[Click eStock] "Lotte Chemical, Target Price Down Due to Delayed Recovery in Petrochemical Profitability"

Yuanta Securities lowered the target price of Lotte Chemical to 220,000 KRW on the 11th. This is based on the outlook that the recovery of the petrochemical industry will be delayed, postponing the timing of turning profitable.

Lotte Chemical Daesan Plant

Yuanta Securities forecasted that Lotte Chemical will record sales of 5.5 trillion KRW and an operating loss of 134.1 billion KRW in the third quarter. They expected the quarterly deficit to widen compared to the second quarter (-111.2 billion KRW). By segment, the basic materials sector is projected to incur an operating loss of 227 billion KRW, advanced materials 68.5 billion KRW, and the precision chemicals and battery materials division 24.4 billion KRW.

Hwang Kyu-won, an analyst at Yuanta Securities, analyzed, "The cost ratio increased as high-priced raw material naphtha was used, and rising transportation costs and the KRW-USD exchange rate acted as pressure factors, worsening profitability compared to the second quarter."

He also stated, "Due to oversupply of copper foil this year, goodwill of 1.7 trillion KRW recognized from the high-priced acquisition of Lotte Energy Materials is expected to be impaired," adding, "Goodwill impairment will be a cause of profitability deterioration in the fourth quarter."

However, he noted, "As oil prices decline, there is a possibility that the spread of petrochemical products will recover," and added, "In September, the ethylene spread recovered to a breakeven point of around 230 dollars."

He further commented, "Although partial recovery signals are appearing, such as the recovery of export volumes of petrochemical products to China, due to high oil prices and rising transportation costs, the timing for Lotte Chemical to turn profitable inevitably has to be pushed back to 2025."