Shinhan Investment Corp. announced on July 14 that it has raised its target price for Korean Air from 35,000 won to 38,000 won, citing continued strength in cargo rates. The firm maintained its 'buy' rating.
Choi Min-ki, a researcher at Shinhan Investment, stated, "Korean Air is achieving outstanding results among global airlines due to the unique characteristics of its cargo business and its geographical advantages." He added, "The strong cargo rates have led to stable operating profits."
In the second quarter, Korean Air reported standalone revenue of 5.1 trillion won, a 25.9% increase compared to the same period last year, with an operating profit of 261.8 billion won. Choi noted, "Although rising fuel costs have somewhat impacted profitability, the airline's performance has been more stable than market concerns during the Middle East conflict."
The passenger segment has seen a slight decline in overseas travel demand due to increased fuel surcharges. However, the reduction in supply from foreign airlines on routes to the Middle East, China, and Japan has boosted transfer demand, along with increased inbound demand due to the weakening won.
The passenger segment is expected to continue its recovery. Choi predicted, "As the burden of fuel surcharges eases, overseas travel demand is likely to rebound around the Chuseok holiday. While cost pressures from the weak won will persist, strong inbound demand is expected to continue."
The cargo segment has experienced significant growth, driven by increased demand for data center-related cargo due to expanded investment in artificial intelligence (AI), leading to rising freight rates. Cargo revenue and rates rose by 46.1% and 41.8%, respectively, compared to the previous year.
Looking ahead to the second half of the year, Choi anticipates continued strong performance in the cargo business. He explained, "The decline in jet fuel prices has been more significant than the drop in air cargo rates, indicating a need to revise upward the cargo performance outlook for the second half."
* This article has been translated by AI.
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