"Target Price Lowered but 59% Upside Remains?... The Travel Stock Analysts Say to Watch at Year-End [Weekend Money]"

Hanatour and Modetour Hindered by High Oil Prices
Two Consecutive Years of Negative Growth
"Deferred Demand Expected Next Year"

"There has never been three consecutive years of negative growth."

According to securities industry analysts, there is a possibility that the travel industry—which has been facing sluggish market conditions for two years in a row due to persistently high oil prices—could find a bottom and begin to recover as the end of the year approaches. The rationale is that, apart from the period of the COVID-19 pandemic over the past 20 years, there has never been a case of three consecutive years of negative growth in the travel sector.

Kihoon Lee, a research analyst at Hana Securities, highlighted in his recently released travel industry analysis report, "Why We Should Consider a Year-End Bottom," that "the package tour sector is characterized by slow rather than negative growth," adding, "Considering the unique nature of the industry, where deferred demand is certain to emerge, the probability of recovery is high in 2027."

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For Hanatour, a leading travel stock, the number of package tour customers for this year is estimated to be 2.04 million, down 2% year-on-year, marking two consecutive years of negative growth following last year. This continued downturn is attributed first to political issues and an airline disaster at the end of 2024, and second to the impact of war and high oil prices weighing on the travel market this year. Expected third-quarter revenue and operating profit are projected at 108.5 billion won and 4 billion won, respectively, both below market consensus.

Lee noted, "Although there was a Chuseok holiday, it was not long enough to significantly stimulate demand. By region, Japan and China saw slight growth, but Southeast Asia and long-haul routes appeared weak." He subsequently lowered his target price for Hanatour by 9% to 48,000 won.

Modetour is also projected to remain sluggish. According to Hana Securities, the number of package tour customers in the third quarter is expected to reach 140,000, down 18% compared to the same period last year, and its operating loss is forecast to be 2.5 billion won. A full-year operating loss also appears inevitable. Lee commented, "While Japan and China are posting high growth rates, other destinations, including Southeast Asia, are experiencing a decline of around -50% due to high fuel surcharges." He went on to project that, even if the monthly number of customers recovers to around 60,000 in the fourth quarter, continued losses remain highly likely.

Nevertheless, Hana Securities is focusing on "deferred demand," even amid falling package tour client numbers at travel agencies due to high oil prices and inflation. Typically, the travel industry sees a surge in delayed demand once the economy improves or cost-related headwinds subside. Analysts point out that if oil prices normalize to pre-war levels, the situation could change drastically.

Yonhap News Agency

Lee stated, "The sharp appreciation of the won is being offset by high oil prices (and high fuel surcharges), but if the oil price issue is resolved and returns to pre-war levels, significant deferred demand can be expected. If this normalization coincides with a strong won, it would have a notably positive impact on demand." While he reflected lowered earnings estimates by reducing Hanatour's target price, he reemphasized, "There has not been three consecutive years of negative growth in the past 20 years." In addition, regarding Modetour—which is expected to swing to an operating loss this year—he projected that if the headwinds affecting package tours are eased and the monthly customer count recovers to around 70,000 next year, operating profit could sharply rebound to approximately 15 billion won.

He also pointed out that the sluggish market conditions have already been largely reflected in the share prices of Hanatour and Modetour. So far this year, the average year-to-date return for leading travel stocks such as Hanatour, Modetour, Trip.com, Tripadvisor, Booking Holdings, Expedia, and Airbnb has been -23%. As of September 30, the day before the downward revision of the target price, Hanatour's stock price stood at 30,050 won. Compared to the new target price (48,000 won), this represents a 59% upside potential. On the same day, Modetour's stock price was 8,210 won, with its target price maintained at 11,000 won.

Lee concluded, "If the current share price level—representing roughly 8 to 9 times the expected P/E ratio for 2027—holds through the end of the year, it might be worth considering an investment."

This content was produced with the assistance of AI translation services.