[Click eStock] "Paradise, Additional Growth Momentum Needed... Target Price Down"

Target Price Downgraded from 24,000 Won to 22,000 Won

On the 16th, Kiwoom Securities downgraded the target price for Paradise from 24,000 KRW to 22,000 KRW, stating that additional growth momentum is needed. The investment rating was maintained at 'Buy.'

Namsoo Lee, a researcher at Kiwoom Securities, explained, "While maintaining the investment rating to reflect operating profit growth, the target price is lowered due to a slowdown in growth. Recently, through a disclosure, Paradise set a consolidated sales target of 1.2554 trillion KRW for 2026, but the stock price declined after the announcement due to the absence of short-term performance improvement points and increased mid- to long-term investment costs." He added, "The second and third quarters of this year require additional growth momentum as the base of last year's performance is high."

Paradise's second-quarter performance is expected to fall short of market expectations. Lee said, "Second-quarter sales are expected to increase by 2.5% year-on-year to 282.2 billion KRW, while operating profit is expected to decrease by 25.4% to 40.9 billion KRW, falling short of consensus (average securities firm forecasts). Although the Paradise City casino segment grew, the Walkerhill, which recorded a surprise in May-June last year, is excluded, resulting in a combined casino performance improvement of only 1.6% year-on-year." He added, "Costs are also expected to increase due to expanded Chinese customer attraction and operations of new competing casinos, which will have a limited but negative impact on profit size."

Recovery of Chinese VIP demand is considered crucial. Lee stated, "In 2019, the quarterly average number of VIP visitors by nationality was 11,300 from China, 20,300 from Japan, and 19,400 from others. Except for Japan, there is room for improvement in Chinese and other VIPs. Since the number of visitors and drop amount (the amount casino customers exchange for chips) have stabilized, the fluctuation in hold rate (net sales/drop amount) is expected to be small. However, from the third quarter, the base of VIP visitors will be higher than last year. The key is the growth of Chinese VIPs, who show the highest per capita drop amount," he explained.