[Click eStock] "Hotel Shilla, Difficult Operating Environment Continues... Target Price Down 9%"

Meritz Securities Report

[Asia Economy Reporter Minji Lee] Meritz Securities maintained a buy rating on Hotel Shilla on the 17th, stating that the company will continue to face a challenging operating environment in the short term, and lowered the target price by 9% from the previous level to 100,000 KRW.

According to Meritz Securities, Hotel Shilla is expected to record consolidated sales of 975.7 billion KRW and operating profit of 22.3 billion KRW in the fourth quarter of last year, representing a 16% growth and a return to profitability compared to the same period last year.

Specifically, in the duty-free sector, sales are expected to reach 856.1 billion KRW, a 15% increase compared to the same period last year. Operating profit is anticipated to return to profitability, estimated at 20.1 billion KRW. Yoonhee Choi, a researcher at Meritz Securities, said, “Domestic duty-free stores are in a situation where dependence on Daigong is absolute, and the structure inevitably involves expenditure to increase sales, making the operating environment challenging. However, the outlook that airport rent reductions may continue due to delayed recovery in traveler demand is positive.”

Sales in the hotel and leisure sector are expected to reach 119.6 billion KRW, with operating profit of 2.2 billion KRW, showing 20% growth and a return to profitability compared to the same period last year. Hotel sales are believed to have improved profitability by returning to profitability following the previous quarter. Researcher Choi said, “It will be difficult for the stock price to reverse upward until the expansion of new sales channels and the possibility of overseas travel resumption become prominent. However, expectations for performance growth remain valid with the gradual recovery of individual tourist demand due to the reopening of global travel this year.” He added, “Unlike domestic competitors, Hotel Shilla is a global operator that also runs overseas airport duty-free businesses.”