[Edaily Reporter kyoungeun kim ] iM Securities has lowered its target price for LOTTE CHEMICAL CORPORATION(011170)from 130,000 won to 100,000 won, reflecting the recent deterioration in investor sentiment across the stock market and the chemical sector as a whole, despite slightly raising its earnings estimates. However, the firm maintained its “Buy” rating. This decision is based on the assessment that the company could return to an annual profit trend starting next year once the effects of restructuring at its Daesan and Yeosu plants begin to materialize.
Jeon Yu-jin, an analyst at iM Securities, stated in a report on the 10th, “Although we slightly raised our earnings estimates, we adjusted the target price by applying a 20% discount to the previous multiple to reflect the recent deterioration in market and sector-wide sentiment,” adding “The target price was calculated by applying a price-to-book ratio (PBR) of 0.35 to the 2026 book value per share (BPS) of 288,595 won,” she explained.

However, the firm noted, “As the current stock price stands at a PBR of 0.21x—a historically low level indicating absolute undervaluation—we maintain our ‘Buy’ recommendation.”

LOTTE CHEMICAL CORPORATION’s second-quarter operating profit was 110.1 billion won, falling 15% short of the market consensus of 129.7 billion won. This was due to the reflection of a 200 billion won inventory valuation loss (100 billion won each for Basic Materials and Titan) resulting from the decline in oil and petrochemical product prices in June. Research Analyst Jeon analyzed, “Excluding this factor, the actual operating profit exceeded 300 billion won due to a positive lag effect.”

The most notable segments this quarter were Advanced Materials and LCUSA. Operating profit for Advanced Materials reached 132.5 billion won (up 115% from the previous quarter), marking an all-time high since the acquisition from Samsung was completed in 2016. Researcher Jeon stated, “Even accounting for the lag effect, this represents a notable improvement compared to domestic competitors,” adding, “We estimate that the company was able to pass on rising raw material costs more flexibly because the proportion of customized specialty products for each client reached 80–90%.” He continued, “Unlike competitors, who are expected to remain at the break-even point (BEP) due to the reverse lag effect in the third quarter, the company is projected to maintain profits of around 60 billion won (operating profit margin [OPM] of 6%).”

Researcher Jeon predicted that the chronic supply glut would gradually ease due to reduced production and delays in new capacity expansions among Asian and European companies, resulting from damage to Middle Eastern facilities and disruptions in naphtha procurement following the U.S.-Iran conflict. However, he noted that production disruptions are normalizing more quickly than initially expected, driven by increased utilization rates at U.S. ethane crackers (ECC) and China’s coal- and methanol-based olefin production facilities (CTO/MTO), as well as the expanded use of liquefied petroleum gas (LPG) as a substitute feedstock by Asian naphtha crackers (NCC).

Looking ahead to 2027, the firm projected that profitability would improve slightly as the full impact of the Daesan restructuring is reflected, and that profitability could improve further if the Yeosu restructuring is completed within the year. Researcher Jeon emphasized, “While a decline in revenue is inevitable due to the exclusion of the Yeosu and Daesan consolidated results, what is more significant is that the company can enter a trend of annual profitability by reducing large-scale losses and leveraging profits from advanced materials, LCUSA, and fine chemicals.”