[Click eStock] "Hotel Shilla, 1Q Strong Performance as the Biggest Beneficiary of Duty-Free Industry Restructuring"

Hanwha Investment & Securities maintained a 'Buy' rating and a target price of 115,000 KRW for Hotel Shilla on the 6th.

Hotel Shilla's first-quarter revenue is expected to be 971.5 billion KRW, with an operating profit of 20.2 billion KRW, slightly exceeding market expectations (18.8 billion KRW). Due to a temporary decrease in sales to _ttaigong_ caused by a reduction in brokerage fees for _ttaigong_-oriented transactions as part of the duty-free industry restructuring starting this year, downtown store sales are estimated to decline by 30% year-on-year. However, profitability is expected to improve simultaneously, allowing the duty-free (TR) division's operating profit to be defended at 11.9 billion KRW. The hotel and leisure business division is expected to achieve an operating profit of 8.3 billion KRW, supported by improved occupancy rates (OCC).

The restocking demand from _ttaigong_, which temporarily decreased, is expected to rebound from the second quarter ahead of Jingdong Day (June 18). The consumption recovery following China's reopening will drive increased demand from _ttaigong_, while the recovery of tourists such as FIT (Free Independent Travelers) may lead duty-free operators to reduce supply to _ttaigong_. The industry structure is shifting towards a seller-centric model. With improving tourism demand on Hainan Island, it is anticipated that Chinese duty-free stores' willingness to meet _ttaigong_ demand will decline, which will give domestic duty-free stores a stronger negotiating position with _ttaigong_. Hotel Shilla is the biggest beneficiary of the duty-free industry restructuring towards a seller-centric structure.

Lee Jin-hyeop, a researcher at Hanwha Investment & Securities, analyzed, "Hotel Shilla's current stock price is about 14 times our forecast, leaving room up to the upper end of the price-to-earnings ratio (PER) of 20 times. As the results of the industry restructuring towards a seller-centric model become evident, there is a high possibility of upward revisions to Hotel Shilla's earnings forecasts. Furthermore, if group tours from China are permitted, not only will the forecasts be revised upward, but the valuation ceiling can also be raised."

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