[Click eStock] Lotte Jeongmil Chemical, Profit Growth... Target Price Up

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 7th that it maintains a buy rating on Lotte Fine Chemical and raises the target price by 9% to 120,000 KRW. The target price was set by applying a price-to-book ratio (PBR) of 1.4 times to the 12-month book value per share (BPS). This corresponds to a price-to-earnings ratio (PER) of 9 times.

Operating profit for the third quarter is expected to reach 62.6 billion KRW, up 16.1% from the previous quarter, slightly exceeding market expectations of 58.6 billion KRW. Considering the overall chemical industry is expected to see a quarterly profit decline due to market slowdown, this performance can be regarded as relatively robust.

The better-than-expected results are thanks to ECH. The spread per ton rose to $1,609 on average in April, then fell to $1,403 in June, but rebounded again to $1,628 in August and recently (September) further increased to $1,776, marking the highest level since the fourth quarter of 2019.

The strong ECH spread is believed to be due to robust demand in front-end industries such as construction, leading to a strong epoxy chain, and disruptions in chlorine-based product operations caused by hurricanes in the U.S.

Researcher Han Sang-won of Daishin Securities stated, "Despite having multiple investment points such as differentiated earnings trends within the industry (quarterly/annual profit growth), strong market conditions for key products, investment in secondary battery materials (Sollus Advanced Materials; copper foil), and pursuing eco-friendly growth through green ammonia, the stock is absolutely undervalued at a PER of 5 times," adding, "The target price is also conservative (only PER 9 times), so we strongly recommend an active buy response."

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