Hotel Shilla Upgrade to Neutral

Research evidence excerpt

Hotel Shilla Upgrade to Neutral

er group-tour recovery, earnings visibility has improved materially and

downside risks have moderated. As a result, we believe the stock's risk-reward is now more balanced

and upgrade our rating to Neutral from Sell.

EVIDENCE According to Korea Tourism Organization data, inbound tourist arrivals are robust, growing by ~20%

YoY each month in 2026 and exceeding pre-COVID levels. In addition, weekly flights from China will

increase from 608 to 664, providing further support for Chinese inbound demand in 2H26.

Combined with improving tourist spending trends, this should support stronger sales productivity at

Hotel Shilla's duty free operations. Meanwhile, the hotel business continues to benefit from solid

fundamentals, with ADR growth of around 10% YoY and occupancy levels of 70-80%. Given room

rates remain below key regional peers and occupancy has not yet fully recovered, we see additional

room for improvement. We believe these trends enhance earnings visibility and support a more

sustainable recovery in profitability despite ongoing structural challenges in the duty free industry.

WHAT´S PRICED IN? Shilla share price has corrected 37% from recent peak in April and is now trading at 14x 2027E PE vs.

historical range of 16x-28x.Please

Upside/Downside

Spectrum

Overseas

Downtown Domestic Valuedrivers (2027E) Hotel sales growth duty-free

sales growth duty-free OPM

OPM

Won60,000 upside +4% YoY +7.8% YoY +8% +0.1%

Won49,000 base +2% YoY +7% YoY +6.6% -0.5%

Won30,000 downside +0% YoY +5% YoY +3.8% -0.1%

Source: UBS estimates

Company Description Founded in 1973 and headquartered in Seoul, Hotel Shilla is engaged in duty-free retailing and

hospitality services. Under its trading division, it operates a chain of duty-free shops that distribute