[Click eStock] "Lotte Chemical, 2Q Earnings Expected to Fall Short of Forecast... Target Price Down"

[Asia Economy Reporter Hwang Yoon-joo] Samsung Securities analyzed on the 14th that Lotte Chemical's operating profit for the second quarter is expected to fall short of forecasts. Accordingly, it maintained a 'Buy' investment rating but lowered the target price to 225,000 KRW.

Hyun-ryeol Cho of Samsung Securities stated, "The operating profit for the second quarter is expected to be 15.2 billion KRW, which will further underperform the recently sharply lowered consensus (42.8 billion KRW, -64%)."

Researcher Cho explained, "Although international oil prices rose by 11.5% quarter-on-quarter in the second quarter due to the reduced operating rates of regional NCC companies, naphtha prices remained flat. Nevertheless, the profit decline was mainly due to much weaker demand rather than supply cuts."

The olefin operating loss is expected to continue at 60.6 billion KRW. Researcher Cho analyzed, "This is due to opportunity losses from scheduled maintenance at the Yeosu plant and the continued weakness in major product spreads."

The aromatic operating profit is forecasted to decrease by 4% quarter-on-quarter to 53.3 billion KRW. This is because the decline in PET spreads is expected to be offset by improvements in PX spreads.

LC Titan is expected to turn to an operating loss of 23.4 billion KRW from the previous quarter. This was influenced by a higher proportion of general-purpose products, which are more affected by spread declines.

Lotte Advanced Materials' operating profit is projected to decrease by 5% quarter-on-quarter to 51.9 billion KRW. This reflects the impact of weaker spreads in general-purpose products.

Researcher Cho stated, "As the 2022 ROE forecast is further lowered (from 3.7% to 3.1%), the target price is also further reduced by 8% (from 245,000 KRW to 225,000 KRW). Considering the increased possibility of global demand slowdown and China's continued zero-COVID-19 policy, it is difficult to expect a recovery in the industry in the short term."

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