[Click eStock] "Daigong Commission Hits Record High"... Hotel Shilla Faces Consecutive Target Price Downgrades

[Asia Economy Reporter Ji Yeon-jin] Hotel Shilla has been seeing its target stock price repeatedly downgraded after announcing third-quarter earnings that fell short of market expectations this year.

Hotel Shilla reported third-quarter sales of 968.7 billion KRW, up 10.2% year-on-year, and operating profit of 20.9 billion KRW, turning to black. Duty-free segment (TR) sales and operating profit increased by 11.1% year-on-year, achieving 857.6 billion KRW and 20 billion KRW in operating profit, respectively, turning to black, while the hotel segment recorded sales and operating profit down 7.5% year-on-year, with operating profit turning to black at 900 million KRW.

Shin Jeong-young, a researcher at Shin Young Securities, said, "The third-quarter operating margin of the duty-free segment was 2.3%, significantly down from the 5-6% margin in the first half, which is notable," adding, "Demand in the Korean duty-free market is led by Chinese wholesalers, and as competition among domestic and international duty-free operators intensifies to secure customers, commission rates have risen to an all-time high. Additionally, some brands faced supply disruptions, which is also understood to be a cause of the third-quarter earnings slump."

On the same day, researcher Shin lowered Hotel Shilla’s earnings estimates and cut the target stock price by 9% to 100,000 KRW. Lee Jin-hyup, a researcher at Yuanta Securities, also lowered Hotel Shilla’s target price from 130,000 KRW to 110,000 KRW, citing intensified competition in the duty-free sector and concerns over Chinese consumption.

However, KB Securities researcher Ahn Ji-young maintained a target price of 120,000 KRW, forecasting a gradual recovery in the absolute operating environment of domestic duty-free shops in the fourth quarter this year. Researcher Ahn said, "As of the end of October, the domestic vaccination rate is 75.3%, and overseas travel products are being launched toward the end of the year, making the recovery of domestic sales visible," adding, "In the fourth quarter, some conservative responses to commission competition are expected, and it is judged that the focus will be on small-sized Daigo transaction competitiveness centered on the main store."

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