[Market Focus] Hotel Shilla Surges Over 8% on Duty-Free Business Profitability Outlook for Q2

Hotel Shilla showed strong performance in early trading on April 28. This is interpreted as investor sentiment gathering due to securities analysts' expectations that the duty-free business has passed its low point and will return to profitability starting in the second quarter.

As of 9:33 a.m. on this day, Hotel Shilla was trading at 42,500 won, up 3,400 won (8.70%) from the previous trading day.

On this day, Daishin Securities set a target price of 50,000 won for Hotel Shilla, a 19% increase, stating that "the duty-free business has passed its low point and is expected to turn to an operating profit in the second quarter."

Yoo Jeonghyeon, a researcher at Daishin Securities, estimated Hotel Shilla's first-quarter sales at 971.8 billion won, down 1% year-on-year, and an operating loss of 2.5 billion won.

Researcher Yoo explained, "First-quarter sales at domestic downtown stores are expected to decrease by 21% year-on-year, but sales at airport stores, particularly Incheon Airport, are expected to increase by 19% year-on-year due to expanded operating space, resulting in overall sales remaining at last year's level." He added, "The sharp decline in downtown store sales is because the company intentionally reduced low-margin wholesale business, which significantly lowered discount rates."

Researcher Yoo stated, "Efforts within the duty-free industry are leading to meaningful improvement in profitability in the downtown store segment." He continued, "Although airport rent is putting pressure on performance, the company is currently negotiating with domestic and overseas airport authorities, and visible results are expected in the second or third quarter."