[Click eStock] There Is an End to Lotte Chemical's Tunnel

[Asia Economy Reporter Junho Hwang] Shinhan Financial Investment maintained the target price of Lotte Chemical at 270,000 KRW, stating that the industry downturn is bottoming out.

Shinhan Financial Investment expects Lotte Chemical's operating profit for the first quarter of this year to be 51.7 billion KRW, falling short of the market expectation of 116.3 billion KRW. This is due to a decline in performance caused by a sharp drop in product spreads amid continued weak demand in China and a surge in international oil prices. In the case of olefins, a return to losses is expected, and Titan's operating profit is forecasted to decrease by 58% compared to the previous quarter. The spreads for major products HDPE, PP, and MEG are expected to fall by 39%, 36%, and 40%, respectively.

Aromatic operating profit is expected to record 28.9 billion KRW (turning to profit) based on one-time extinguishment and solid PIA profitability. Despite weak ABS spreads, advanced materials are expected to increase earnings due to the solid profitability of compound products. Lotte Chemical (LC USA) is expected to earn an operating profit of 23.4 billion KRW, highlighting higher competitiveness compared to the Naphtha Cracking Center (NCC) despite regular maintenance.

Researcher Jinmyung Lee of Shinhan Financial Investment said, "While the industry is going through its worst phase, the focus should be on the possibility of improvement rather than further slowdown," adding, "We expect a gradual market improvement in the second half of this year due to the stabilization of oil prices at a lower level, recovery of demand in China, and easing of bottlenecks." He continued, "Currently, the price-to-book ratio (PBR) is low at 0.5 times, so valuation pressure is low, and considering continuous investments for mid- to long-term growth, there is still room for stock price appreciation."

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