Travel Stocks Face Prolonged Industry Slump Beyond Expectations... "Conservative Approach Needed"

The arrival hall of Terminal 1 at Incheon International Airport was quiet on May 18 due to the impact of the novel coronavirus disease (COVID-19). Photo by Moon Honam munonam@

[Asia Economy Reporter Kum Boryeong] An analysis has emerged suggesting a conservative approach is necessary for travel stocks.

On the 24th, Ebest Investment & Securities estimated Hana Tour's performance this year, projecting consolidated sales of 332.7 billion KRW and an operating loss of 15 billion KRW. Compared to the same period last year, sales are expected to decrease by 56.4%, and operating profit is expected to turn into a loss, marking the largest loss since the company's founding. As of the third quarter, the total number of outbound travelers was 703,000, a decrease of 86.5% from the previous year. Tourists on package tours also dropped by 91.2%.

Hana Tour extended its unpaid leave period until March next year as the government's employment retention subsidy, which was applied until October, ended. Unpaid leave was implemented for 2,000 employees excluding 300 essential personnel.

Researcher An Jin-ah of Ebest Investment & Securities explained, "We estimated that profit level recovery would begin around the third quarter of next year, but due to the second pandemic of COVID-19, delays in vaccine and treatment development, the prolonged COVID-19 situation makes even this uncertain," adding, "As COVID-19 prolongs, deferred demand for overseas travel will increase, and benefits are expected to concentrate on surviving travel companies."

Modetour is in a similar situation. Operating profit in the second and third quarters, when the impact of COVID-19 was fully reflected, decreased by more than 95% year-on-year, proportional to the number of overseas dispatches. The fourth quarter performance is also expected to be similar to the third quarter. Ebest Investment & Securities forecasted Modetour's fourth-quarter results at sales of 4.6 billion KRW and an operating loss of 5.6 billion KRW. Compared to the previous year, sales are down 93%, and operating losses continue.

Thanks to vaccine expectations, stock prices reached new highs earlier this month but have since declined. Hana Tour and Modetour surged to 62,400 KRW and 23,200 KRW respectively on the 3rd, marking 52-week highs during trading. Based on closing prices, Hana Tour rose 51.53% from 39,200 KRW on the 2nd of last month to 59,400 KRW on the 3rd. During the same period, Modetour increased 56.38% from 14,100 KRW to 22,050 KRW. However, due to vaccine side effects and COVID-19 variants, stock prices fell again to 50,800 KRW for Hana Tour and 18,500 KRW for Modetour as of the previous day, dropping approximately 14.48% and 16.10% respectively in about three weeks.

Ebest Investment & Securities recommended a conservative approach to these stocks. Researcher An said, "Hana Tour's prolonged industry downturn beyond initial expectations and costs incurred from diversification into related businesses (travel, hotels, duty-free) are factors worsening the financial structure."

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