Korean Air's stock price showed strength on the 7th, thanks to the decline in the exchange rate of the won against the U.S. dollar (won-dollar exchange rate). However, KB Securities noted that it would be difficult for the upward trend to continue.
Korean Air's shares closed at 22,650 won in the KOSPI market on that day. The stock price rose by 7.86% (1,650 won) compared to the previous trading day. This is the highest level in terms of daily stock price increase since November 2022.
The decline in the won-dollar exchange rate served as a driving force for the stock price increase. A lower exchange rate is beneficial for Korean Air in terms of profit and expense. Kang Sung-jin, a researcher at KB Securities, estimated that if the won-dollar exchange rate falls by 50 won, Korean Air's annual operating profit would increase by 139 billion won this year.
Specifically, a decline in the exchange rate increases Koreans' overseas travel, which raises the average passenger fare. This is because Koreans tend to be high-value customers. Researcher Kang estimated that if the won-dollar exchange rate drops by 50 won, the improvement in Korean Air's operating profit would be around 83 billion won.
Additionally, Korean Air's foreign currency operating expenses are expected to be about 10 trillion won, with foreign currency revenue at around 8.4 trillion won. If the won-dollar exchange rate drops by 50 won, operating expenses are expected to decrease more quickly than revenue, leading to an improvement of 56 billion won in operating profit. Furthermore, the drop in the won-dollar exchange rate is favorable for Korean Air in terms of decreased interest expenses on foreign currency borrowings and foreign exchange translation gains.
Researcher Kang pointed out, however, that Korean Air's stock price was not low due to low profits. He noted, "The reason Korean Air has historically had a low price-to-book ratio (PBR; market capitalization ÷ net worth) is because of the unstable external environment," adding that "uncertainties regarding external variables such as exchange rates, oil prices, and interest rates have increased due to U.S. tariff hikes, trade conflicts, wars in the Middle East and Ukraine, and domestic political turmoil."
He added, "Although the market's outlook for Korean Air's operating profit is at an all-time high, it is still insufficient to say that external uncertainties have been alleviated," noting that "trade negotiations with the U.S. are still in their early stages, and military conflicts between India and Pakistan are creating new uncertainties."