[Click eStock] Lotte Rental Expects Record-Breaking Q4 Performance

[Asia Economy Reporter Lee Seon-ae] NH Investment & Securities announced on the 30th that it maintains a Buy rating and a target price of 61,000 KRW for Lotte Rental. This is an investment analysis based on earnings expectations.

Joo Young-hoon, a researcher at NH Investment & Securities, stated, "In the last third quarter, the revenue growth rate stagnated as the auction scheduled for September was postponed to October due to the timing of Chuseok. Despite concerns about a slowdown in top-line growth and the operating profit margin hitting a quarterly record high, the stock price did not reflect this. However, in the fourth quarter, the effect of increased auction frequency is expected to be reflected, enabling a recovery to double-digit revenue growth. Considering the current rental car and used car market conditions, the strong performance is expected to continue into 2022, so a stock price rebound can be anticipated."

Expansion of shareholder return policies is also an investment point. Last year, the dividend payout ratio on an individual basis was 16.3%, but based on Lotte Group's dividend policy, it plans to raise the payout ratio to 30%. The dividend per share is expected to be 830 KRW, which is likely to act as a downside support factor for the stock price.

The effect of increased used car auction frequency in the fourth quarter is also anticipated. The consolidated revenue and operating profit for the fourth quarter are estimated at 603.8 billion KRW (+15% y-y) and 51.1 billion KRW (+67% y-y), respectively. In addition to stable growth in the auto rental division, the used car sales division's revenue is expected to increase significantly due to the auction frequency increase caused by the timing difference of Chuseok. The average used car transaction price in the fourth quarter is around 13 million KRW, rising approximately 1 million KRW compared to the same period last year, leading to an improvement in the company's overall operating profit margin.

Revenue in the Green Car division is estimated to increase by +16% compared to the same period last year. Of the funds raised through the public offering, 100 billion KRW will be invested in the Green Car business (for vehicle purchases, platform advancement, and electric vehicle charging infrastructure construction), so additional revenue growth is expected in the future.

Researcher Joo forecasted, "Since SoCar, the industry leader, is preparing for an initial public offering (IPO) in 2022, the value of the Green Car business is also expected to be re-evaluated during that process."

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