[Click eStock] "Lotte Chemical, 4Q Results Below Expectations... Stock Price Passing the Bottom"

[Asia Economy Reporter Ji Yeon-jin] KB Securities announced on the 10th that it has lowered its earnings estimates for Lotte Chemical and downgraded the target stock price to 327,000 KRW. The investment rating was maintained as Buy.

Baek Young-chan, a researcher at KB Securities, stated, "Lotte Chemical's controlling shareholder net profit for 2022-2023 has been lowered by 9.2% and 4.3%, respectively, compared to previous estimates, reflecting the spread decline of major products due to new capacity expansion and supply increase," adding, "The earnings slowdown has already been reflected in the stock price, and gradual profitability improvement is expected from the second half of this year."

Last year's fourth-quarter revenue and operating profit are expected to be 4.4051 trillion KRW, a 36.8% increase year-on-year, and operating profit is expected to fall short of market expectations at 223.4 billion KRW, down 22.5%. This is due to decreased demand for chemical products caused by the spread of variant viruses in November-December last year and costs incurred from scheduled maintenance.

Researcher Baek explained, "Lotte Chemical's short-term earnings momentum is not significant," adding, "This is because front-end demand expansion is limited due to the spread of variant viruses and supply chain issues, and global ethylene new capacity expansions have been 10.13 million tons and 8.06 million tons from last year to this year, indicating a continued oversupply." He continued, "If there are negative factors such as demand slowdown and chemical product oversupply in the first half of this year, there are also positive factors in the second half, such as front-end demand improvement through economic stimulus measures and supply-demand balance improvement due to reduced new capacity expansions in 2023. With patience, it is judged that the current phase is passing the bottom."

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