[Click eStock] "Lotte Jeongmil Hwachem, Expecting Fundamental Recovery Next Year... Target Price Down"

Target Price Revised Downward by 10% Compared to Previous Level

Shinhan Investment Corp. on the 6th lowered the target price for Lotte Fine Chemical from 60,000 KRW to 54,000 KRW, anticipating a recovery in fundamentals starting next year. The investment rating was maintained at 'Buy.'

Lee Jin-myung, a researcher at Shinhan Investment Corp., explained, "The target price was lowered by 10% reflecting changes in the Price-to-Book Ratio (PBR) due to increased macroeconomic uncertainties," adding, "Since the group's liquidity risk became prominent, the PBR has fallen to an all-time low." He continued, "However, considering the stable financial structure and low likelihood of additional financial support, the possibility of further decline is limited. Rather, a stock price revaluation is expected due to improved chemical segment performance and high profitability in green materials."

Lotte Fine Chemical's fourth-quarter earnings this year are expected to exceed market expectations. The researcher said, "Operating profit in Q4 is projected to increase by 139% from the previous quarter to 24.6 billion KRW, surpassing the consensus estimate of 21.7 billion KRW. The chemical segment is expected to return to profitability, and the green materials segment is forecasted to achieve a 3% increase in sales to 154.5 billion KRW and a 20% rise in operating profit to 21 billion KRW."

Following solid Q4 performance, a recovery in fundamentals is anticipated next year. The researcher forecasted, "After recording strong results in Q4, fundamentals will recover next year, and profit momentum will gradually expand. The chemical segment is expected to see quarterly profit growth due to reduced losses from the recovery of the Epichlorohydrin (ECH) spread and sustained high profitability of caustic soda. The green materials segment is expected to experience growth in both scale and profits due to expansion in high value-added food and pharmaceutical materials and recovery in industrial demand."