[Click eStock] "Hotel Shilla, Sales Slump... Target Price Down"

Target Price 88,000 KRW → 82,000 KRW

Shinhan Investment Corp. downgraded the target price for Hotel Shilla from 88,000 KRW to 82,000 KRW on the 9th, citing prolonged sluggish sales and rising costs. The investment rating was maintained as 'Buy.'

Jo Sang-hoon, a research fellow at Shinhan Investment Corp., stated, "Considering the prolonged sluggish sales and rising costs, we have lowered our earnings estimates and reduced the target price by 7%. However, we still maintain our Top Pick rating within the sector because Hotel Shilla has a long-established track record and holds a superior negotiating position with global brands, giving it a unique purchasing competitiveness."

Hotel Shilla's fourth-quarter results last year are expected to fall significantly short of market expectations. Research fellow Jo said, "Hotel Shilla's Q4 sales are projected at 1 trillion KRW (down 22.9% year-on-year), and operating profit at 900 million KRW (turning positive), which will significantly miss market consensus. Similar to Q3, the poor performance is due to the cost burden at airport stores and rising cost ratios." Duty-free sales (TR) continue to suffer from decreased demand from Chinese daigou shoppers, and the proportion of free independent travelers (FIT) is estimated to exceed 50%. Operating losses are expected to persist due to continued cost burdens at airport stores and worsening cost ratios (inventory liquidation and KRW-USD exchange rate decline) from the previous quarter. On the other hand, the hotel & leisure segment is expected to show steady sales and favorable operating profits.

The positive effects of the resumption of Chinese group tours are expected to become visible starting from the second quarter of this year. Research fellow Jo noted, "Although the effect of the resumption of Chinese group tours has not been as significant as expected, the gradual recovery of Chinese group tourists' arrivals from Q1 will lead to a full-scale effect from Q2. The average spending per group tourist is about three times that of individual tourists, which should dispel doubts about purchasing power. Consequently, the inventory issue will naturally be resolved, and from the first half of this year, the TR segment is expected to drive the company's overall performance."

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