[Click e-Stock] "Hotel Shilla, Duty-Free Competition Eases... Target Price Raised"

On June 26, Shinhan Investment Corp. upgraded its investment rating on Hotel Shilla to "Buy." The target price was raised from 41,000 won to 60,000 won.

Shinhan Investment Corp. analyst Cho Sanghoon stated, "Although concerns remain regarding the fundamental decline in the attractiveness of the duty-free channel, changes in cosmetics consumption trends, and the prolonged downturn in Chinese consumer demand, the outlook for earnings improvement is becoming clearer due to easing competition." He added, "Starting from the third quarter, discussions are underway regarding the implementation of a visa-free policy for Chinese group tourists, so we can now expect a recovery in the stock price."

Hotel Shilla's revenue for the second quarter is projected to be 1.07 trillion won, with operating profit expected to reach 16.3 billion won. Revenue is anticipated to increase by 6.5% compared to the same period last year, while operating profit is expected to decrease by 41.1%.

Analyst Cho commented, "The duty-free segment is expected to post an operating loss of 5.8 billion won. However, following the previous quarter, Hotel Shilla is likely to benefit from the suspension of corporate daigou transactions by competitors." He continued, "In the hotel and leisure segment, despite weak performance at the Jeju branch, strong results at the Seoul branch and Stay, as well as the rapid increase in average daily rates at major hotels in Seoul due to a shortage of hotel supply in recent years, are encouraging."

He further noted, "Currently, the duty-free industry is experiencing a prolonged deterioration in performance due to weak demand at downtown stores and the added burden of airport store rental fees." He emphasized, "It is important to focus on whether profitability can be improved through factors such as easing competition at downtown stores, reductions in domestic and overseas airport store rental fees, and internal cost-efficiency efforts."