[Click eStock] "Hotel Shilla, Duty-Free Shops Returning to Normal... Target Price Up"

[Asia Economy Reporter Song Hwajeong] Daishin Securities raised the target price for Hotel Shilla from 90,000 KRW to 120,000 KRW on the 31st, citing that duty-free store operations, excluding airport locations, have recovered to normal levels. The investment rating was maintained as 'Buy.'

Hotel Shilla recorded an operating profit of 26.6 billion KRW in the first quarter, significantly surpassing the market consensus of 1.3 billion KRW. Yujeonghyun, a researcher at Daishin Securities, stated, "A notable point in the first-quarter results is achieving a company-wide operating margin of 3.7% and a duty-free segment (TR) operating margin of 6.6%. Although the company-wide operating margin of 3.7% is lower than the 6.1% recorded in Q1 2019 before COVID-19, considering that the TR segment operating margin was 6.7% at that time, it can be said that the duty-free industry has already recovered to normal levels excluding airport stores."

Although the number of foreign visitors to Korea sharply declined due to COVID-19, the domestic duty-free industry, which had already been reorganized around Chinese traders (ttaikong) after the THAAD (Terminal High Altitude Area Defense) issue, has seen profits rapidly improve mainly at major downtown stores located in the Gangbuk area as competition eased during the pandemic. Researcher Yu predicted, "If overseas travel fully resumes and the number of arrivals and departures significantly increases, competition in the domestic duty-free industry may become fiercer than now. However, this will act as a momentum for performance improvement, with sales increasing substantially and profits growing rather than deteriorating."

External factors surrounding the duty-free industry are viewed positively. Researcher Yu explained, "Although concerns about worsening Korea-China relations were raised after the recent Korea-US summit, these concerns have been alleviated due to conciliatory remarks from the Chinese government. The ongoing appreciation trend of the yuan against the dollar and the rising Chinese consumer sentiment index are very positive for investment sentiment in domestic duty-free stocks." He added, "Considering the normalization of operating profits and favorable external factors surrounding the domestic duty-free industry, Hotel Shilla's stock price is expected to continue its upward trend."

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