[Click eStock] "For Hotel Shilla, the Key is Sales Recovery"

On November 5, Shinhan Investment Corp. analyzed that a recovery in sales is key for Hotel Shilla's stock price to rebound. The company maintained its "Buy" investment rating and a target price of 66,000 won.

In the third quarter, Hotel Shilla posted sales of 1.03 trillion won and operating profit of 11.4 billion won. These figures fell short of Shinhan Investment Corp.'s expectations by 37%. Due to the return of the Incheon Airport DF1 (perfume and cosmetics) concession in September, related costs such as penalties (approximately 190 billion won) were reflected, resulting in a significant pre-tax loss.

Shinhan Investment Corp. researcher Cho Sanghoon stated, "The downtown stores improved their cost ratio and discount rate by 0.6 percentage points and 0.7 percentage points, respectively, thanks to overall easing competition, stabilized exchange rates, and an improved customer mix." He added, "However, the airport stores saw their losses widen due to increased rent burden from higher passenger traffic, and a loss on inventory disposal (about 3 billion won) was also reflected ahead of the Macau airport store withdrawal in November."

He continued, "The hotel and leisure division saw sales rise 3% and operating profit increase 0.5% year-on-year, driven by the strong performance of the Seoul branch and Stay. It is encouraging that the average daily rate of major hotels in downtown Seoul has been rising rapidly due to a supply shortage over the past few years."

Researcher Cho pointed out that the key going forward is a recovery in sales. He said, "We expect to see the effects of improved financial structure from easing competition at downtown stores, reduced losses at airport stores, and ongoing cost-efficiency efforts. The main point will be whether the decline in airport store sales due to the withdrawal from Incheon Airport DF1 can be offset by the recovery of online channels and the return of high-spending Chinese group tourists."

He also predicted, "The visa waiver policy for Chinese group tourists will further boost sales, and from 2026, losses at airport stores are expected to decrease, leading to a significant profit leverage effect."