[Click eStock] Lotte Chemical, Valuation Rise Seen "Target Price Up 14%"

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 8th that it is raising the target price of Lotte Chemical to 400,000 KRW, an increase of 14%. This is based on an analysis that valuation upside is possible.

The target price was calculated by applying a target price-to-book ratio (PBR) of 1.0 times to the expected book value per share (BPS) for 2021. The target PBR of 1.0 times is the average level of 2017-18 and has been adjusted upward from the previous 0.8 times, resulting in a 14% increase in the target price as well.

Researcher Han Sang-won of Daishin Securities stated, "Lotte Chemical is expected to raise expectations for mid- to long-term growth through demand increase and market improvement after the Lunar New Year, rather than concerns about market slowdown due to supply increase from new capacity expansion centered on China NCC in the second half of this year. Additionally, M&A (electronic and battery materials) and eco-friendly strategies will contribute to this." He added, "They have set targets of 3 trillion KRW in eco-friendly business sales by 2030 and 1 million tons of recycled product sales (currently around 60,000 tons), and plan to start mass production of chemically recycled products from 2023."

Meanwhile, Lotte Chemical's operating profit for the fourth quarter of last year was 212.5 billion KRW (+10% QoQ), in line with the consensus of 227.7 billion KRW. Operating profit for the first quarter of this year is forecasted at 365.2 billion KRW (+72% QoQ). The main drivers of operating profit growth are the sharp increase in olefin profits (+138%) due to the restart of Daesan, improved profitability of advanced materials through subsequent price hikes, and the turnaround to profitability of aromatics and LC USA.

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