[Click e Stocks] "Lotte Chemical, 3Q Earnings Expected to Fall Short Due to Weak Olefin Market Conditions"

[Asia Economy Reporter Song Hwajeong] Samsung Securities on the 20th forecasted that Lotte Chemical's third-quarter earnings this year would fall short of market expectations due to a decline in profitability caused by the sluggish olefin market, and lowered the target stock price from 380,000 KRW to 340,000 KRW. The investment opinion was maintained as 'Buy.'

Samsung Securities expected Lotte Chemical's third-quarter operating profit to record 376.1 billion KRW, about 19% below the market consensus. The decline in profitability due to the sluggish olefin product market led to poor performance. Researcher Cho Hyunryeol of Samsung Securities explained, "Olefin operating profit is expected to decrease by 24% from the previous quarter to 205.3 billion KRW due to the decline in PE and NCC spreads, which weakened profitability," adding, "Following the start-up of new PIA facilities in China, aromatic operating profit is expected to drop by 72% to 14.6 billion KRW due to weak spreads." Lotte Advanced Materials' operating profit is expected to decrease by 28% to 91.2 billion KRW. This decline is estimated to be due to reduced profitability of general-purpose PC products compared to the previous quarter and weakened export competitiveness caused by a sharp increase in maritime freight costs. LC USA's operating profit is expected to increase by 19% to 45.3 billion KRW, showing growth compared to the previous quarter due to a recovery in operating rates, making it the only segment to show quarter-on-quarter growth.

There is an opinion that the supply-demand balance will improve due to China's power consumption regulations. To achieve the carbon emission reduction target in 2021, from September, the operating rates of petrochemical facilities in certain regions of China were lowered or suspended. Along with this, the deepening coal supply shortage has also led to a reduction in the operating rates of coal chemical facilities. Researcher Cho analyzed, "Currently, the spread strength due to supply reductions of ECH, PVC, caustic soda, and MEG is prominent, but since these sanctions are likely to intensify until the end of the year or the first quarter of next year, an overall improvement in the supply-demand balance of petrochemical products is expected."

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