Lotte Chemical’s earnings will begin to improve from the first quarter, said NH Investment and Securities on Feb. 14 maintaining a “buy” recommendation and 370,000 won (US$328.89) target price.
It suffered a double whammy in the fourth quarter last year due to a sharp decline in both oil price and demand. Its operating profit in the period has nosedived 86 percent on-year to 101.6 billion won, below market expectations. Due to trade conflicts between the US and China, demand has decreased in the company’s all businesses while oil price drop has led to 170 billion won raw material cost. Opportunity loss cost from maintenance of its naphtha cracking center in Yeosu and a factory in Ulsan is estimated to be 90 billion won, said analyst Hwang Yu-sik.
Its operating profit in the first quarter, however, will soar 358 percent from the previous quarter to 465.1 billion won, he said. The company will enter a high season and overstocks will decline. Rebound in demand is likely to boost its spread and raw material costs will stabilize. As its newly expanded manufacturing facility begins operations and LC Titan’s facility embarks full operations, its earnings will rebound, forecast the analyst.
By Hwang You-mee (firstname.lastname@example.org)