[E-Daily Reporter Kim Hyung-il ] NH INVESTMENT & SECURITIES issued a positive assessment of JIN AIR(272450), citing the potential for economies of scale through its merger with AirBusan and Air Seoul, as well as the possibility of expanding routes originating from Busan. Given expectations for route diversification and the expansion of new routes utilizing spare aircraft following the merger, the firm maintained its “Buy” rating and target price of 10,000 won.

On the 10th, Jeong Yeon-seung, an analyst at NH INVESTMENT & SECURITIES, stated that AirBusan and Air Seoul are scheduled to merge with JIN AIR in March of next year, and projected that the consolidated entity’s earnings would begin to be reflected starting in the second quarter of next year. He estimated that the number of new shares to be issued as a result of the merger would be 50.32 million, representing a 96% increase compared to the existing number of shares.

Reflecting this, revenue for the merged JIN AIR next year is estimated at 2.34 trillion won, with operating profit at 105.2 billion won. The analysis suggests there is ample room for upward revisions to these figures, considering the synergies from the merger and the effects of expanding routes originating from Busan.

Recently, demand for short-haul flights has been strong, particularly on routes to Japan and China. A favorable demand environment has emerged for Japan routes due to a combination of factors: slowing travel demand to Southeast Asia and Jeju, the weak yen, and the availability of airport slots and lower hotel prices in Japan resulting from deteriorating Sino-Japanese relations. China routes are also benefiting from improved South Korea-China relations and the visa-free policy between the two countries.

However, intensifying competition resulting from the expansion of supply on Japan routes remains a concern. This is because low-cost carriers (LCCs) are increasing their fleets and expanding supply on these routes. The high concentration of revenue on Japan routes, coupled with vulnerability to natural disasters, was also cited as a risk factor.

NH INVESTMENT & SECURITIES concluded that consolidation within the domestic LCC industry is inevitable in the long term. As JIN AIR is the first among major LCCs to undergo consolidation, it is assessed to be well-positioned to respond flexibly to future consolidation and to expand into new routes by utilizing spare aircraft.

Research Analyst Jeong explained, “The target price was calculated by applying a target price-to-book ratio (PBR) of 1.7 times—the global average for low-cost carriers—to next year’s projected book value per share (BPS).” He added, “While intensifying competition in the domestic aviation market and concerns over falling fares are discount factors, we did not apply a separate discount rate, taking into account the economies of scale resulting from consolidation and the benefits of securing routes originating from Busan.”