[Click eStock] Lotte Chemical, Bottom Now 'Rebound Expected'... Target Price Maintained

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment announced on the 14th that it maintains a 'Buy' rating and a target price of 500,000 KRW for Lotte Chemical. This is based on the judgment that the current stock price is at rock bottom and a rebound is possible.

Yoon Jae-sung, a researcher at Hana Financial Investment, analyzed, "Lotte Chemical's current stock price is at a 12-month forward price-to-book ratio (PBR) of 0.6, which is rock bottom," adding, "The only times it has fallen below this were during the 2008 financial crisis and the 2020 COVID-19 outbreak, so a clear rebound is expected at the current level."

First, from August to September, a clear market rebound is expected along with a solid performance flow contrary to concerns. The company's strong commitment to green businesses such as hydrogen, mobility, and battery materials is also likely to lead to a revaluation of its valuation. The expectation of a market rebound from August to September is due to the gradual recovery of production bottlenecks in global construction, architecture, and automotive sectors, influenced by workforce returns, easing of COVID-19 resurgence, and passing the worst phase of semiconductor chip shortages. The U.S. market has already started to rebound again from high prices.

Operating profit for Q2 is expected to be 610.2 billion KRW (QoQ -2%, YoY +1,755%), in line with the consensus (609.8 billion KRW). Considering a loss of about 70 billion KRW due to the regular maintenance of Daesan NCC, the actual operating profit reaches the high 600 billion KRW range. Due to recent market sluggishness, Q3 operating profit is expected to decrease to 502.4 billion KRW (QoQ -18%), but this has already been reflected in the stock price, which has fallen 20% from its peak.

Attention should also be paid to the mid-to-long-term growth strategy centered on green business. The company concretized its mid-to-long-term growth strategy focused on green business by 2030 at a briefing on the 13th. The target is over 10 trillion KRW in green business sales. For reference, this includes 3 trillion KRW from hydrogen, 3 trillion KRW from mobility and battery, 3 trillion KRW from eco-friendly products, and 1 trillion KRW from plastic recycling.

In particular, the hydrogen business plans to invest a total of 4.4 trillion KRW, aiming for sales of 2 trillion KRW in 2025 and 3 trillion KRW in 2030, with a target operating profit margin (OPM) of 10%. The strength of Lotte Chemical's hydrogen business lies in its ability to utilize existing infrastructure across the entire value chain, including production, distribution, and utilization. Especially, it appears to have an advantage over other companies in securing ammonia-based green hydrogen through collaboration with subsidiaries. In the mid-to-long term, the company plans to expand its business to areas such as high-pressure trailer development, fuel cells, and hydrogen turbine power generation, so a valuation increase due to the expansion of green business centered on hydrogen can be expected in the mid-to-long term.

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