Lotte Group Stocks Recovering from COVID Shock, Outlook Remains Mixed

Chemical Hits 52-Week Highs Recently with Broad Gains
Strong Earnings Boost 4th Quarter Expectations

[Asia Economy Reporter Song Hwajeong] Lotte Group stocks, which had repeatedly struggled due to COVID-19 and diplomatic conflicts between Korea-Japan and Korea-China, are raising expectations for a stock price recovery.

According to the Korea Exchange on the 19th, Lotte Chemical rose 21.24% this month, followed by Lotte Holdings up 18.49%, Lotte Shopping 15.71%, Lotte Chilsung 13.04%, Lotte Food 8.33%, and Lotte Himart 3.27%, showing strong performance. In particular, Lotte Chemical reached an intraday high of 285,500 won on the 12th, marking a 52-week high.

The recent strength is interpreted as a result of better-than-expected third-quarter earnings and expectations for future improvement. Lotte Shopping recorded an operating profit of 111 billion won in the third quarter, a 27% increase compared to the same period last year, exceeding consensus estimates. Lotte Chemical also posted a 489% surge in third-quarter operating profit compared to the previous quarter, significantly surpassing consensus. Lotte Chilsung and Lotte Himart also exceeded market expectations with third-quarter operating profits of 58.4 billion won and 55.9 billion won, up 19% and 67.4% year-on-year, respectively.

Recovery in fourth-quarter and next year’s earnings is also anticipated. Researcher Inayeon from Daishin Securities said about Lotte Shopping, "Until the third quarter, the negative impact of COVID-19 was inevitable across all channels, but since October, major channels and subsidiaries have shown a complete recovery from the pandemic situation," adding, "With earnings recovery, the momentum for stock price recovery is sufficiently secured." Researcher Han Seungjae from DB Financial Investment said about Lotte Chemical, "Fourth-quarter operating profit is expected to increase 96% year-on-year to 278.8 billion won, continuing the improvement trend," and forecasted, "Although this year’s performance was weak due to COVID-19 and the Daesan plant accident, profits will normalize next year with the Daesan plant resuming operations within the year."

Although the companies appear to be recovering from the COVID-19 shock, investment opinions and target prices for future outlooks are divided. Kiwoom Securities raised Lotte Chilsung’s target price from 120,000 won to 130,000 won, and Daishin Securities upgraded its investment opinion from 'market performance' to 'buy,' expecting a meaningful turnaround next year. On the other hand, Meritz Securities lowered the target price from 140,000 won to 96,000 won, a 31.2% cut, and downgraded the investment opinion from 'buy' to 'hold.' Researcher Kim Jungwook of Meritz Securities explained, "Lotte Chilsung’s liquor business is sluggish and growth in the beverage sector is stagnating long-term," adding, "We reflected a 4.3 billion won decrease in beverage segment earnings and a 18.3 billion won expansion in liquor segment losses compared to previous estimates."

Korea Investment & Securities upgraded Lotte Shopping’s investment opinion from 'neutral' to 'buy,' but Ebest Investment & Securities downgraded it from 'buy' to 'hold.' Hyundai Motor Securities raised the annual earnings forecast for Lotte Himart, reflecting better-than-expected third-quarter results, and increased the target price from 40,000 won to 47,000 won. Conversely, NH Investment & Securities lowered the investment opinion from 'buy' to 'hold,' citing limited upside potential due to stock price realization.

This content was produced with the assistance of AI translation services.