[Click eStock] "Lotte Rental Reassessed Following Competitor SoCar's IPO"

[Asia Economy Reporter Park So-yeon] Kiwoom Securities evaluated Lotte Rental on the 9th, stating, "Based on the stable growth of its core car rental business, its expansion potential into related businesses such as used car sales and car sharing stands out," and added, "Premium valuation for the market-leading operator and re-evaluation of the car sharing sector following competitor Socar's listing are expected."

Kiwoom Securities noted that Lotte Rental is the number one car rental company in South Korea, with a fleet of approximately 240,000 vehicles. In the third quarter of this year, it recorded sales of 611.5 billion KRW and an operating profit of 72.9 billion KRW. Net profit was 38.5 billion KRW. Operating profit and net profit increased by 23.4% and 53.4%, respectively. The improvement in short-term car rental profitability and the rise in the selling price per used car are analyzed to have driven the strong performance.

Industry estimates suggest that the domestic car sharing market grew from about 500 billion KRW at the end of 2020 to 1 trillion KRW by the end of 2021. Market shares are estimated at Socar 59%, Green Car 32%, and People Car 9%. Kiwoom Securities stated, "In the car sharing market, Lotte Rental holds cost competitiveness through the use of purchase discounts and its maintenance subsidiary, Auto Care."

Kiwoom Securities forecasts that Lotte Rental will record sales of approximately 2.42 trillion KRW, operating profit of 240 billion KRW, and net profit of around 110 billion KRW this year. Next year, sales are expected to grow by 5-7%, with slight improvements in operating profit and net profit.

Lotte Rental plans to establish a joint venture for electric vehicle-exclusive car sharing under Green Car. It has signed a Memorandum of Understanding (MOU) with LG Energy Solution for battery utilization. It has invested in autonomous driving software company 42.Dot and agreed to cooperate in supplying autonomous driving services. Recently, it launched a B2B used car platform and plans to promote a B2C platform in the future.

Kim Min-seon, a researcher at Kiwoom Securities, said, "Currently, Lotte Rental's stock is trading at a PER of about 13 times. Considering that Coway (home appliances) and SK Rent-a-Car (the second-largest car rental operator) are trading at 12 times and 15 times, respectively, based on market consensus, it is trading at a level similar to its peer group," and added, "Considering the expansion potential of the car rental market compared to home appliances, the premium for the number one operator, and the vertical integration business expansion based on car rental, additional premium valuation is possible."