[Click eStock] "Lotte Chemical, Deficit Expected in Q4... Earnings Bottom Has Passed"

[Asia Economy Reporter Hwang Yoon-joo] Shinhan Investment Corp. evaluated on the 9th that it is difficult to expect a meaningful rebound for Lotte Chemical until the end of the year. The investment opinion 'Buy' and the target price of 210,000 KRW were maintained.

Researcher Lee Jin-myung of Shinhan Investment Corp. stated, "I believe the industry conditions and performance hit the bottom in the third quarter."

Lotte Chemical recorded an earnings shock due to the worst market conditions ever in the third quarter. The operating loss in the third quarter was 423.9 billion KRW, expanding the deficit compared to the previous quarter and falling short of consensus.

The deficit is expected to continue in the fourth quarter as well. However, the scale of the deficit is expected to shrink. The researcher forecasted, "An operating loss of 119.7 billion KRW is expected in the fourth quarter," adding, "This includes the performance of Lotte Fine Chemical (86.5 billion KRW)."

He explained, "Although the negative lagging effect of olefins and Titan has disappeared, the deficit trend will continue due to sluggish downstream demand and ongoing supply burdens. However, spreads are expected to slightly recover due to lower naphtha prices, but a significant improvement in performance is unlikely."

Aromatics are expected to see an expanded deficit due to the off-season effect, and advanced materials are expected to increase profits due to cost reductions in raw materials and freight. LC USA is expected to continue its deficit due to weak MEG prices despite the stabilization of ethane prices following the decline in U.S. gas prices.

The researcher analyzed, "Concerns related to market conditions have been reflected in the stock price in advance. With the core business passing through the worst phase, growth expectations are gradually expanding through acquisitions such as Iljin Materials and investments in new businesses (secondary battery materials, hydrogen, etc.)."