DAISHIN SECURITIES analyzed on the 28th that Hotel Shilla is showing improved profitability in its city shop due to a reduction in the wholesale proportion of its duty-free business (TR) sector. Consequently, it revised its investment opinion from neutral (marketperform) to buy and raised the target price from 42,000 won to 50,000 won.
Researcher Yoo Jeong-hyun of DAISHIN SECURITIES noted, "There is significant improvement in profitability in the city shop sector due to the efforts of the duty-free industry," adding, "Although airport rent is a burden on performance, negotiations are underway with domestic and international airports, and visible results are expected in the second to third quarters."
Hotel Shilla's TR sector revenue and operating profit for the first quarter of this year were 971.8 billion won and negative 2.5 billion won, respectively. This researcher analyzed, "Incheon Airport store revenue increased by 19% compared to the previous year due to an expansion of sales area, while the total revenue of the TR sector remained at last year's level," and explained, "The significant decrease in city shop revenue is due to the intentional reduction of low-margin wholesale, leading to a lower discount rate."
He added, "The operating loss in the TR sector was 5 billion won, reversing from an operating profit of 5.9 billion won in the same period last year; however, this is a significant decrease from the previous quarter's loss of 43.9 billion won," and explained, "This is due to the removal of one-time costs from overseas airport incentives last year, as well as the improvement of operating profit margins in city shops through better discount rates."