[Click eStock] Lotte Rental's Performance Expected to Show 'Low First Half, High Second Half' Trend This Year

On May 12, Hana Securities maintained its 'Buy' investment rating and a target price of 34,000 won for Lotte Rental, stating that a significant catalyst for a share price increase is expected to emerge in the second half of the year.

On this day, Do-Hyun Ahn, a researcher at Hana Securities, said, "In March, the largest shareholder of Lotte Rental changed to the global private equity fund Affinity. If Lotte Rental reestablishes its growth strategy and its second-half results meet expectations, a full-fledged share price rally is likely to begin."

In the first quarter, Lotte Rental recorded sales of 685.6 billion won, up 4% year-on-year, operating profit of 67 billion won (operating margin of 9.8%), up 18%, and net profit of 29.8 billion won (net profit margin of 4.3%). Researcher Ahn analyzed, "Long-term car rental sales in the first quarter rose 5%, with operating profit also increasing 33% to 34 billion won. Short-term car rental sales increased 8%, but car-sharing sales decreased 7%, and general rental sales also declined 6%."

Regarding this year's performance trend, he said, "Used car sales in the first quarter were lower than Hana Securities' expectations. We expect the full-scale increase to occur in the second half of the year, with a gradual upward trend each quarter. As the core long-term car rental business continues to show solid growth and a net increase, the company's performance this year is expected to follow a low-first-half, high-second-half pattern."

He added, "We expect second-quarter sales to rise 7% and operating profit to increase 1% to 76.8 billion won (operating margin of 10.4%). In the second half, the deficit in car-sharing is also expected to narrow due to a recovery in domestic consumer sentiment. We forecast annual sales of 2.973 trillion won and operating profit of 330 billion won."

He further stated, "After being acquired by Affinity, the growth potential of the core rental car business is expected to be strengthened. Lotte Rental has established the infrastructure needed for growth, as it can improve vehicle asset efficiency and sales profit margins through new businesses such as used car rentals and B2C (business-to-consumer) used car retail."