[Click eStock] "Gangwon Land Q3 Earnings Outlook Weak... Target Price Down"

July Rain... Peak Season Effect Diminished

On the 25th, Kiwoom Securities lowered the target price for Kangwon Land to 20,000 KRW, anticipating that its third-quarter earnings this year will fall short of market expectations. The investment rating of "buy" was maintained.

On the same day, Namsoo Lee, a researcher at Kiwoom Securities, stated, "Kangwon Land's third-quarter revenue is expected to be 365.7 billion KRW, down 8% compared to the same period last year, and operating profit is expected to decrease by 29.8% to 83.3 billion KRW, falling short of market forecasts. Last year, social distancing measures were lifted and overseas travel had not fully resumed, so the results were close to those of the third quarter of 2019. This year, heavy rainfall for nearly 20 days in July appears to have caused a decline in travelers due to the rain."

The number of casino visitors in the third quarter is expected to be 635,000, a 2.9% decrease compared to the same period last year, and the drop amount (game chip exchange amount) is expected to decrease by 8.3% to 1.5325 trillion KRW. The drop amount per person is also estimated to decrease by about 5% compared to the previous quarter. By segment, casino revenue is expected to be 311.5 billion KRW, down 9.3% compared to the same period last year, while non-casino revenue is expected to increase slightly by 0.2% to 54.2 billion KRW. Although the water park improved due to seasonal effects, the overall improvement in segments affected by a decline in customers, such as lodging and golf, is expected to be relatively modest.

Public customer tables and slot machines are showing demand close to 100% compared to 2019, and casino visitors this year are expected to reach 2.41 million. Researcher Lee said, "Although this is expected to be a 17% decrease compared to 2019, the drop amount per person has improved by 7% during the same period, helping to defend earnings. However, the drop amount per person is also expected to record 2.39 million KRW in the third quarter due to a weakening consumption surge, which is a 5.7% decrease compared to the same period last year."

What is needed for earnings growth is a rebound in VIP customers. Researcher Lee analyzed, "The key to earnings improvement is a rebound in VIP customers, who have decreased by 54% compared to 2019. VIP customers appear to have significantly declined due to illegal gambling, increased overseas travel, and other factors." However, since similar levels of earnings were recorded during the COVID-19 period, confirming the basic earnings contribution of VIP customers, the current decline seems to have reached a sufficient level.

Researcher Lee added, "It is unlikely that demand will deteriorate further than it is now. The advantage of being the only open casino in the country is hard to undermine. The Special Act on Support for Development of Mining Areas has also been extended until 2045, allowing for long-term stable business operations."

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