[Click eStock] "Hotel Shilla, Slow Recovery in Business Conditions... Target Price Down"

Target Price Revised Downward by 6% Compared to Previous Level

Shinhan Investment Corp. on the 10th downgraded the target price of Hotel Shilla from 70,000 KRW to 66,000 KRW, citing a slow pace of industry recovery. The investment rating was maintained at 'Buy.'

Jo Sang-hoon, a research fellow at Shinhan Investment Corp., explained, "The target price downgrade is due to the slower-than-expected industry recovery, which led to a downward revision of the company's earnings estimates. The current stock price is even lower than during the MERS and COVID periods. With the prolonged slump in Chinese consumption, the recovery of group tourists remains slow, and demand from Chinese daigou (informal shoppers) is also weak."

Hotel Shilla's second-quarter earnings this year are expected to fall short of market expectations. Research fellow Jo said, "Hotel Shilla's Q2 sales are expected to increase by 24.4% year-on-year to 1.08 trillion KRW, while operating profit is projected to decrease by 48.8% to 34.7 billion KRW, falling 7% below the consensus (average securities firm forecast). The weak performance is attributed to the downturn in Chinese consumer sentiment and the ongoing burden of overseas airport store lease fees."

Regarding Hotel Shilla's recent issuance of exchangeable bonds worth 132.8 billion KRW to repay short-term borrowings, research fellow Jo evaluated, "The 0% interest rate helps reduce financial costs, and in case of early redemption requests, the bonds will be replaced with treasury shares held by the company, so there is no dilution of shares. Additionally, the high exchange price and stringent conversion conditions are positive factors."