[Click e-Stock] "Lotte Chemical Lacks Fundamentals to Support Share Price Rise"

On November 13, Samsung Securities raised its target price for Lotte Chemical to 90,000 won. However, it maintained a neutral investment rating, citing a lack of fundamental improvement to support the higher target price.

Lotte Chemical posted an operating loss of 132.6 billion won in the third quarter, slightly beating market expectations. The basic materials segment (olefins, aromatics, LC Titan, and LC USA) recorded an operating loss of 122.5 billion won due to scheduled maintenance at the Daesan plant and operational disruptions at LC USA.

The advanced materials segment posted an operating profit of 57.5 billion won, maintaining solid profitability through sales of high value-added products despite a decline in demand from downstream industries. Lotte Energy Materials continued to post an operating loss of 34.3 billion won, affected by inventory adjustments at client companies.

Cho Hyunryul, a researcher at Samsung Securities, stated, "We expect an operating loss of 207.9 billion won in the fourth quarter, which will fall short of consensus." He explained, "The basic materials segment is expected to see its operating loss widen to 180.9 billion won, mainly due to market weakness following the recent introduction of new NCC facilities in China, as well as further losses from the additional operation of the Indonesia plant."

Nevertheless, Cho raised the target price for Lotte Chemical from 71,000 won to 90,000 won, citing improved investor sentiment in recent days.

He added, "We are raising the target price to reflect the recent strength in the Korean stock market and improved investor sentiment toward low PBR stocks. However, we are maintaining a neutral investment rating, as the fundamental factors to support a further share price increase are limited, given the widening operating losses from the new plant in Indonesia and the deepening downturn in the Asian chemical market."

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