“For the first time in five years...” Lotte Chemical swings from a 943.1 billion won loss to a 535.3 billion won profit; restructuring benefits in focus

[Financial News]  Lotte Chemical Corporation is expected to return to operating profitability in 2027, for the first time in five years, through restructuring its commodity petrochemical facilities at home and abroad. Analysts say the recovery in the company’s value will accelerate as oversupply from China eases and loss-making businesses are scaled back.
On the 3rd, Hwang Kyu-won, an analyst at Yuanta Securities, assigned Lotte Chemical Corporation a “Buy” rating and set a target price of 134,000 won. He cited restructuring of its domestic and overseas naphtha cracking facilities (NCCs), an improving supply-demand balance for ethylene in Asia, and a price-to-book ratio (PBR) near a historic low as key investment rationales.
Lotte Chemical Corporation was once the country’s largest NCC operator, with annual ethylene production capacity of 4.54 million tonnes across its domestic and overseas operations. However, as large-scale capacity expansions in China eroded the profitability of commodity petrochemical products, the company has been accelerating its business restructuring since last year.
According to Yuanta Securities, Lotte Chemical Corporation’s restructuring is proceeding along three tracks. After converting its 1.1-million-tonne Daesan NCC facility into a 50:50 joint venture with Hyundai Chemical last September, the company plans to convert its 1.23-million-tonne Yeosu NCC facility into a joint venture with Yeochun NCC by the end of the first quarter next year. Sales of all or part of the stakes in Malaysia’s 800,000-tonne Titan NCC and Indonesia’s 1-million-tonne Line Project are also expected to be pursued.
Industry conditions are also expected to enter a recovery phase. Net additions to ethylene capacity in Asia are forecast to fall from 4.17 million tonnes this year to 1.01 million tonnes next year.
Hwang said, “Supply pressures will ease as growth in new capacity slows and closures of aging facilities in Korea, China and Japan gather pace.” 
Lotte Chemical Corporation’s operating results are therefore estimated to improve from a loss of 943.1 billion won last year to a loss of 177.2 billion won this year, before turning to a profit of 181.1 billion won next year. Operating profit is expected to grow to 535.3 billion won in 2028.
The stock’s undervaluation was also cited as a factor enhancing its investment appeal. Lotte Chemical Corporation’s PBR is 0.17 times, well below its historical average of 1.1 times. Hwang viewed the launch of the integrated Yeosu entity in 2027, when the effects of restructuring are reflected in earnings, as a major catalyst for a revaluation of the company.
Hwang said, “In 2027, the completion of restructuring, a recovery in Asia’s petrochemical industry, and a move out of ultra-low PBR territory will coincide,” highlighting the possibility of a simultaneous recovery in earnings and corporate value.


[email protected] Kim Gyeong-a Reporter