcher Choi said, "Based on the uniqueness of the cargo business and geographic conditions, it delivered standout strong results within the industry even by global standards," adding, "With concerns about results easing and the benefits of the Asiana Airlines merger gradually becoming visible, we expect a re-rating of the share price."