[Click eStock] Modetour Minimizes Damage Through Cost Reduction... Target Price Up">

[Asia Economy Reporter Hwang Yoon-joo] On the 14th, Samsung Securities raised its 2023 operating profit forecast for Modetour. It maintained its investment rating of 'Hold' and increased the target price by 12.5% to 18,000 KRW.

Choi Ji-ho, a researcher at Samsung Securities, stated, "The reason for the upward revision in earnings is a reflection of Modetour's better-than-expected cost management capabilities."

Samsung Securities expects Modetour's third-quarter sales to increase by 422% year-on-year to 18.2 billion KRW, with an operating loss improving to 5.1 billion KRW.

Researcher Choi explained, "Although third-quarter sales were expected to be sluggish due to the resurgence of COVID-19 domestically during the peak travel season (July-August), efforts to reduce costs are minimizing the damage."

He analyzed, "Since the outbreak of COVID-19, costs have been strictly controlled. In particular, efforts to reduce labor and marketing expenses, which constitute the largest portions of costs, stand out." Employees are expected to return to 100% attendance starting in the fourth quarter.

[Image source=Yonhap News]

Researcher Choi predicted that whether market share expands in the fourth quarter will determine the stock price's direction. He said, "With the easing of entry restrictions between Korea and Japan, travel demand to Southeast Asia, Europe, and even Japan is expected to return to normal. Especially, a sharp rebound in Japan is anticipated."

He added, "We assume a gradual recovery of Modetour's market share until the end of 2022. If the market share rebounds beyond pre-COVID-19 levels, there is potential for further earnings revisions."

However, he noted it is regrettable that the online channel revamp, essential for attracting free package travelers, will only be completed in the first half of 2023.