[Click eStock] "Kangwon Land, Visitor Increase Expected After Herd Immunity Formation"

KB Securities Report

[Asia Economy Reporter Minji Lee] KB Securities on the 10th issued a buy rating and a target price of 36,000 KRW for Kangwon Land.

The stock price of Kangwon Land rose by 6.3% from February 13 last year to the 4th of this month, underperforming the overall stock index growth of 54.4% during the same period by 48.1 percentage points. Although Kangwon Land faced difficulties due to COVID-19, it is expected to return to profitability next year and record a controlling shareholder net profit growth rate of 16.4% in 2023. This exceeds the KOSPI controlling shareholder net profit growth consensus by 8.5%.

According to the Statistics Korea Household Trends Survey, following the COVID-19 pandemic, the government's emergency disaster relief payments increased households' public transfer income, resulting in the largest-ever household surplus last year. The surplus rate exceeded 30% for five consecutive quarters, recording 31.1% in the first quarter of this year. KB Securities researcher Sunhwa Lee analyzed, "The increased household income is expected to lead to revenge consumption," adding, "Kangwon Land, as the only domestic casino for Korean nationals, will see a surge in demand if entry restrictions due to social distancing are lifted after vaccination."

Jeongseon County, Gangwon Province, where Kangwon Land is located, is currently maintaining social distancing at level 1.5. Even if relaxed to level 1, the number of occupants is expected to increase by 83%, from 1,200 to 2,200. As social distancing eases, the simultaneous occupancy capacity of casino facilities increases, so the number of casino visitors is expected to rise sharply.

Considering the government's announcement that herd immunity will be formed around November this year with 70-85% of the population vaccinated, Kangwon Land's visitor numbers are predicted to recover rapidly. Researcher Lee explained, "Kangwon Land's visitors are expected to quickly rebound from 600,000 last year to 3 million in 2022, reaching pre-COVID-19 levels."

This year's expected sales are forecasted to increase by 70% year-on-year to 816.4 billion KRW. If herd immunity is achieved as the government anticipates in November, next year's sales are expected to grow by 90% compared to a year earlier, reaching 1.552 trillion KRW. Operating profit this year is expected to reduce losses, but with sales recovering to pre-COVID-19 levels next year, operating profit is also projected to record a surplus of 436.6 billion KRW. Researcher Lee said, "In 2023, Kangwon Land will continue to achieve a growth rate exceeding market growth," adding, "Sales and operating profit in 2023 are expected to increase by 6.7% and 18.5%, respectively, compared to the same period last year."

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