[THE INVESTOR] Lotte Chemical’s products may face a decline in demand due to the trade conflict between the US and China, said KB Investment and Securities on Nov. 2 lowering the target price to 340,000 won (US$301.55) from 420,000 won.
The company’s operating profit in the third quarter has dropped 34.3 percent on-year to 503.6 billion won while revenue increased 6.5 percent to 4.25 trillion won. Shrinking spreads and maintenance costs have dragged down its earnings below market expectations. Spreads of polyethylene, polypropylene and mono ethylene glycol have declined from the previous quarter and price of products has been weakening, said analyst Baek Yeong-chan.
In the fourth quarter its earnings will slide with 3.91 trillion won revenue and 373.3 billion won operating profit. The chemical industry will need time to recover as demand from China remains slow and the market enters a low season. Regardless, Lotte Chemical’s continuing investments for growth is a positive, said the analyst maintaining a “buy” recommendation.
By Hwang You-mee (firstname.lastname@example.org)