[Click eStock] "Hotel Shilla, Overseas Duty-Free Rent Reduction Benefits Reduced... Target Price Down"

NH Investment & Securities downgraded the target price for Hotel Shilla to 83,000 KRW on the 29th, citing expectations of reduced rent relief benefits for overseas duty-free shops, following the company's poor performance in the fourth quarter. The investment rating was maintained at 'Buy.'

Researcher Ju Young-hoon stated, "The new target price was calculated by applying a price-to-earnings ratio (PER) of 24 times based on the expected 2024 net income attributable to controlling shareholders," adding, "The main reason for the target price downgrade is the revision of estimates considering the reduction of rent relief benefits at overseas duty-free shops in Singapore, Hong Kong, Macau, and other locations."

Hotel Shilla's announced operating profit for the fourth quarter fell short of market consensus (average estimate). Sales amounted to 937.6 billion KRW, down 28% year-on-year, and the operating loss continued at 18.3 billion KRW, following the previous year's deficit. In particular, duty-free shop sales dropped 32% to 772 billion KRW, with an operating loss of 18.3 billion KRW, significantly contributing to the overall decline in company performance.

Researcher Ju explained, "The loss from disposal of aged inventory was similar in scale to the previous quarter, but excluding related costs, domestic profitability indicators improved due to an increased proportion of retail customers," adding, "However, the most notable difference from previous expectations was the deterioration in profitability due to reduced rent relief benefits at overseas duty-free shops. We need to observe how much improvement is possible through future negotiations with overseas airports."

He further noted, "Ultimately, the key to the stock price direction will be whether group tourism demand from Chinese visitors recovers," and added, "We expect a full-scale recovery in group tourism demand from Chinese visitors starting in March, after the Lunar New Year."

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