Published 17 Apr.2023 08:36(KST)
Heungkuk Securities analyzed that gradual performance improvement and revaluation will continue for Hotel Shilla. Accordingly, the investment opinion was raised to 'Buy' and the target price was increased to 110,000 KRW.
On the 17th, Park Jong-ryeol, a researcher at Heungkuk Securities, stated in a report, "This year, Hotel Shilla's performance momentum is expected to show a pattern of low in the first half and high in the second half, and due to structural improvements in the duty-free business, the recovery in performance will proceed somewhat slower than initially expected."
Heungkuk Securities forecasted that Hotel Shilla's consolidated first-quarter sales will decrease by 22.8% year-on-year to 845 billion KRW, while operating profit will increase by 12.5% to 17 billion KRW, compensating for the previous quarter's sluggishness. The duty-free store's sales and operating profit are expected to be 722.2 billion KRW and 10.8 billion KRW respectively, with sales decreasing by 26.2% year-on-year. However, profitability is expected to improve due to a shift to a profit-focused business strategy through normalization of commission fees.
The Hotel & Leisure segment is expected to improve year-on-year. Sales and operating profit are projected to be 122.7 billion KRW and 6.2 billion KRW respectively, increasing by 6.0% and 159.3% year-on-year. This is attributed to improved occupancy rates at Jeju and Seoul hotels, Stay, leisure, and others, as well as increased food and beverage and banquet sales, sustaining solid performance momentum compared to the previous year.
Heungkuk Securities expects Hotel Shilla's annual consolidated sales to increase by 0.6% year-on-year to 5 trillion KRW, and operating profit to grow by 89.1% to 147.7 billion KRW, recovering from the poor performance during the pandemic period starting in 2020.
Researcher Park said, "This year's strategy for Hotel Shilla's duty-free business will focus on strengthening scale and profitability by acquiring new customers other than _taigong_ and expanding best-selling items." He added, "Considering that the Hotel & Leisure segment already recovered pre-COVID profitability last year and that the increase in overseas travelers this year could lead to decreased demand for domestic hotels, the growth in operating profit may be limited."
Regarding the stock price outlook, he said, "Since November last year, the stock price has shown a rapid rebound due to expectations of future performance improvement. Although there is some gap between performance and expectations, gradual performance improvement is possible, and revaluation through this will continue."
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