[Click eStock] "Hotel Shilla, Duty-Free Store Profit Turnaround Exceeds Expectations"... Target Price Up

[Asia Economy Reporter Ji Yeon-jin] Hyundai Motor Securities announced on the 2nd that it has upgraded its investment opinion on Hotel Shilla to "Buy" as the company's operating performance in the first quarter of this year significantly exceeded market expectations, and raised the target stock price from the previous 84,000 KRW to 100,000 KRW.

Hotel Shilla reported consolidated sales of 727.2 billion KRW in the first quarter, a 23% decrease compared to the previous year, but operating profit turned positive at 26.6 billion KRW. Although the hotel and leisure division continued to incur operating losses, the duty-free shop division recorded operating profits that greatly surpassed initial expectations.

Due to COVID-19, domestic demand for overseas travel and the number of foreign visitors to Korea have sharply declined, resulting in a challenging business environment. However, downtown duty-free shop sales remained at the same level as in the first quarter of last year, while airport store sales plummeted. Although duty-free shop sales decreased by 25.5% year-on-year, operating profit turned positive, which is attributed to reduced airport duty-free rent and cost-cutting measures at downtown duty-free shops.

Park Jong-ryeol, a researcher at Hyundai Motor Securities, stated, "The hotel and leisure division maintained sales at the same level as the previous year due to continued low occupancy rates, and reduced the operating loss slightly to 15.1 billion KRW. The recovery of performance in the hotel and leisure division has been slow as social distancing measures continued in the first quarter." However, he forecasted that with the improvement in duty-free shop performance in the second quarter and the reduction of losses in the hotel division, favorable performance momentum is expected to continue.