[Edaily Reporter Kwon Oh Seok ] NH INVESTMENT & SECURITIES announced on the 6th that it is maintaining its “Buy” rating on LOTTE rental(089860)and raising its target price from 40,000 won to 47,000 won.

Joo Young-hoon, an analyst at NH INVESTMENT & SECURITIES, explained, “The target price was calculated by applying a P/E ratio of 10.3x (the upper end of the three-year valuation range) to the 12-month forward net income attributable to controlling shareholders,” adding, “We expect the stock to trade at a fairer valuation based on improved earnings.”
He noted, “Discussions are currently underway with private equity firm TPG (Texas Pacific Group) regarding due diligence for a potential stake sale. As nothing has been finalized yet, we will need to monitor developments going forward,” adding, “If there is a change in the largest shareholder, we estimate that the company will be able to move beyond the conservative debt-to-equity ratio policy of the existing group and engage in more aggressive business activities.”
On a consolidated basis, second-quarter revenue and operating profit stood at 765.8 billion won (+2.3% year-over-year) and 84.6 billion won (+9.6%), respectively. Analyst Ju noted, “Adjusting for the impact of changes in accounting treatment for credit card fees (1.7 billion won), actual operating profit was 86.3 billion won, which is in line with consensus estimates.”
He added, “Net income temporarily declined due to a book loss (14.4 billion won) resulting from the dilution of the company’s ownership stake following SOCAR’s third-party private placement,” and “In the core auto rental business, profitability is improving as the share of high-margin used car rentals (20.6%, +2.6 percentage points) rises rapidly, while the downward trend in per-vehicle accident costs—a key cost factor—continues,” he elaborated.
Furthermore, the company noted, “Short-term rentals are expected to benefit from the increase in foreign visitors to Korea,” and added, “Although sales and operating profit in the used car sales segment declined due to growing uncertainties such as interest rate hikes and the war, we are responding by shifting that volume to used car rentals; therefore, we do not consider this to be a significant issue in terms of consolidated performance.”