Hyundai Motor Securities on the 18th said Hotel Shilla's duty-free profitability is entering full-fledged improvement and inbound demand for the hotel business is also expected to increase. It maintained a "buy" (BUY) rating and raised the target price 18.6% to 70,000 won from 59,000 won. The previous trading day's closing price was 57,800 won.
In the first quarter of this year, Hotel Shilla's duty-free institutional sector achieved an operating profit surplus for the first time in seven quarters. The result reflects improved profitability at downtown stores and the reflection in the first quarter of this year of rent reductions at overseas airport duty-free shops that were deferred in the fourth quarter of last year.
Hyundai Motor Securities projected that from the second quarter of this year, profitability improvement at Hotel Shilla will gain traction thanks to rent savings from withdrawing from the Incheon Airport DF1 duty-free zone and the expiration of the contract at the Macau airport store.
Kim Hyun-seok, an analyst at Hyundai Motor Securities, judged it positive that although foreign tourists' shopping channels are diversifying, the share of Chinese tourists—key customers of downtown duty-free shops—is increasing.
Kim said, "The proportion of Chinese tourists among all foreign tourists fell to around 5% in 2022 but has expanded to around 30% in the first quarter of this year," adding, "If the yuan's strength continues in the second half of this year, it will have a positive effect not only on top-line growth but also on profitability improvement."
Kim also viewed the hotel institutional sector as likely to see a favorable environment continue in the second half of this year, supported by stable inbound demand from foreign tourists.
Kim said, "Since the second quarter of 2021, the number of inbound foreign tourists has increased year over year for 20 consecutive quarters," and predicted, "Shilla Stay, which caters to foreign tourist demand, is likely to maintain a high room occupancy rate in the second half, and the average daily room rate will continue to rise."