IBK Securities on the 31st said Hotel Shilla(008770) has a high potential for a rise in corporate value thanks to solid inbound tourism, stabilization in duty-free shop results, and a lower valuation. It maintained a "Buy" rating and a target price of 81,000 won. The previous session's closing price was 43,000 won.
Nam Seong-hyeon, an analyst at IBK Securities, said "The potential for a rise in Hotel Shilla's corporate value is high," citing as reasons: ▲ a solid increase in inbound (foreign visitors to Korea) ▲ stabilization in duty-free shop results ▲ a lower valuation.
The inbound uptrend is likely to continue in 2027. In July this year, about 2,093,000 foreign visitors came to Korea, up 20.8% from a year earlier. In particular, visitors from China rose 29% to 777,000, leading growth.
Nam said, "Routes to China already increased in the first half, and additional increases are being considered for the second half, so this trend is likely to continue in 2027," adding, "Given this, the impact of expanded Chinese travel demand to Korea in 2027 is expected to be positive."
In addition, Hotel Shilla's duty-free profitability improved significantly after withdrawing from the Incheon Airport duty-free DF1 zone. Second-quarter operating profit was about 36 billion won.
Nam said, "With the easing of rent burden from the DF1 withdrawal and continued strategic choices to improve profitability, coupled with expected inbound growth, this improving trend in duty-free profitability will continue," adding, "Meaningful top-line expansion for the duty-free division is likely to be limited, but through profitability-focused strategies it has achieved stable fundamentals."
He added that it is worth noting that these strategic choices have translated into the ability to generate more than 100 billion won in annual profit.
Lastly, the valuation is currently low. At the start of the year, the consensus (market average estimate) for Hotel Shilla's operating profit this year was about 146.6 billion won, but the current operating profit consensus has risen more than 30% to 197.6 billion won. However, the stock price increase has been limited.
Hotel Shilla turned to the black this year as a turning point, and its 2027 price-earnings ratio (PER) level has fallen to 10.3 times.
Nam explained, "The hotel division has entered a structural growth cycle, and the previously weak duty-free business is improving, so we view the current share price as undervalued."