[Click e-Stock] "Lotte Rental at an Inflection Point"

On April 21, LS Securities analyzed Lotte Rental, stating, "Sales growth will be possible through aggressive new vehicle deployment, supported by an increase in the debt ratio." The firm maintained its 'Buy' investment rating and a target price of 39,000 won.

LS Securities projected Lotte Rental's first-quarter revenue to reach 688 billion won and operating profit to reach 61 billion won, representing year-on-year growth of 4.7% and 7.7%, respectively. The company identified the normalization of profits in the short-term auto rental segment, revenue growth in the long-term auto rental segment, and improved performance of the car-sharing service G car as the main factors driving improved profitability. Typically, long-term rental car contracts are recognized as revenue over four years, and the net increase in the number of rental cars, which began in the first quarter of last year, is expected to continue contributing to revenue. G car's operating loss for the first quarter was estimated at 4 billion won, an improvement of about 2 billion won from the previous year. For the full year, the company expects an improvement of 5 to 6 billion won, driven by higher utilization rates due to increased membership and stabilized marketing expenses.

Lotte Rental's debt ratio stands at 377%, which has remained lower than its competitors due to Lotte Group's conservative debt ratio guidelines. However, following last month's completion of the sale to the private equity fund Affinity Equity Partners, there are expectations that the debt ratio will be increased to a level similar to competitors, at around 500% to 600%.

Analyst Lee Byungkeun commented, "Sales growth will be possible through aggressive new vehicle deployment," and added, "An increase in shareholder returns and synergy effects resulting from the change in the largest shareholder are expected to drive valuation growth."

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