An analysis showed that Lotte Chemical, whose stock price has been falling due to disappointing sales in the third and fourth quarters, has sufficient upward momentum.
Although its performance was below expectations, it is undervalued and is likely to rise. According to the Korea Exchange on the 21st, Lotte Chemical fell a total of 4.17% for four trading days from the 16th to the 19th. The stock price, which was 228,000 won earlier this month, recently fell to 209,500 won.
This is analyzed as a disappointing sale for the third and fourth quarter results. Lotte Chemical recorded sales of 4.4419 trillion won and operating profit of 288.3 billion won in the third quarter.
Operating profit increased 48.8% year-on-year, but it decreased 51.5% compared to the previous quarter. It posted an earnings shock of 36% below the consensus (KRW 446.3 billion) due to cost burden stemming from rising oil and naphtha prices and weak forward demand stemming from the reproliferation of COVID-19 in Southeast Asia.
In particular, as the petrochemical industry worsens, concerns are growing over the oversupply of polyethylene and ethylene glycol, Lotte Chemical's flagship products.
Heungkuk Securities evaluated Lotte Chemical that all business sectors except LC USA were sluggish. There has been a series of analysis of downward revision of target stock prices since the announcement of earnings in the third and fourth quarters.
Heungkuk Securities said, "Although we maintain our buying opinion, we will lower the target price to 310,000 won," but added, "Even considering that the sluggish market is expected to continue, the leading PBR (Stock Price Net Asset Ratio) for the next 12 months is clearly undervalued at 0.48 times based on the current stock price.".
"We need to pay attention to our strategy to expand our business portfolio to new eco-friendly businesses such as green hydrogen business, EV separator materials and chemical recycling PET," Heungkuk Securities said. "It will serve as a positive factor in valuation from a mid- to long-term perspective.".
Reporter Lee Dong-hoon usinvestmentidea2020@gmail.com
