[Click eStock] Lotte Chemical, Structural Uptrend... Target Price Up 18%

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 9th that it maintains a buy rating on Lotte Chemical and raises the target price by 18% to 470,000 KRW.

The target price was calculated by applying a target price-to-book ratio (PBR) of 1.1x (vs. previous 1.0x) to the 12-month forward book value per share (BPS). Reflecting changes in earnings estimates (2021 OP previous 1.55 trillion KRW vs. new 1.97 trillion KRW), the target PBR was raised, resulting in an 18% increase in the target price compared to before.

This year's profit level is similar to that of 2018 (1.95 trillion KRW), but while that period was at the tail end of a boom with profit slowdown, the current situation is one where a structural market upturn can be expected. Although concerns exist about market adjustments due to the gradual restart of US facilities after the cold wave, last year's second half also experienced a stepwise spread increase following restarts after equipment troubles in the US and Korea. This indicates that the current supply and demand is that tight. The provision of concrete guidance on eco-friendly products, which will determine future growth potential (3 trillion KRW in sales by 2030, commencement of chemical recycling mass production in 2023), is also positive.

Hansangwon, a researcher at Daishin Securities, emphasized, "Considering that the PBR rose to as high as 1.4x during past booms, it is necessary to keep the upside of the stock price open up to 600,000 KRW even in the current demand-driven boom," adding, "This is the time to actively buy ahead of further upward revisions to earnings estimates (consensus)."

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