[THE INVESTOR] Korean Air’s second-quarter earnings will be slow due to burgeoning jet fuel costs and unfavorable exchange rate, said Eugenue Investment and Securities on July 25, lowering the target price to 38,000 won (US$33.70) from 41,000 won while maintaining a “buy” recommendation.
Despite solid demand for overseas travels, cost hike will overrun growth, and while its revenue in the period will increase 7.8 percent on-year to 3.13 trillion won, operating profit will plunge 63.8 percent to 62.6 billion won. The average jet fuel price has hiked 34.3 percent on-year, adding 189.2 billion won in costs, and strong dollar since June brought about 400 billion won in loss, said analyst Bang Min-jin.
Fuel costs will increase over 250 billion won in the third quarter as well, but as it is a high season with a low baseline due to North Korean issues last year, profits momentum is expected, noted Bang.
By Hwang You-mee (glamazon@heraldcorp.com)