[Click eStock] "Hotel Shilla, Expectations for Korea-China Relations Improvement... Investment Opinion & Target Price Up"

[Asia Economy Reporter Song Hwajeong] NH Investment & Securities on the 16th raised the target price for Hotel Shilla from 90,000 KRW to 125,000 KRW, citing high expectations for the lifting of the Han-Han ban following the improvement in Korea-China relations and the normalization of duty-free store profitability. The investment rating was also upgraded from 'Hold' to 'Buy.'

Lee Ji-young, a researcher at NH Investment & Securities, said, "Reflecting strong duty-free store sales, we raised the earnings per share (EPS) for 2019 and 2020 by 5% and 6%, respectively, and increased the target price-to-earnings ratio (PER) from 20 times to 25 times to reflect expectations for the lifting of the Han-Han ban, resulting in a 38% increase in the target price compared to before." She added, "The domestic duty-free industry still faces uncertainties such as the re-selection of duty-free operators at Incheon Airport Terminal 1 (T1) in January and February, mandatory changes to the on-site delivery system for duty-free goods within the first half of the year, expansion of downtown duty-free store access for Chinese nationals by the Chinese government, and intensified competition with latecomers. However, now is a time when expectations for the improvement of Korea-China relations, including the lifting of the Han-Han ban, and the normalization of duty-free store profitability are greater."

Fourth-quarter results last year are expected to exceed expectations. NH Investment & Securities estimated Hotel Shilla's fourth-quarter sales last year to be 1.5086 trillion KRW, a 26% increase compared to the same period last year, and operating profit to be 61.2 billion KRW, a 123% increase. The researcher said, "Both scale and profitability are estimated to have exceeded market expectations," adding, "For the duty-free segment, sales are estimated to have increased by 29% to 1.378 trillion KRW, and operating profit by 128% to 57.2 billion KRW. For the hotel segment, sales are expected to have increased by 8% to 130.6 billion KRW, and operating profit by 63% to 3.9 billion KRW, respectively."

This content was produced with the assistance of AI translation services.