[Click e Stocks] "Lotte Chemical Target Price Lowered to 310,000 Won"

[Asia Economy Reporter Park Soyeon] Heungkuk Securities has lowered the target price of Lotte Chemical to 310,000 KRW while maintaining a buy rating.

According to industry sources on the 20th, Lotte Chemical recorded sales of 4.4419 trillion KRW and an operating profit of 288.3 billion KRW in the third quarter. The operating profit showed an earnings shock, falling 36% short of the consensus estimate (446.3 billion KRW) due to cost burdens from rising oil and naphtha prices and weak front-end demand caused by the resurgence of COVID-19 in Southeast Asia.

Heungkuk Securities evaluated that all business divisions except LC USA underperformed. The Olefin division posted an operating profit of 148.9 billion KRW, down 45.1% from the previous quarter. Profitability significantly declined due to rising naphtha prices and shipments from capacity expansions. The Aromatics division recorded 11.9 billion KRW, a 78.6% decrease from the previous quarter, as cost pressures and the inflow of PIA products from Chinese capacity expansions worsened profitability. The Advanced Materials division’s operating profit was 76.5 billion KRW, down 39.3% quarter-on-quarter, affected by semiconductor supply issues and increased freight costs due to logistics disruptions. LC Titan recorded 27.0 billion KRW, a 77.5% decrease from the previous quarter, reflecting front-end demand weakness caused by the COVID-19 resurgence in Southeast Asia and opportunity costs from downstream facility maintenance. LC USA posted an operating profit of 41.8 billion KRW, up 9.7% from the previous quarter. Despite rising costs, strong demand and price increases for key products such as ethane and monoethylene glycol helped maintain high profitability.

It is expected that the market downturn will continue for some time due to the low season in the fourth quarter, semiconductor and logistics issues, and the burden of ethylene olefin capacity expansions next year. Attention should be paid to the strategy of expanding the business portfolio into eco-friendly new businesses such as green hydrogen, EV separator materials, and chemical recycling PET, which is expected to act as a positive factor for valuation from a mid- to long-term perspective.

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