[Click eStock] "Lotte Chemical, Expected Benefit from Oil Price Decline"

Yuanta Securities analyzed that if the Ukraine war ends and oil prices fall, Lotte Chemical could turn its operating profit positive this year. While maintaining a 'Buy' rating, the target price was slightly lowered from 220,000 KRW to 200,000 KRW to reflect the reduction in the equity ratio of investment assets.

Lotte Chemical's projected performance for 2025 includes sales of 19.4 trillion KRW and an operating profit of 221.2 billion KRW. This implies a return to operating profit after four years. Hwang Gyu-won, a researcher at Yuanta Securities, explained, "With the improvement in the global ethylene supply and demand balance, expectations for benefits from falling oil prices are rising," adding, "In particular, the deficit is expected to significantly decrease from the first quarter of 2025."

As the global net increase in ethylene production capacity enters a declining trend and expectations for the end of the Ukraine war spread, there are observations that the basic chemicals sector is recovering in the first quarter of this year. Researcher Hwang stated, "Expectations for the end of the Ukraine war could lower the cost of naphtha, a raw material for petrochemicals," and added, "Direct import from Vladivostok, Russia to the East Sea is now possible, which is expected to reduce import transportation costs."

As of the end of last year, the net borrowings, which approached 7 trillion KRW, have been reduced by about 920 billion KRW this year, indicating visible efforts to reduce financial burdens. However, during the repayment process, the equity ratio of sold investment assets was reduced (Line Project from 100% to 51%, Lotte Energy Materials from 53% to 47%), which led to a slight downward adjustment of the appropriate stock price, according to researcher Hwang.