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Photo = Yonhap news |
[Alpha Biz= Paul Lee] Daishin Securities has downgraded the target price for Korean Air.
Despite posting record-high revenues in the first quarter, operating profits fell by nearly 20%, and the ongoing tariff war between the U.S. and China is expected to negatively impact the company.
On April 15th, Daishin Securities revised its target price for Korean Air from 33,000 won to 28,000 won. The downgrade comes as the airline's first-quarter performance fell short of market expectations due to a decline in cargo volume and rising costs. However, the firm maintained its "buy" recommendation.
Korean Air's standalone results for the first quarter showed revenue of 3.9959 trillion won and operating profit of 350.9 billion won. Although revenue increased by 4% compared to the previous year, approaching 4 trillion won, operating profit decreased by nearly 20%.
Daishin Securities attributed the poor performance to the sluggish cargo transport volume, one-time bonuses of approximately 40 billion won from the acquisition of Asiana Airlines, and increased depreciation costs due to the introduction of new aircraft.
Daishin Securities also noted that the "integrated Korean Air," following the acquisition of Asiana Airlines, is under investigation by the Fair Trade Commission for compliance with structural and behavioral corrective actions, leading to uncertainty regarding potential fare increases for international flights.
The structural corrective actions concern five routes to North America and six routes to Europe. While the structural measures in Europe are expected to be completed by the first half of the year, the U.S. routes are expected to be impacted until the second half of the year. The firm stated that for the stock price to rise, the company needs to manage tariff impacts and improve visibility on the integrated Korean Air's performance.
However, Daishin Securities sees the improved consolidated performance due to the acquisition of Asiana Airlines as a positive factor.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
