Hyundai Motor Securities announced on June 18 that it has raised its target price for Hotel Shilla from 59,000 won to 70,000 won, citing an expected improvement in the profitability of its duty-free business. The firm maintained its "buy" rating on the stock.
Analyst Kim Hyun-seok of Hyundai Motor Securities forecasted that Hotel Shilla's duty-free segment will see significant performance improvements in the first quarter of this year. He noted, "The increasing proportion of Chinese tourists, a key customer base for downtown duty-free shops, is a positive sign," adding that as of the first quarter, Chinese tourists accounted for about 30% of all foreign visitors.
In the first quarter, Hotel Shilla achieved its first operating profit in seven quarters, driven by improved profitability in its downtown duty-free shops and reduced rental costs at overseas airport duty-free locations. Kim projected that starting in the second quarter, profitability will further improve due to cost reductions from exiting the DF1 area at Incheon Airport and the expiration of its contract at the Macau airport.
Particularly, Shilla Stay, which has a high demand from foreign tourists, is expected to maintain a high occupancy rate while also seeing an increase in average daily rates (ADR). Kim stated, "The number of foreign tourists has increased year-on-year for 20 consecutive quarters since the second quarter of 2021," and he assessed that the continued depreciation of the won will create a favorable environment for the hotel sector.
* This article has been translated by AI.
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