[Click eStock] Lotte Chemical Exceeds Q1 Expectations, 'Q2 Profit Turnaround Anticipated'

On the 5th, IBK Investment & Securities maintained its buy rating and target price of 250,000 KRW for Lotte Chemical. This is based on the expectation that Lotte Chemical's operating loss in the first quarter of this year will be 132.2 billion KRW, significantly reduced compared to the previous quarter's loss of 400 billion KRW, slightly exceeding market expectations of a 141.1 billion KRW loss, and that the company will turn profitable in the second quarter.

Lee Dong-wook, a researcher at IBK Investment & Securities, explained, "The reopening of China and the effect of front-end inventory accumulation have improved the profitability of key products such as ethylene. Additionally, the rise in the exchange rate has increased the won-denominated spread, and the elimination of inventory-related losses incurred in the previous quarter will reduce the scale of operating losses in the first quarter."

He forecasted that operating profit in the second quarter of this year will be 67.2 billion KRW, an increase of about 200 billion KRW compared to the previous quarter, turning profitable. He added, "Due to large-scale regular maintenance of crackers in the region, chemical product prices are expected to rise, but Lotte Chemical will have no regular maintenance this year, so there will be no volume deterioration." He further noted, "The performance of Lotte Energy Materials is expected to be fully reflected in the consolidated income statement, and despite the strong oil and gasoline prices, the rebound in the price of naphtha, a raw material, is expected to be limited due to the large-scale regular maintenance of crackers in the region."

Lotte Energy Materials is expected to see increased profits compared to last year (operating profit of 120.1 billion KRW this year, up 41.6% year-on-year), as the yield and production disruption issues are limited, and the scale economies from the full operation of the plant expanded in the second half of last year and the new plant operation in the second half of this year are added. The researcher pointed out, "When the Malaysia plant is completed in the second half of this year, the production share in Malaysia, where electricity and labor costs are low, will increase from 50% in the first half of last year to 76%, which is expected to contribute to maintaining differentiated profitability compared to competitors in other countries."

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