DB Securities on the 27th kept a "buy (BUY)" rating and a target price of 60,000 won on Lotte Fine Chemical, saying its materials and supplies procurement remains relatively stable even amid the United States-Iran war. Lotte Fine Chemical's closing price in the previous trading day was 51,600 won.
Han Seung-jae, an analyst at DB Securities, said, "As operating rate adjustments are appearing among domestic NCCs and refiners due to the United States-Iran war, Lotte Fine Chemical is in a relatively favorable situation for materials and supplies procurement."
Han emphasized that Lotte Fine Chemical procures propylene, its key materials and supplies, half each from PDH and NCC. Han said, "Propane supply is relatively better than crude oil or naphtha, so PDH-based propylene supply is stable," adding, "However, if the situation is prolonged, it is necessary to review the possibility of operating rate adjustments after May."
DB Securities forecast Lotte Fine Chemical's operating profit for the first quarter of this year at 24.6 billion won, up 31% from a year earlier. That is similar to the market consensus (25.8 billion won). Han explained, "Margins narrowed in March due to a surge in costs, but from April, list price hikes reflecting higher costs should be possible."
Han also cited changes in China's chemical industry conditions as a positive factor. Han said, "As palm oil and glycerin prices rise, operating rates for China's epoxy chloropropane (ECH) are being adjusted, leading to continued spillover benefits," adding, "After April, structural adjustments following the abolition of China's export VAT rebate on PVC and operating rate cuts due to the war should keep caustic soda relatively strong."
Han added, "Sales volumes of green materials for food and pharmaceuticals, with capacity expansion completed at the end of 2025, are expected to increase toward the second half," and "In 2026, concurrent earnings improvement in the chemical and green materials businesses is anticipated."