[Click eStock] "Lotte Shopping, Potential for Net Profit Turnaround... Investment Opinion and Target Price Raised"

[Asia Economy Reporter Kwon Jae-hee] NH Investment & Securities upgraded its investment opinion on Lotte Shopping to 'Buy' on the 8th and raised the target price by 45% from the previous level to 145,000 KRW.

Lotte Shopping's operating profit for the second quarter of this year is expected to increase by 568% year-on-year to 50.6 billion KRW. Sales are projected to rise by 1% during the same period to 3.9266 trillion KRW. Although the subsidiary Lotte Hi-Mart continues to experience poor performance due to a slowdown in home appliance sales, all other business divisions are expected to show favorable trends.

The growth rates of existing stores in department stores and discount stores are also expected to increase by 13% and 5%, respectively. In particular, following the easing of social distancing policies, department stores are expected to see a significant profit improvement due to strong sales in the high-margin fashion category. Unlike the first quarter, no special one-time factors have been identified so far.

The profit and loss improvement of Culture Works is also positive. Culture Works was the business division most affected by COVID-19, recording operating losses of 160 billion KRW and 132 billion KRW in 2020 and 2021, respectively. Since indoor dining at multi-use facilities was permitted from April 25, it is estimated that the movie theater business performance in May recovered to the break-even point (BEP), and a return to profitability is expected in June.

Researcher Joo Young-hoon of NH Investment & Securities said, "Lotte Shopping recorded consecutive net losses for five years since 2016, making it difficult to properly evaluate corporate value. This year, the normalization of operations in major business divisions has been confirmed, and the possibility of impairment of right-of-use assets is also considered low. Therefore, the visibility of a net profit turnaround for the first time in six years is expected to be high."

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