[Click eStock] "Lotte Jeongmil Chemical, Expected Record High Performance in 4Q This Year"

4Q Operating Profit Expected at 83.5 Billion KRW... Highest Quarterly Performance Ever
Main Product Price Increase... Exchange Rate Also Favorable for Exports

[Asia Economy Reporter Minwoo Lee] Lotte Fine Chemical is expected to record its highest-ever quarterly operating profit in the fourth quarter of this year. Despite rising raw material prices and logistics cost burdens, favorable exchange rate conditions for exports and price increases of key products were effective, analysts say.

On the 9th, Kiwoom Securities maintained its 'Buy' rating and target price of 117,000 KRW for Lotte Fine Chemical based on these factors. The closing price on the previous day was 79,600 KRW.

Kiwoom Securities forecasted that Lotte Fine Chemical's operating profit for the fourth quarter of this year will increase by 193.4% year-on-year to 83.5 billion KRW. This would be the highest quarterly operating profit ever, already accounting for 60% of last year's annual operating profit. Prices of key products and goods such as epoxy raw materials (ECH), caustic soda, ammonia, and cellulose all rebounded.

Regarding ECH, a supply shortage is occurring due to the sustained strong demand for epoxy resin in the front end, regional regular maintenance, and unplanned shutdowns. The sharp rise in transportation costs and the increase in glycerin prices caused by changes in Brazil's biodiesel blending ratio have reduced the profitability of competing glycerin-based ECH processes, resulting in continued indirect benefits. Caustic soda prices also remain high. This is because supply from China, the world's largest caustic soda producer, has decreased due to environmental regulations, and demand for caustic soda has increased due to expanded alumina refining capacity both domestically and abroad.

Operating profit for next year is also expected to increase compared to this year. The logistics disruption is expected to ease, reducing transportation cost burdens in the cellulose sector, while ongoing environmental regulations in China are expected to keep ammonia and caustic soda prices at firm levels. Additionally, the effects of this year's capacity expansions of Mesellos and Anycot will be reflected, along with further expansions of food and pharmaceutical-grade cellulose products next year.

The outlook for the ammonia market is also bright. Lotte Fine Chemical holds about 60-70% of the domestic ammonia market based on storage capacity of approximately 93,000 tons. Leveraging its market share and infrastructure, the company is expanding its entry into the high-growth green ammonia business. Researcher Dongwook Lee of Kiwoom Securities explained, "Ulsan, where Lotte Fine Chemical's ammonia infrastructure is located, is only 50 km away from Busan, the world's sixth-largest bunkering base, giving it a competitive edge in the ammonia bunkering business. Additionally, demand for hydrogen mobility and fuel cells is expected to increase, but the growth potential of the ammonia market due to ammonia co-firing power generation should also be considered."

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