[Click eStock] "Modetour, Slow Operating Profit Recovery"... Target Price ↓

[Asia Economy Reporter Lee Jung-yoon] Hyundai Motor Securities downgraded the earnings forecast for Modetour next year due to delayed profit improvement, lowering the target stock price from the previous 25,000 KRW to 18,000 KRW on the 16th. The investment rating was maintained at neutral.

Modetour's sales in the third quarter of this year recorded 13 billion KRW, a 272% increase compared to the same period last year, with an operating loss of 4.5 billion KRW. Despite a surge in sales including the recovery of package demand, the improvement in operating profit was slow, showing poor performance. The total number of passengers sent increased 2.4 times compared to the previous quarter, but sales only rose 1.6 times. Also, the operating loss decreased by only 400 million KRW, showing a slower-than-expected recovery in performance. Although a sharp rebound in travel demand to Japan in the fourth quarter is expected to cause a stepwise increase in package demand, it is forecasted to recover only 20% of the pre-COVID-19 level.

The number of outbound travelers showed a rapid recovery with 400,000 in the first quarter, 940,000 in the second quarter, and 2 million in the third quarter, reaching 30% of the pre-COVID-19 level in the third quarter. Hyundai Motor Securities researcher Kim Hyun-yong explained, "In the fourth quarter, travel demand to Japan is rapidly reviving, and the number of outbound travelers is expected to soar to 2.5 to 3 million," adding, "Nevertheless, the recovery of package travel demand is slow, which can be confirmed by the fact that before COVID-19, 30% of outbound travelers chose package tours, but currently this ratio is only 10%."

The number of international flights operated by domestic airlines is judged to have recovered 50% of the pre-COVID-19 level by the end of this year and is gradually returning to normal, reaching 100% by the end of next year. Researcher Kim said, "There is a time lag of more than three months in each process of increasing international flights, recovering the number of outbound travelers, and recovering package tours," and added, "The recovery rate of Modetour’s package passengers compared to the average year is expected to reach 20% by the end of this year and 70% by the end of 2023." Furthermore, he added, "Accordingly, a turnaround to profitability is expected to be possible around the second half of 2023."

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