Daishin Securities said on the 1st that for Lotte Rental, a change in the largest shareholder and stronger competitiveness in the rent-a-car market are expected to lift market share and profits. It maintained a "buy" rating and a target price of 60,000 won. The previous session's closing price was 47,350 won.
Park Gang-ho, an analyst at Daishin Securities, said, "Lotte Rental is projected to further increase its market share in the domestic rent-a-car market next year, with the potential for higher profits and dividends coming to the fore," and noted, "As the largest shareholder shifts from Lotte to global private equity TPG, active investment and a stronger business-to-business (B2B) portfolio are expected."
Park in particular focused on changes affecting competitor SK Rent-a-Car. Park said, "Affinity Equity Partners (the largest shareholder of SK Rent-a-Car), which had earlier pursued the acquisition of Lotte Rental, failed due to the Korea Fair Trade Commission's disapproval, highlighting uncertainty over SK Rent-a-Car's ability to expand its competitiveness," and predicted, "If Affinity pushes an exit (equity sale) from SK Rent-a-Car, Lotte Rental's market standing will strengthen by comparison."
A positive trend is also expected on the earnings front. Daishin Securities estimated Lotte Rental's third-quarter sales this year at 790 billion won, up 4.2% from a year earlier, and operating profit at 93.3 billion won, up 4.8%. Sales would be a quarterly record high, and operating profit would be the best since the third quarter of 2022 (94 billion won).
Park said, "Earnings should improve on the back of more inbound foreign tourists using the short-term rent-a-car market in September; entry into the peak season with Chuseok and the early-October holidays; and a larger share (above 20%) of highly profitable long-term rentals of used cars," and added, "If a record result is posted in the first quarter after TPG became the largest shareholder, it will justify the acquisition price (59,000 won per share) and the rationale for the deal."
Park added, "New major shareholder TPG has presented a vision to nurture Lotte Rental into a comprehensive solutions company by leveraging its auto platform and car-sharing (GreenCar) assets," and said, "It is also positive that the company is focusing on improving mid- to long-term operating margins by expanding direct sales on its own mall for business-to-consumer (B2C) transactions of used cars and by extending vehicle maintenance, repair and operations (MRO) linkage services."