IBK Securities on the 29th said the effect of the 10,000-ton (t) TMAC plant expansion, a raw material for semiconductor developer, will become visible starting this year after Lotte Fine Chemical completed the expansion. It maintained a Buy rating and raised the target price 36.5% to 86,000 won from 63,000 won. Lotte Fine Chemical closed at 64,500 won the previous day.
IBK Securities assessed that Handuk Chemical's expansion of semiconductor developer (TMAH) capacity in the semiconductor materials business is directly linked to greater demand for Lotte Fine Chemical's highly profitable TMAC business.
Lotte Fine Chemical invested about 16 billion won last year to expand a 10,000 t plant for TMAC, a key raw material of semiconductor developer. TMAC is converted into TMAH at affiliate Handuk Chemical and then supplied to major domestic semiconductor customers such as Samsung Electronics and SK hynix.
TMAH is a high-purity material used as a photoresist developer in semiconductor and LCD/OLED substrate manufacturing processes. Physical proximity to customers' plants, quality stability, delivery responsiveness, and emergency supply capability serve as key competitive strengths.
Lee Dong-uk, an analyst at IBK Securities, said, "Handuk Chemical's plan to invest about 130 billion won in Pyeongtaek to newly expand TMAH is not a simple capacity increase but a strategic decision to build a supply chain adjacent to the semiconductor clusters in the Seoul metropolitan area and the Chungcheong region," adding, "The new Pyeongtaek plant will not only enhance Handuk Chemical's customer responsiveness but also strengthen the long-term demand visibility of Lotte Fine Chemical's TMAC, its raw material supplier."
IBK Securities viewed the 10,000-ton TMAC plant expansion as a factor that will prompt a reassessment of Lotte Fine Chemical's business portfolio.
The analyst noted, "If existing flagship products such as ECH, an epoxy resin raw material, and ammonia are commodity chemicals sensitive to economic and price cycles, TMAC is a core intermediate in the semiconductor materials value chain where customer certification and high-purity quality control act as entry barriers," and added, "If Handuk Chemical's Pyeongtaek TMAH facilities begin full operation, Lotte Fine Chemical could see higher utilization of its expanded TMAC capacity along with potential for additional TMAC investment going forward."
This year, Lotte Fine Chemical's operating profit in the first quarter was 32.7 billion won, up 69.4% from the previous quarter.
The analyst said, "First-quarter operating profit exceeded the recently heightened market expectation (28.1 billion won)," and added, "We raise the target price to 86,000 won, considering earnings improvement, stronger semiconductor materials, and the sector's overwhelmingly solid financial structure."