[Click eStock] Lotte Chemical, Stock Price Revaluation Expected... Target Price Raised

Meritz Securities maintained its "Buy" rating on Lotte Chemical on the 21st and raised the target price from 190,500 KRW to 220,000 KRW. The previous trading day's closing price was 185,000 KRW. Noh Woo-ho, a researcher at Meritz Securities, stated, "With the first results expected from Lotte Precision and Lotte Energy Materials, newly included as consolidated subsidiaries, a diversification of the profit structure is anticipated," adding, "The 2023 stock price revaluation will depend on the business outcomes of the core and growth sectors."

Since 2020, domestic petrochemical companies have declared a major business structure transformation towards sustainability, specifically Net Zero, focusing on the development of eco-friendly chemical materials. Major companies are implementing various restructuring strategies such as petrochemical equity sales and business withdrawals to shift their business portfolios and secure investment resources. In particular, amid the medium- to long-term oversupply trend of ethylene in the Asian region, LG Chem has revealed restructuring strategies including the sale of its Yeosu Plant 1 and Chinese factories, which is expected to somewhat benefit existing domestic petrochemical companies through reduced supply.

Unlike peer companies that declared a major business transformation, Lotte Chemical’s strength in petrochemicals lies in its use of low-cost raw materials (from the U.S.) and securing high-growth demand base markets, and it plans to maintain its petrochemical business going forward. The 'Vision 2030' announced two years ago aims to achieve 50 trillion KRW in sales and a 15% profit margin by 2030 in areas such as hydrogen, mobility, battery materials, and eco-friendly materials.

Researcher Noh noted, "First results are expected from Lotte Energy Materials (formerly Iljin Materials) and Lotte Precision Chemical, which have been consolidated since this year," adding, "With the inclusion of their consolidated profits, Lotte Chemical is expected to reduce the typical profit volatility of petrochemicals and achieve a diversified profit structure." He further predicted, "When new business outcomes become visible, led by Lotte Energy Materials, currently the second-largest copper foil operator in Korea, the company is likely to overcome the limitations of the cyclical industry multiple discount and enter a revaluation phase."

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