iM Securities raised its target price for Jeju Air from 7,000 won to 8,000 won on November 4, maintaining a "buy" rating. The firm expects profitability to improve due to the recovery of Japan routes and cost reductions from the introduction of new aircraft, easing financial burdens and continuing the performance turnaround.
Baek Se-ho, a researcher at iM Securities, stated, "The operating profit for the third quarter significantly exceeded previous forecasts, with operations centered on Japan routes and cost efficiencies from the introduction of the B737-8 contributing to profit recovery. We anticipate that the easing of financial burdens and fleet modernization will continue to drive operational performance improvements."
For the third quarter, Jeju Air reported standalone revenue of 489.6 billion won, a 32.2% increase compared to the same period last year, and an operating profit of 54.9 billion won, marking a return to profitability. The operating profit margin was recorded at 11.2%. Notably, the operating profit surpassed market consensus by more than eight times, which was set at 6.5 billion won.
The improvement in performance was influenced by high passenger loads and fares on Japan routes. In the third quarter, passenger numbers on the Incheon-Tokyo route reached 224,000, a 48.3% increase year-on-year, while the Incheon-Kansai route saw 214,000 passengers, up 61.9%. The load factors for these routes were estimated at 95.0% and 88.0%, respectively. Japan routes account for approximately 40% of Jeju Air's passenger revenue.
Cost burdens have also eased. The decline in oil prices has been reflected in fuel costs with a lag, and the strengthening of the won has contributed to cost reductions. The average price of aviation fuel in the third quarter was $153 per barrel, a 5.3% decrease from the previous quarter, and fuel costs were estimated to have decreased by 14% to 173 billion won.
The competitiveness of Japan routes is expected to support performance in the coming year. From January to September this year, Jeju Air's passenger numbers on Japan routes reached 3.7 million, a 28.9% increase compared to the same period last year, outpacing the overall market growth rate of 20.6% for Japan routes. iM Securities assessed that focusing fleet resources on the robust demand for Japan routes is leading to improved profitability.
* This article has been translated by AI.
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