[Click eStock] "Lotte Chemical, Q1 Earnings Improvement Expected... Completing the Green Puzzle"

[Asia Economy Reporter Ji Yeon-jin] SK Securities presented a target price of 77,000 KRW for Lotte Fine Chemical, expecting a recovery in the chemical division due to price improvements in epichlorohydrin (ECH), a raw material for plastics, and a turnaround in caustic soda prices.

Lotte Fine Chemical's sales and operating profit for the first quarter of this year were estimated at 335.6 billion KRW and 33.1 billion KRW, respectively. This is expected to slightly exceed the existing market forecasts (sales of 306.6 billion KRW, operating profit of 30.1 billion KRW).

The chlorine system shows an upward trend in prices for both ECH and caustic soda. The price of ECH rose from an average of $1,473.8 per ton in the fourth quarter of last year to $1,708.8 per ton in the first quarter of this year. Caustic soda, which was sluggish at the beginning of the year, rebounded due to the cold wave in the United States. It is also analyzed that ammonia sales are expected to improve with increased cargo volume, and cellulose is projected to show solid performance centered on Hecellose once the exchange rate impact is removed in the fourth quarter.

Green material cellulose is expected to expand by 25% from 64,000 tons in the first half of this year to 80,000 tons in the second half, with expansion planned in the first half. Since it is based on wood pulp, it is also evaluated to align with the eco-friendly trend. Entry into new markets such as pharmaceuticals and alternative meat is anticipated. Analyst Han-saem Park of SK Securities said, "The contribution of high-margin profits is expected to gradually expand," adding, "The ammonia sector, where Lotte Fine Chemical holds a 50% market share, can fit the puzzle piece in the direction of green hydrogen, representing an opportunity for business expansion."