[Click eStock] "Lotte Jeongbotongsin, Expected to Join 1 Trillion Won Sales Club Next Year"

[Asia Economy Reporter Park Jihwan] Cape Investment & Securities on the 27th presented a 'Buy' investment opinion and a target price of 50,000 KRW for Lotte Information & Communication, stating that despite the novel coronavirus disease (COVID-19), it is expected to join the 1 trillion KRW sales club next year.

Choi Jinseong, a researcher at Cape Investment & Securities, stated, "Lotte Information & Communication is expected to benefit from smart factory and logistics businesses due to the group's digital transformation next year, as well as growth in the cloud business following the implementation of the Digital New Deal policy."

In particular, he anticipated that the benefits from the group's digital transformation based on smart factory and logistics businesses would continue. Researcher Choi emphasized, "Despite performance deterioration due to the impact of COVID-19 this year, investments totaling 1.4317 trillion KRW, approximately 200 billion KRW more than the previous year on a cumulative basis through the third quarter, were made," adding, "Demand for the group's digital transformation is expected to continue."

Lotte Information & Communication plans to support the group's digital transformation by establishing a smart ecosystem that extends from smart factories to smart logistics and smart retail. Smart factory sales are expected to increase from around 30 billion KRW this year to 55 billion KRW in 2022, and the total number of factories within the group is 91, indicating that demand for smart factories will continue to rise, according to Researcher Choi.

In the logistics sector, sales are expected to rise from 25 billion KRW this year to 80 billion KRW in 2022 through the group's integrated logistics BPO project. Next year's sales are forecasted at 999.6 billion KRW, a 10.5% increase compared to this year, and operating profit is expected to increase by 13.2% to 50.7 billion KRW.

Researcher Choi said, "Full-scale growth is expected through the group's DT transformation, and benefits from the Digital New Deal through SOC digitalization are also anticipated," adding, "Considering sales increases from the completion of the IDC center next year, sales from the establishment of Lotte On, and orders for smart factories and logistics, the company appears undervalued compared to competitors."