Lotte Corporation Highlights Improved Profitability and Treasury-Share Value; Target Price Set at KRW 33,000

[Financial News] SK Securities maintained its 'Buy' rating and target price of KRW 33,000 for Lotte Corporation, saying downside risk to the stock price is limited given the group's overall profitability improvements, high dividend yield, and the value of its treasury shares.
Choi Kwan-soon, an analyst at SK Securities, said on the 3rd, "The high dividend yield is supporting the downside of the stock price, while the effects of group-wide profitability improvements are becoming visible."
Lotte Corporation's consolidated revenue in the first half rose 1.1% year on year to KRW 7.7 trillion, while operating profit increased 9.3% to KRW 175.1 billion. Net income came to KRW 790 billion, marking a return to profitability.
Lotte Wellfood's overseas business growth led to improved performance in the food segment, while results at equity-method affiliates, including Lotte Chemical, also improved.
KOREA SEVEN returned to profitability by posting KRW 4.1 billion in operating profit, its first profit in 11 quarters since the third quarter of 2023, after closing low-profitability stores and relocating to better locations.
The analyst also viewed the potential expansion of shareholder returns positively. Lotte Corporation has a policy of maintaining a shareholder-return ratio of at least 35%, calculated as the sum of cash dividends and treasury-share cancellation amounts relative to separate net income. Its separate net income in the first half rose 179.6% year on year to KRW 195.2 billion, supported by improved results at affiliates and the reversal of impairment losses on investment securities.
Choi estimated that this year's cash dividend would remain at KRW 1,250 per share, the same as last year. This corresponds to a dividend yield of 5.2% based on the current share price.
The analyst also identified Lotte Corporation's treasury shares, which account for 23.7% of its shares, as a factor that could lead to a revaluation of the stock. With the possibility of disposing of some treasury shares to improve its financial structure and secure investment funds, Choi forecast, "Both cancellation and disposal could provide an opportunity for the value of the treasury shares held by the company to come into focus."
Lotte Corporation's current discount to its net asset value (NAV) is 29.5%, higher than the post-2024 average of 21.1%, while its price-to-book ratio (PBR) stands at around 0.3 times.
Choi judged, "Announcements of the cancellation or disposal of the treasury shares held by the company and new orders for Lotte Biologics are highly likely to serve as catalysts for a rise in the stock price, and the timing is not far off."
[email protected] Lee Jeong-hwa Reporter