[Click e Stocks] "Hotel Shilla Faces Inevitable Stock Weakness Due to Earnings Shock... Target Price Down"

On the 30th, KB Securities downgraded the target price of Hotel Shilla from 95,000 KRW to 90,000 KRW, citing an inevitable stock price weakness due to a Q3 earnings shock this year. The investment rating was maintained as 'Buy.'

Shinae Park, a researcher at KB Securities, stated, "The number of Chinese entrants during the National Day holiday showed a somewhat lackluster trend compared to market expectations, negatively impacting the stock price in October. Along with the Q3 earnings shock, a period of stock price weakness seems unavoidable for the time being."

Hotel Shilla reported consolidated Q3 sales of 1.0118 trillion KRW and operating profit of 7.7 billion KRW. These figures represent decreases of 26% and 77%, respectively, compared to the same period last year. Researcher Park explained, "While sales met consensus estimates, operating profit fell short by 89%. The significant shortfall in operating profit compared to market expectations is attributed to valuation losses from discount sales of accumulated inventory (20 to 30 billion KRW), increased fixed costs related to Incheon Airport operations, higher labor costs (bonus provisions), rising cost ratios due to the strong Korean won, and the disappearance of cost compensation profits that occurred in Q2."

Although valuation losses occurred due to weak demand from Chinese peddlers, they are expected to be resolved in Q4. Researcher Park said, "The biggest reason for the Q3 earnings slump, valuation losses on accumulated inventory, is understandable given the significant contraction of the Chinese peddler market since early 2023. Some valuation losses will continue through Q4, but their impact will be minimal from Q1 next year."

The sales trend after early next year will be crucial. Researcher Park forecasted, "We will monitor the sales trend of peddlers and the recovery of Chinese group tourists after early next year to seek opportunities for a stock price rebound."

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