Yuanta Securities on the 17th downgraded the target price for Hotel Shilla to 80,000 KRW, citing expectations of fourth-quarter earnings falling short of forecasts. The investment rating was maintained at 'Buy.'
Researcher Lee Seung-eun stated, "Fourth-quarter 2023 sales are expected to be 979.9 billion KRW, a 24.6% decrease compared to the previous year," and added, "Operating profit is expected to turn positive at 14.2 billion KRW, compared to a loss last year." This falls short of the market's initial expectations of 1.0727 trillion KRW in sales and 20.9 billion KRW in operating profit.
Lee also noted, "When comparing fourth-quarter sales to the third quarter, there appears to be no significant performance momentum."
The proportion of group tour sales within domestic sales was estimated at 5%. This is due to the slow recovery of group tour sales in August even after the lifting of travel bans. Factors include the slow resumption of Korea-China flights, a shortage of visa issuance centers required for visits outside Jeju, and an increase in closures of Korean inbound travel agencies specializing in Chinese tourists during the COVID-19 period.
The target price was lowered by applying the lowest price-to-earnings ratio (PER). It is expected that operating profit margins will decline due to an increase in cost ratios from inventory liquidation through the fourth quarter and fixed costs rising at Incheon Airport duty-free shops.
He pointed out, "Many Daigohyang products were ordered in the first half of 2022," adding, "A large volume of these products reached the point of being classified as inventory in the third and fourth quarters of 2023, one and a half years later. The impact is considered greatest through the fourth quarter."
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