[Lotte Chemical] No indicators of business enchancment, regardless of expectations

The creator is an analyst for NH Funding & Securities. He will be reached at yk.choi@nhsec.com — Ed.

Whereas some predict business enchancment pushed by restructuring, the enlargement cycle centered on China is predicted to proceed till 2027. In consequence, oversupply and weak spreads are more likely to persist for a while.

Spreads weakening additional 

Sustaining a Maintain ranking, we elevate our TP on Lotte Chemical by 23.1%, from W65,000 to W80,000, reflecting a rise in our goal a number of from 0.20x to 0.26x to account for share value beneficial properties amongst friends. Nonetheless, by shifting the bottom 12 months for our TP calculation from 2025 to 2026, we revise the utilized BPS down from W314,884 to W312,926, anticipating continued working losses and additional BPS deterioration in 2026. No vital modifications are made to our earnings forecasts.

Whereas some market contributors count on business enchancment pushed by restructuring, there are presently no indicators of restoration, comparable to product value or unfold rebounds, or stock buildup in response to provide reductions. In reality, ethylene-naphtha spreads per ton declined from US$242 in 3Q25 to US$163 as of Nov 11. We count on the enlargement cycle centered on China to proceed till 2027, suggesting that oversupply and weak spreads will persist for a while.

Working loss to broaden in 4Q25 as soon as once more 

Lotte Chemical booked an working lack of W132.6bn (OPM -2.8%), consistent with consensus, supported by the disappearance of the reverse lag results seen in 2Q25 and common repairs totaling W400bn. Amid the absence of seen market enhancements, product spreads declined barely q-q.

For 4Q25, we forecast an working lack of W183.3bn (OPM -4.0%). Working losses are anticipated to deepen on account of deteriorating market circumstances and additional unfold declines.