Hana Securities reiterated its "Buy" recommendation on Seobu T&D (KOSPI: 006730) on the 18th, maintaining a target price of 18,000 won. Based on the closing price of 10,120 won on 14th August, the brokerage sees upside potential of approximately 78%.
Second-quarter results beat on underlying performance
Seobu T&D reported second-quarter (April–June) revenue of 87.7bn won and operating profit of 18.3bn won, representing year-on-year increases of 61% and 63% respectively. The hotel division led the way, generating revenue of 50.4bn won (+18%) and operating profit of 17.1bn won (+39%). Occupancy rates (OCC) reached approximately 79% — up 7 percentage points year on year — while the average daily room rate (ADR) rose 9% to 210,000 won. Both metrics hit all-time highs.
The quarter absorbed roughly 15bn won in one-off charges, comprising an approximately 80bn won property tax bill (up 8bn won from the prior year) and non-recurring staff costs related to the planned redevelopment of the Sinjeong-dong site. Stripping these out, Hana Securities notes the underlying result was broadly in line with the market consensus of 19.9bn won.
Corelle — the tableware manufacturer and distributor consolidated as a subsidiary — also contributed to the improvement. Corelle posted second-quarter revenue of 27.5bn won, a 55% jump from the prior quarter, with operating profit of 3.2bn won at an operating margin of 11.6%.
Third quarter: a historic milestone in occupancy
Hana Securities forecasts third-quarter (July–September) revenue of 78.0bn won (+11% year on year) and operating profit of 25.3bn won (+19%), which would represent an all-time quarterly high. Critically, the brokerage expects OCC to exceed 80% for the first time. Although won appreciation poses some downside risk to the ADR, Hana Securities expects the room rate to hold near second-quarter levels, supported by stronger demand for premium rooms.
The China factor: diverted tourists, concentrated gains
The structural driver behind these figures is a sharp polarisation in Chinese outbound tourism. In the first half of this year, 3.21 million Chinese tourists visited South Korea — up 26% year on year. By contrast, visits to Japan fell 55% to 2.06 million. In June alone, arrivals in South Korea were 37% higher than a year earlier, while arrivals in Japan were down 57%.
Analysts attribute this divergence to an informal Chinese government restriction on group tours to Japan — informally known in Korea as the "hanil-ryeong" (限日令), or Japan travel ban — which has effectively redirected a significant flow of Chinese tourists to South Korea.
Seobu T&D is a direct beneficiary. Its flagship property, Seoul Dragon City in Yongsan, is one of the largest hotel complexes in South Korea with approximately 1,700 rooms and sits at the centre of many Chinese group tour itineraries. Rising occupancy is not merely boosting room counts; it is enabling the hotel to upsell premium rooms, creating an earnings leverage effect that simultaneously lifts the ADR.
Development pipeline adds another growth layer
Seobu T&D's growth story extends beyond hotel operations. Presales of serviced apartments (officetel units) on lots 12 and 13 of the Yongsan Electronics Market site are scheduled to launch in the fourth quarter, while the mixed-use Sinjeong-dong development (Square One Seoul) is awaiting building permits. Should profits from both projects flow through to the income statement, earnings visibility would improve materially. Hana Securities projects annual operating profit of 88.5bn won in 2026, rising to 99.0bn won in 2027.
Risks investors should not overlook
Several risks temper the bullish case. First, a sustained appreciation of the won could erode the spending power of foreign visitors, potentially capping further ADR gains. Second, and more consequentially, the Japan travel restriction is a political instrument — any improvement in Sino-Japanese diplomatic relations or a shift in Chinese government policy could swiftly unwind the demand skew that Korean hotels currently enjoy.
The timing of development profits is also uncertain. Both the Yongsan presales and the Sinjeong-dong project are subject to permitting delays and broader conditions in the property market. On the balance sheet, net financial debt is projected to reach 1.1352tn won by 2026, making the company's earnings sensitive to movements in interest rates.
Valuation: cheap, but the market is sceptical
At current prices, the stock trades at roughly 7 times Hana Securities' projected 2027 operating profit — a level that looks undemanding given the earnings trajectory, particularly as the share price has declined since the start of the year. Yet the wide gap between the current price and the 18,000-won target suggests that the market is pricing in considerable uncertainty around both the realisation of development gains and the durability of China's Japan travel restrictions. Until those uncertainties resolve, the discount is likely to persist.