IBK Securities said on the 19th that LOTTE Chemical has secured feedstock flexibility by allowing liquefied natural gas (LNG) to account for up to 50% at the new naphtha cracking center (NCC) in Indonesia. It also noted that restructuring to integrate and reorganize petrochemical facilities within the Daesan industrial complex is expected to cut expenses.
At the same time, it maintained a buy investment opinion and a target price of 107,000 won. The previous trading day's closing price was 80,600 won.
IBK Securities projected that when LOTTE Chemical produces 1 million tons of ethylene, it would need about 3.2 million tons of naphtha if using 100% naphtha, but that feedstock would decrease by roughly 600,000 tons when mixing naphtha and LPG at 50%.
Lee Dong-uk, an analyst at IBK Securities, said, "Because it is about $100 cheaper per ton than naphtha, in theory the annual expense savings could be up to about 700 billion won," adding, "It can realize the most competitive ethylene production cost."
He further estimated, "As the share of LPG increases, byproduct butadiene output could decrease by 50,000–60,000 tons a year, but at the same time, C3 tail (propane) recovery would additionally increase by 200,000–220,000 tons a year, generating additional revenue."
It also pointed out that the company is reviewing a business restructuring plan to integrate and reorganize petrochemical facilities within the Daesan industrial complex with HD Hyundai Chemical.
The analyst explained, "The integrated entity's ethylene production capacity would be reduced by about 31%, and total production capacity by about 25%, which would meet the government's facility reduction guidelines."
He added, "Initially, temporary expenses will arise from environmental impact assessments, waste disposal, safety measures, and the redeployment of downstream facilities (which use ethylene and propylene to produce various petrochemical products), but in the mid to long term the cost structure is likely to improve."