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[Alpha Biz= Reporter Kim Sangjin] On the 26th, Hanwha Investment & Securities downgraded its investment rating on Jin Air from 'buy' to 'hold' and revised its target price from 18,000 KRW to 14,000 KRW.
Hanwha Investment & Securities stated that Jin Air's operating profit for the second quarter is expected to significantly fall short of market expectations, prompting the downgrade of its investment rating to 'hold' from 'buy', and lowering the target price from 18,000 KRW to 14,000 KRW.
Hanwha Investment & Securities commented, "While there is still strong demand for international travel in the overall market, the issue lies in increased supply and costs," adding, "Compared to last year, both full-service carriers (FSC) and low-cost carriers (LCC) have significantly increased supply in terms of flight frequencies, but inflationary pressures persist in operating costs and labor expenses."
Hanwha Investment & Securities further explained, "Even excluding seasonal off-peak impacts, Jin Air's second quarter was not as smooth as the first quarter in terms of operations," and noted, "There are inflationary pressures in terms of operating costs, but fares have been consistently declining."
As a result, Hanwha Investment & Securities anticipated that Jin Air's operating profit for the second quarter would amount to 9 billion KRW, significantly below the market expectation of 21.4 billion KRW.
They also remarked, "Reflecting on the domestic passenger market before the pandemic, challenging business conditions persisted due to overheated supply competition," and added, "It will be difficult to expect a smooth situation until the market restructuring intensifies following the merger of the two major national carriers."
AlphaBIZ Kim SangJin(letyou@alphabiz.co.kr)
