[Click eStock] "Kangwon Land, Entering Visible Range of Earnings Recovery... Target Price Up"

[Asia Economy Reporter Song Hwajeong] On the 10th, Samsung Securities raised the target price for Kangwon Land from 31,000 KRW to 35,000 KRW, stating that the company has entered the visible range of earnings recovery. The investment rating was maintained as 'Buy.'

Kangwon Land recorded sales of 245.2 billion KRW and an operating profit of 24.3 billion KRW in the third quarter of this year. Sales increased by 220% compared to the same period last year, and operating profit turned positive. Eun Kyung Park, a researcher at Samsung Securities, explained, "Due to the impact of the COVID-19 Delta variant, operating profit fell short of market expectations (consensus) by 19%. These results represent about 60% of the sales and 17% of the operating profit compared to the third quarter of 2019, with the operating profit affected by fixed cost burdens."

The number of operating days and simultaneous admission capacity have been on the rise since the second quarter. With the phased daily recovery (With COVID-19) starting this month, it is expected that the normalization of earnings will continue due to the increase in simultaneous admission capacity. Researcher Park said, "Sales are expected to recover to 85% of pre-COVID levels in the fourth quarter and fully recover to pre-COVID sales levels by the third quarter of next year. We forecast sales of 866 billion KRW and an operating loss of 300 million KRW this year, and sales of 1.37 trillion KRW (90% of 2019 levels) and operating profit of 321.6 billion KRW (64% of 2019 levels) next year." However, even after full earnings normalization, the operating profit margin is expected to remain below 30%. Park analyzed, "The operating profit margin before COVID-19 was typically around 30-35%. From this year, the payment standard for the mining area development fund changed from 25% of pre-tax profit to 13% of Gross Gaming Revenue (GGR), increasing cost burdens."

This is considered to have the highest earnings visibility within the leisure industry. Researcher Park said, "With the start of With COVID-19 from November, visibility for next year's earnings has improved. Reflecting this, we normalized the previously conservative earnings estimates for next year and raised the operating profit forecast by 13% compared to previous estimates." He added, "Kangwon Land is the company showing the clearest trajectory of earnings recovery within the leisure sector. Leisure companies such as travel and foreigner-only casinos will secure earnings visibility only when cross-border movement becomes free."

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