[Click eStock] "Lotte Energy Materials, Weak Performance in China Business... Target Price Down"

Shinhan Investment Corp. lowered the target price for Lotte Energy Materials from 80,000 KRW to 70,000 KRW on the 18th.

Lotte Energy Materials recorded sales of 163.6 billion KRW and an operating profit of 6.1 billion KRW in the first quarter. Compared to the same period last year, sales decreased by 18%, and operating profit plummeted by 72%, falling significantly short of market expectations. This was due to a 56% drop in sales to China, down to 22 billion KRW, caused by inventory adjustments of secondary batteries by Chinese customers. Additionally, amid weakening demand, increased domestic electricity costs led to a separate (domestic) operating loss of 5 billion KRW. This is the first time since 2014 that the company recorded a quarterly loss on a separate basis.

However, Shinhan Investment Corp. maintained a 'Buy' rating, expecting stock price improvement in the second half of the year. First, demand stimulation is anticipated due to new electric vehicle launches by European customers. This is expected to restart investment momentum at the local plant in Spain.

Furthermore, expectations are rising for securing new orders for North America due to the impact of the U.S. Inflation Reduction Act (IRA). Materials classified as battery components must exclude overseas risk groups from the value chain by 2024. If Chinese-made copper foil is phased out of the market, Lotte Energy Materials, which produces mainly in Korea and Malaysia, is expected to benefit indirectly.

Researcher Jeong Yong-jin said, "Demand weakness is expected to continue until the second quarter of this year, making a strong short-term stock price rebound difficult. However, looking at the long-term investment plans expected to be announced in the second half, it is anticipated that a high market share in advanced countries such as the U.S. and Europe will be confirmed."

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