[Click eStock] "Lotte Energy Materials, 3Q Performance Improvement Noted Despite Weak First Half"

Daishin Securities maintained a buy rating and a target price of 90,000 KRW for Lotte Energy Materials on the 6th, emphasizing the need to pay attention to improved performance starting from the third quarter of this year.

Jeon Chang-hyun, a researcher at Daishin Securities, stated, "The stock price declined due to poor performance forecasts caused by global industry downturn from oversupply of newly expanded copper foil from China in the first half and the impact of domestic electricity cost increases," adding, "However, it is necessary to focus on the improved performance from the third quarter."

He continued, "The global copper foil oversupply phase is expected to gradually ease in the second half, leading to a recovery in demand from major customers," and explained, "The expansion of high-profitability Malaysian production capacity (CAPA) operation is also expected to positively impact the improvement of the profitability mix."

Lotte Energy Materials' second-quarter sales are expected to decrease by 9% year-on-year to 171.8 billion KRW, and operating profit is forecasted to drop by 56% to 11.2 billion KRW, which is 16% below the consensus estimate based on operating profit.

Researcher Jeon said, "The copper foil price is expected to rise compared to the previous quarter, reflecting the exchange rate increase effect and the lagged impact of rising copper prices," and added, "Demand for copper foil purchases from downstream battery customers is expected to remain sluggish, so the increase in sales volume compared to the previous quarter is estimated to be limited."

Profitability is expected to continue to weaken for the domestic corporation due to additional increases in domestic electricity costs.

Third-quarter sales are projected to increase by 10% from the previous quarter to 188.6 billion KRW, and operating profit is expected to rise by 49% to 16.6 billion KRW. The operating rate of the Malaysian corporation, which procures 100% of its power from low-cost hydropower, is rising, and both sales and profits are expected to improve compared to the previous quarter due to increased sales volume.

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