[Click eStock] Lotte Jeongmil Chemical, Focus on Structural Changes Over Poor Performance 'Buy Recommendation'

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 5th that it maintains a buy rating and a target price of 68,000 KRW for Lotte Fine Chemical.

It is analyzed that attention should be paid to the company's structural changes rather than short-term performance weakness. Achieving the sales target of 5 trillion KRW by 2030 would represent about a fourfold increase compared to 2020. For cellulose, specific execution plans include expanding the proportion through high value-added food and pharmaceutical capacity expansion (+45%), pursuing new businesses in electronic and battery materials, and seeking M&A opportunities. The profit contribution of the chemical business (chlorine + ammonia), which is sensitive to market fluctuations, is expected to fall to around 20%, enabling stable profit generation.

Operating profit in the fourth quarter was 28.5 billion KRW (+10% QoQ), meeting market expectations. The increase in profit compared to the previous quarter is attributed to the turnaround to profitability in the chlorine segment. However, profits in the cellulose segment decreased. This is likely due to the market characteristics of a global oligopoly structure, with a high export ratio (about 90%), making it sensitive to fluctuations in the KRW-USD exchange rate.

Meanwhile, the dividend per share (DPS) for 2020 was decided at 1,500 KRW. This corresponds to a payout ratio of 24% on a separate basis, but excluding one-time gains (about 90 billion KRW), the payout ratio is about 34%.

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