[Click eStock] "Used Car Retail Allowed... Lotte Rental, Business Structure Change" Target Price Up

[Asia Economy Reporter Ji Yeon-jin] Kiwoom Securities announced on the 23rd that it has raised the target price for Lotte Rental from 55,000 KRW to 62,000 KRW, anticipating that the company will secure growth momentum and trigger a business structure transformation as it is now allowed to enter the used car retail sales market.

Kim Min-seon, a researcher at Kiwoom Securities, stated, "Lotte Rental was previously only able to sell returned rental cars to wholesalers such as dealerships, but with retail sales now permitted, these restrictions have been lifted," adding, "The company plans to increase the volume of used car sales from 47,500 units last year to up to 200,000 units after 2025, and the proportion of used car sales in revenue is expected to grow from 26.7% last year to 50% by 2025, transforming Lotte Rental into a specialized used car sales company."

The entry into the used car retail sales business is also expected to improve profitability. Considering that the proportion of used car sales in revenue was 26.7% last year, Lotte Rental's profit margin is projected to improve by 1 percentage point. Researcher Kim said, "In the mid to long term, it will not be possible to supply 200,000 units solely from returned rental cars," adding, "There will be volume procurement through direct purchases and other means, and to prevent this procurement from leading to structural profitability decline, it is important to secure volume through the growth of the core long- and short-term rental car business."

Recently, Lotte Rental expanded its presence in the car-sharing market by acquiring a 13.9% stake in Socar for 183.2 billion KRW. Through a memorandum of understanding (MOU) with LG Energy Solution and others, it is also strengthening electric vehicle services such as battery separation rental business, attempting vertical integration of mobility services that connect 'car-sharing - repair - used car sales.'

The company's operating profit for the first quarter is projected to be 63.1 billion KRW, with used car sales profitability expected to remain solid despite delays in vehicle delivery, and growth in rental cars and general rentals is also anticipated to continue.

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