Korea Investment Securities projected on October 1 that Hotel Shilla's operating profit for the third quarter will fall short of market expectations due to ongoing weakness in the duty-free sector. While maintaining a 'buy' rating, the firm reduced its target price from 73,000 won to 63,000 won, a decrease of 13.7%.
Analyst Kim Myung-joo estimated that Hotel Shilla's consolidated revenue for the third quarter will decline by 6.3% year-on-year to 961.4 billion won, while operating profit is expected to rise by 372.3% to 54 billion won. This operating profit figure is 15.6% below market expectations.
The hotel segment is expected to continue performing well, with operating profit in the hotel and leisure division estimated to increase by 25.8% year-on-year to 27.4 billion won. The improvement in the hotel business, including Shilla Stay, is attributed to a rise in foreign tourist arrivals.
In contrast, the duty-free segment's operating profit is anticipated to drop by 26.8% from the previous quarter to 26.6 billion won. Despite hopes for the resumption of visa-free entry for Chinese group tourists, sales in the duty-free industry are expected to remain similar to or slightly decrease from the second quarter. However, the recent strengthening of the won is seen as a factor that could reduce cost burdens for the duty-free business.
Kim noted, "Unlike in the past, tourists visiting Korea are enjoying shopping not only at duty-free shops but also at department stores, broadening the scope of beneficiaries related to inbound tourism." He added, "Given the disappointing market conditions and performance, Hotel Shilla's stock price is expected to take a brief pause. However, the inbound momentum remains strong, and improvements in Hotel Shilla's performance are certain, so we maintain our 'buy' rating."
* This article has been translated by AI.
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