DB Securities projected on the 2nd that LOTTE Fine Chemical's performance in the second quarter of this year would hit a low point but is expected to resume growth in green materials due to the expansion of edible materials by the end of the year. It raised its target stock price from the previous 47,000 won to 57,000 won, an increase of 21.3%, while maintaining its investment opinion of 'buy.' The closing price of LOTTE Fine Chemical on the previous trading day was 39,950 won.
DB Securities anticipated that LOTTE Fine Chemical's operating profit for the second quarter of this year would be 8.5 billion won, a decrease of 50.4% compared to the previous year. This figure aligns with the brokerage's forecast of 9.2 billion won.
Han Seung-jae, a researcher at DB Securities, noted, "Due to the reflection of large maintenance costs for the first time in two years and the decline in exchange rates, both chemicals and green materials are expected to experience reduced earnings," adding, "Despite the rebound in epoxy resin raw material (ECH) spreads, profits are likely to decline due to maintenance effects and falling ammonia prices, so the level of profit will not be high, at only 1.9 billion won."
The steady rebound of the ECH spread is positive. With the U.S. and Europe announcing favorable anti-dumping and countervailing tariffs on Korean epoxies, exports of epoxies to the U.S. and Europe, which have relatively high prices, have increased. One researcher stated, "Expectations for expanded exports due to the rising operating rates of U.S. and European epoxy companies are also growing." Furthermore, the strong performance of glycerin has led to a rebound in the price of Chinese ECH, which uses glycerin as a raw material.
LOTTE Fine Chemical's ECH spread, using propylene as a raw material, averaged $891 per ton in June, approaching the theoretical breakeven point (BEP). One researcher emphasized, "This is a point where expectations for the turnaround of ECH, which was estimated to have the worst deficit last year at minus 87.6 billion won, are growing."
LOTTE Fine Chemical achieved the number one global market share (M/S) with an expansion of 6,000 tons in edible materials by the end of the year. DB Securities projected that sales would increase, particularly in North America, leading to a resumption of growth in green materials' performance after 2026.
One researcher stated, "A rebound centered on chemicals is expected in the second half of the year," and added, "Since we are passing the quarterly earnings low point, I believe it is the right time for 'increased weighting.'"