Korea Investment Securities has significantly upgraded its investment stance on Shilla Hotels from Neutral to Buy and reset its target price to the 1 million KRW level for the first time in 1.5 years. This positive assessment is attributed to improved performance in the first half of the year and growing expectations for the recovery of the Chinese economy. Specifically, both duty-free and hotel business segments have recorded outstanding operational results that exceeded expectations, which served as the decisive catalyst to raise the target price from the previous 55,000 KRW back to the 100,000 KRW range.
The most significant positive factor for the duty-free business is its successful transition to profitability in operating profit by effectively absorbing fee reductions. Researcher Kim Myeong-ju analyzed that the consolidated operating profit reached 20.4 billion KRW, surpassing market expectations. Additionally, the hotel segment achieved favorable results with an operating profit of 8.2 billion KRW by reflecting room rate increases, thereby improving the overall business environment. These achievements are interpreted not as a temporary upturn but as a structural improvement, leading to high expectations for future performance sustainability.
Changes in the domestic environment in China are also having a positive impact on investor sentiment. As the value of the RMB strengthens, the fees paid by Chinese wholesalers (taigongs) have decreased, which has instead acted to reduce the burden on the duty-free industry. Experts believe that macroeconomic indicators in China are stabilizing and the RMB trend is improving, forecasting that the likelihood of fee burdens increasing again in the duty-free sector is low. If the Chinese economy gradually recovers in the second half of the year, demand for cosmetics is expected to rise, increasing taigong sales, which will become a key driver for enhancing the overall value of the duty-free business.
The combination of increased inbound tourist arrivals and a shortage of hotel supply in Seoul is expected to boost the hotel segment as well. Recently, the number of overseas tourists visiting has been steadily increasing, leading to a surge in demand for accommodations in Seoul, while actual hotel supply remains severely inadequate. This supply-demand imbalance has naturally led to a trend of rising hotel room rates, which further enhances the value of Shilla Hotels' high-end hotel assets. If individual Chinese tourists and group tour sizes expand, the synergy effect on the duty-free business is also expected to grow, which is anticipated to lead to a comprehensive increase in corporate value.