[Click eStock] Data Center Completion in January... Lotte Information & Communication Still Undervalued

All Business Divisions Growing Broadly... PER Significantly Lower Compared to Industry Peers

[Asia Economy Reporter Minwoo Lee] There is a forecast that Lotte Information & Communication's growth next year will be certain. It is analyzed that full-scale sales growth is possible with the completion of the fourth data center.

On the 24th, Shinhan Financial Investment predicted that Lotte Information & Communication will record sales of 257.7 billion KRW and operating profit of 19.2 billion KRW in the fourth quarter of this year. This represents growth of 8% and 18%, respectively, compared to the same period last year. The operating profit margin is expected to increase by 0.5 percentage points to 7.4% compared to the previous year. Kangho Oh, a researcher at Shinhan Financial Investment, analyzed, "All business divisions have shown growth, and with the establishment of an additional data center, growth next year is also certain."

Lotte Information & Communication is expected to complete the global 4th data center around January next year and proceed with equipment installation and test operation. Partial operation will begin from the second quarter. It is expected to serve as a dedicated center for a global cloud company, handling data transmission and management in Northeast Asia. After additional sales of about 2 billion KRW occurred in the first quarter of 2021, full-scale sales are expected to appear from the second quarter. The total data center sales next year are forecasted to be 120.5 billion KRW, which is a 22% increase compared to this year's expected amount.

Shinhan Financial Investment diagnosed that despite steady performance growth, Lotte Information & Communication is undervalued. Researcher Oh said, "Based on the expected performance in 2021, the price-to-earnings ratio (PER) is 11.2 times, which is lower than the average of 24.9 times for peer companies such as Samsung SDS, POSCO ICT, and Hyundai AutoEver," and added, "As a company operating global data centers and involved in domestic smart factories and automation, it has sufficient growth appeal in the future."

Against this background, Shinhan Financial Investment maintained a 'Buy' investment opinion on Lotte Information & Communication and raised the target stock price by 3.8% to 55,000 KRW. The closing price the previous day was 37,900 KRW.