[Click eStock] "Lotte Chemical, Ongoing Operating Losses and Uncertainty... Target Price Lowered"

Target Price Lowered from 130,000 Won to 110,000 Won
Operating Losses Expected to Continue for Lotte Chemical

On September 1, Meritz Securities announced that it expects Lotte Chemical to continue posting operating losses and lowered its target price from 130,000 won to 110,000 won. The investment rating was maintained as 'Buy'.

No Wooho, a researcher at Meritz Securities, estimated, "Lotte Chemical's annual operating loss for this year will reach 573.7 billion won," adding, "With all business divisions except for its subsidiary Lotte Fine Chemical showing poor operating performance, Lotte Chemical's stock price has also broken out of its typical trading band due to continued operating losses." He continued, "However, the current stock price discount already reflects many industry and company-specific negative factors, so the stock price is expected to normalize with the emergence of positive catalysts in the future."

Last month, the government announced a restructuring plan for the petrochemical industry, but it is analyzed that uncertainty remains in the domestic petrochemical sector when excluding the medium- to long-term effects of policy implementation. Researcher No commented, "Since August, the slight decline in oil prices and the domestic petrochemical industry's production cuts could reduce the naphtha premium, which is positive." However, he added, "Nevertheless, the price gap between naphtha and ethane continues to widen, so the negative cost structure for naphtha-based petrochemical facilities persists."

Uncertainty regarding U.S. tariffs also remains. No noted, "Tariff negotiations between the United States and China are still ongoing," and explained, "Considering the weak demand trends in the past, such as the wait-and-see attitude toward purchasing intermediate petrochemical products during the first Trump administration's U.S.-China trade conflict, the demand stagnation induced by tariffs may also continue."

There is also a possibility that China's government may include the petrochemical sector in its industry restructuring for overcapacity in October. No stated, "There is talk that older facilities that do not meet government operating standards may be phased out," but added, "Nevertheless, investment in China's petrochemical facilities is expected to continue through 2028."

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