[Click eStock] "Lotte Information & Communication Reflects Central Control Acquisition Effect... Target Price Up 4%"

KTB Investment & Securities Report

[Asia Economy Reporter Minji Lee] KTB Investment & Securities maintained a buy rating on Lotte Information & Communication on the 21st and raised the target price by 3.9% to 53,000 KRW. This reflects the effect of acquiring Jungang Control, an electric vehicle charger manufacturer.

Lotte Information & Communication is estimated to have recorded Q4 sales of 251.2 billion KRW and operating profit of 14.4 billion KRW, growing 18.7% and 43.7% respectively compared to the same period last year. This year’s expected sales are 1.078 trillion KRW and operating profit 65.4 billion KRW, predicted to increase by 14.6% and 26.4% year-on-year. These figures represent upward revisions of 5.7% and 18.9% respectively from previous estimates for sales and operating profit.

This year, the IT outsourcing (SM) division is expected to see sales of 155.7 billion KRW, a 1.7% increase from a year ago. This is due to the anticipated expansion of investment capacity by Lotte Group companies following the transition to the With Corona phase.

The system integration (SI) division’s sales are estimated at 922.4 billion KRW, a 17% increase from last year. Jinwoo Kim, a researcher at KTB Investment & Securities, said, “This takes into account the overall growth rate of the electric vehicle charger market, and the operating profit margin is expected to be similar to that of competitor Signet V, at around 5.7%.”

The government’s target for electric vehicles this year is 440,000 units. The government aims to introduce 0.45 electric vehicle chargers per electric vehicle by 2025, and considering this year’s ratio of 0.4 chargers per vehicle, the annual net increase in chargers is predicted to be 94,000 units. Researcher Kim explained, “The size of the charger manufacturing market this year is forecasted at 528.2 billion KRW, which is a 274% increase compared to a year ago, and the compound annual growth rate of the charger manufacturing market until 2025 will reach 49.9%.”

Lotte Information & Communication is also planning a charger operation business. Researcher Kim analyzed, “Currently, there is a mismatch between charger installation locations and charging volume, but Lotte Group has already secured key points within urban areas,” adding, “The success potential of the charging station operation business is high, and synergy with Lotte Shopping, which needs to increase offline space visits, is also expected.”