On the 20th, Eugene Investment & Securities maintained a target price of 35,000 KRW and a buy rating for Lotte Rental, stating that "the profitability improvement effect of the used car rental business will begin to manifest from the second quarter and lead to strong performance in the third quarter."
Lotte Rental has reduced used car sales and expanded the proportion of long-term used car rentals to maximize profitability and mitigate earnings volatility. Although the company showed weak performance in the first quarter due to a decrease in the number of used car sales and increased costs for the next-generation system, it is expected to see a stepwise recovery in earnings from the second quarter. In particular, it is judged that the third quarter is highly likely to achieve operating profits in the 90 billion KRW range again, which was the highest ever recorded.
In line with the implementation of the corporate value-up program, the company is reviewing strengthening shareholder return policies to enhance corporate value. Lotte Rental is currently trading at a price-to-book ratio (PBR) of about 0.8, below 1.0. It is also expected that not only dividends but also share buybacks and cancellations, which have a significant effect on stock price appreciation, may be implemented.
Researcher Lee Jae-il of Eugene Investment & Securities said, "With the confirmation of profitability improvement effects in the used car rental business, the visibility of earnings forecasts will increase," adding, "Strengthening shareholder return policies is expected to serve as a catalyst for escaping undervaluation." He also stated, "When interest rates fall, profitability improvement effects such as an increase in the residual value of used cars and a reduction in interest expenses will appear," and predicted that Lotte Rental's value-up will be fully underway.
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