[Market Focus] Lotte Chemical Rallies on Expectations of Product Price Hikes Due to Hormuz Strait Closure

Lotte Chemical is showing strong gains of over 8%, marking its second consecutive day of increases.

As of 9:30 a.m. on March 18, Lotte Chemical is trading at 76,400 won, up 6,200 won (8.83%) from the previous day.

The rise in product prices due to the closure of the Hormuz Strait, and securities firms' outlook that first-quarter results will exceed market expectations, appear to be driving the stock higher.

On this day, KB Securities raised its target price for Lotte Chemical from 80,000 won to 90,000 won. Jeon Wooje, an analyst at KB Securities, explained, "While it is inevitable that the operating rate of naphtha cracking centers (NCC) will be adjusted due to the closure of the Hormuz Strait, we see this as an opportunity." He continued, "With a shortage in petrochemical supply, both costs and selling prices are soaring, and a premium is being attached to products that have become scarce globally, making a turnaround into profitability possible." KB Securities revised its estimate for Lotte Chemical's operating profit this year from the previous -288 billion won to 101.6 billion won, based on a scenario in which the blockade is gradually lifted from the middle of the year.

Lotte Chemical's first-quarter results this year are also expected to exceed market forecasts. Analyst Jeon stated, "Lotte Chemical is expected to report an operating loss of 113.8 billion won in the first quarter this year, which surpasses the consensus (the average of securities firms' forecasts) of 224.9 billion won," adding, "This is attributable to the rise in costs and selling prices in March due to the closure of the Hormuz Strait."

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