[Click eStock] "Lotte Chemical, Strong Earnings Expected Centered on Olefins and Advanced Materials"

[Asia Economy Reporter Oh Ju-yeon] SK Securities expects the favorable chemical market conditions in the second half of 2020 to continue into the first half of this year, forecasting that Lotte Chemical's 2020 fourth-quarter performance will also sustain the strong momentum seen in the third quarter. Accordingly, they newly issued a 'Buy' investment rating and a target price of 330,000 KRW.

According to SK Securities on the 5th, Lotte Chemical's fourth-quarter sales and operating profit last year are expected to be approximately 3.5108 trillion KRW and 238.7 billion KRW, respectively, which is in line with market consensus. They explained that strong performance centered on olefins and advanced materials is anticipated.

The representative product HDPE saw its average price per ton rise by 7.4%, from $857 in the third quarter to $920 in the fourth quarter, and PP prices also increased from $921 to $1,041 per ton. Although naphtha prices rose slightly, ABS/PC maintained strength mainly driven by demand from home appliances, which is expected to lead to strong results.

Researcher Park Han-saem stated, "Due to oversupply in the chemical market from 2021 to 2022, further price rallies are challenging," adding, "Nevertheless, Lotte Chemical has the capability to convert from naphtha-based crackers to LPG, which could improve costs."

Park further analyzed, "Currently, the premium on the lowered naphtha price has somewhat disappeared, but it could regain appeal upon a rebound. Additionally, entry into separators using PE is positive, and expanding the proportion of specialty products is expected to help defend profits against the upcoming oversupply."

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