[Featured Stock] Lotte Chemical Falls 4% Amid Profitability Slump

[Asia Economy Reporter Lee Seon-ae] On the 8th, Lotte Chemical's stock price showed weakness. It is interpreted to be influenced by the news of securities firms lowering their target prices due to deteriorating profitability.

As of 9:25 AM on the day, the stock price was trading at 211,500 KRW, down 3.64% compared to the previous trading day. It fell to as low as 210,500 KRW in the early session. Hana Financial Investment announced that it is lowering Lotte Chemical's target price to 360,000 KRW. This reflects a 12% downward revision from the 2022 estimate.

Lotte Chemical's operating profit for the third quarter was 288.3 billion KRW, a 49% increase compared to the same period last year, but it was evaluated to have fallen significantly short of the market consensus (431.7 billion KRW). The major factors were cost burdens due to rising raw material prices and sluggish demand caused by the resurgence of COVID-19 in Southeast Asia, which led to decreased margins in all business divisions except the US subsidiary LC USA.

Yoon Jae-sung, a researcher at Hana Financial Investment, forecasted, "Lotte Chemical is expected to record an operating profit of 363.6 billion KRW in the fourth quarter, a 71% increase compared to the same period last year, due to stabilization of raw material input prices and easing of COVID-19." He added, "The current price-to-book ratio (PBR) is around 0.48, and the stock price does not reflect any of the aggressive moves such as large-scale investments in electric vehicle (EV) separator materials and chemical recycling PET production," emphasizing that the investment opinion remains a buy.