[Click eStock] "SK Rent-a-Car, Favorable Operating Environment Supports Continued Strong Earnings Momentum"

[Asia Economy Reporter Song Hwajeong] Hyundai Motor Securities maintained its 'Buy' rating and target price of 22,000 KRW for SK Rent-a-Car on the 3rd, expecting that the business environment will improve with the transition to With Corona (gradual return to normal life) and favorable performance momentum will continue until next year.

Park Jongryeol, a researcher at Hyundai Motor Securities, said, "Although the third-quarter earnings this year fell short of initial expectations, it was due to advertising expenses and is not a major concern. The rental sector's strong performance, the favorable market conditions in the used car sales sector due to strong used car prices, and the full-scale synergy effects of the integrated corporation will sustain favorable performance momentum in the fourth quarter." He added, "Since the transition to With Corona began in November and the gradual return to normal life is underway, the increase in mobility and recovery of consumer sentiment will provide positive momentum for SK Rent-a-Car's business environment."

SK Rent-a-Car recorded consolidated sales of 271.5 billion KRW, up 27.1% year-on-year, and operating profit of 25.4 billion KRW, up 16%, in the third quarter. Researcher Park analyzed, "Sales growth was solid, driven by the continued strong performance of long-term rentals and short-term rentals centered on Jeju Island, which is in its peak season. Operating profit improved due to better profitability in short-term rentals and used car sales, but additional advertising expenses caused operating profit growth to lag behind sales growth."

Favorable performance momentum is expected to continue in the fourth quarter. Hyundai Motor Securities estimates SK Rent-a-Car's fourth-quarter sales to increase by 21.4% to 274 billion KRW and operating profit to rise 71% to 27 billion KRW. Park explained, "The short-term rental sector is expected to drive business performance due to a surge in domestic travelers to Jeju Island, and the long-term rental sector's continued strong performance and strong used car prices will sustain solid results in the used car sales sector."

As synergy effects of the integrated corporation materialize, the low base from last year is also positively affecting performance momentum. In the rental sector, the integration of SK Rent-a-Car and AJ Rent-a-Car is expected to lead to a gradual increase in the number of registered and operated vehicles through the end of this year.

Researcher Park said, "Favorable performance momentum will continue in the fourth quarter and this trend will persist into next year. Considering the lowered valuation level due to the recent stock price decline, a buying strategy at the current price level is valid."

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