[Click eStock] "Delta Variant, No Impact on Duty-Free Shops... Buying Opportunity for Hotel Shilla"

[Asia Economy Reporter Ji Yeon-jin] Daishin Securities recently announced on the 13th that although social distancing measures have been strengthened due to the COVID-19 Delta variant, there is virtually no impact on the duty-free store industry, and it maintains a buy rating and a target price of 120,000 KRW for Hotel Shilla.

Yoo Jeong-hyun, a researcher at Daishin Securities, stated, "It is unfortunate that expectations for the resumption of overseas travel have been diluted," but added, "Considering that the profitability of downtown stores already exceeds that of 2019 even amid the COVID-19 situation and there is no concern about performance deterioration, the stock price adjustment caused by the variant virus is rather judged to be a good buying opportunity."

Hotel Shilla's sales in the second quarter of this year are expected to increase by 64% year-on-year to 859.4 billion KRW, with an operating profit turning positive to 42.7 billion KRW. The operating profit margin of the duty-free division is also estimated to exceed 6% in the second quarter, which is due to focusing on operations centered on small-sized Daigongs (Chinese peddlers) with low commission rates, emphasizing profitability.

Before COVID-19, the operating profit margin of the duty-free division was 6.2%, and the current operating profit margin in the 6% range already indicates that the duty-free industry has recovered to a normal level excluding airport stores. Researcher Yoo noted, "Although the number of foreign visitors to Korea sharply declined due to COVID-19, it is important to note that the domestic duty-free industry, which had already been reorganized around Daigongs after the THAAD issue, is seeing a rapid improvement in profitability centered on major downtown stores located in the northern part of Seoul, as competition has been restrained and operations have focused on small-sized Daigongs with low commission rates."

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