JPMorgan moved Cathay Pacific Airways Ltd. (293:HK) (OTC:CPCAY) up one notch to Overweight on Tuesday and raised its target price to HK$18.00 from HK$9.10. The brokerage highlighted the carrier's stronger financial footing and fleet plans as key reasons for the change in stance.
The firm noted valuation metrics showing the stock trading at a price-to-earnings ratio of 9.33 and a PEG ratio of 0.41. Analysis from InvestingPro cited in the note indicates the shares remain undervalued relative to their Fair Value.
JPMorgan pointed to a combination of factors that, in its view, position Cathay to capture upside as regional aviation demand recovers. Those include a normalized balance sheet, robust operating cash flow and a significant pipeline of aircraft deliveries. The note observed that, together with Singapore Airlines, the two carriers account for more than 100 aircraft on order.
The bank referenced industry growth projections that favor Cathay's market exposure. IATA's forecast calls for 7.3% growth in Asia Pacific revenue passenger kilometers in 2026, compared with 4.9% globally. JPMorgan said that stronger regional growth particularly benefits Cathay because of its exposure to China and ASEAN markets.
Cirium data cited in the note identifies Cathay as an early mover on restoring and expanding its network while some competitors continue to face supply chain constraints and higher leverage. JPMorgan argued that Cathay's financial strength ought to allow it to capture spillover demand, redeploy capacity toward higher-growth markets and invest in network expansion with greater flexibility.
The stock has returned 31.5% over the past year and currently trades near its 52-week high. JPMorgan emphasized Cathay's ability to sustain elevated load factors and maintain solid liquidity as reasons the carrier is well placed to benefit from the regional recovery and potential market share gains.
In JPMorgan's view, the upgrade reflects operational and financial advantages that should help Cathay outperform as the Asia aviation market is expected to outpace global growth in the coming period.