[Click eStock] Lotte Rental, Time to Buy When Looking at All Indicators

On the 29th, SK Securities began its corporate analysis on Lotte Rental, expressing expectations for improved performance by setting a target price of 40,000 KRW and a 'Buy' investment rating.

Yoon Hyuk-jin, a researcher at SK Securities, stated in the report, "Several indicators such as net increase in long-term rental cars, strong performance in used car long-term rentals, recovery in short-term rentals, passing the bottom of operating profit from used car sales, obtaining a global investment-grade credit rating, and improvement in interest expenses due to interest rate cuts are all shifting toward improvement from the first quarter as the bottom," adding, "This is an attractive situation for long-term investors."

Lotte Rental's operating profit is expected to improve quarterly, starting from 56.9 billion KRW in the first quarter as the bottom, to 73 billion KRW in the second quarter, and 90 billion KRW in the third quarter.

Researcher Yoon said that the indicators related to Lotte Rental now show that it is time to buy Lotte Rental. These indicators include net increase in the number of long-term rental cars, strong used car long-term rentals, recovery in short-term rentals, and reduction in interest expenses.

Yoon explained, "With financial ratio stabilization, the number of long-term rental cars deployed has turned to a net increase since the beginning of the year, and the net increased vehicles are connected to long-term rental deployment after 2 to 3 months, starting to contribute to sales growth," adding, "B2C retention is improving through extensions and renewals, and the decrease in returned vehicles contributes to the net increase."

Used car long-term rentals have surpassed 1,000 new units per month and continue to increase steadily. He analyzed, "The business strategy of selling all vehicles after three years of new car rental has shifted, and from the third quarter, some vehicles are generating additional revenue by being rented as used cars for two more years before being sold."

The short-term rental sector is also showing signs of recovery. Researcher Yoon said, "The Jeju short-term rental business, which was a major cause of poor performance in the first quarter, has already entered an improvement trend since April with an increase compared to the previous year," and added, "Green Car, the car-sharing service, is undergoing cost efficiency improvements through optimization of batch spots and reduction of low-utilization vehicles."

Yoon concluded, "Leading indicators such as net increase in long-term rental cars and growth in used car rentals, along with improvements in Return on Assets (ROA), have already begun to turn around," and said, "After a year and a half of sideways stock price movement, it has already started to take off."