By Ying Xian Wong
Shares of Lotte Chemical Titan Holding Bhd. fell Thursday after the company posted a fourth-quarter net loss due to weaker demand.
The chemical company’s shares dropped to 8.2% in early trading to 1.44 ringgit, putting it 29% lower over the last 12 months.
Lotte Chemical Titan late Tuesday posted a fourth-quarter net loss of MYR317.22 million ($74.4 million), compared with net profit of MYR168.89 million a year earlier. Its quarterly revenue declined 23% on year to MYR2.07 billion, mainly due to lower average product selling prices and sales volume. The Kuala Lumpur stock market was shut on Wednesday.
For 2022, Lotte Chemical registered a net loss of MYR714.64 million after a net profit of MYR1.04 billion in 2021.
The company also said its outlook remained challenging in near future due to a volatile external environment.
Maybank Investment Bank downgraded Lotte Chemical’s stock rating to sell from hold and cut its target price to MYR1.33 from MYR1.19, highlighting its “worsening product spread, limited near-term catalysts and lack of dividend yield attraction in 2023 to 2025”.
Although management has guided for higher plant utilization at 80%-85%, Lotte’s product spreads are unlikely to improve in first half this year and it is likely to post another loss for 2023 as more regional olefin capacity comes online this year, analyst Anand Pathmakanthan said in a note.
Given that product spreads could stay stagnant, weighed by rising naphtha costs and a slower reopening of China’s economy, Lotte’s near-term earnings outlook is uncertain, TA Securities analyst Kylie Chan Sze Zan said in a note.
She cut Lotte’s target price to MYR0.93 from MYR1.27 while maintaining a sell rating as she doesn’t rule out the possibility of “price premium erosion and increased competition following the upcoming launch of Petronas Chemicals’ new polymer plant in Pengerang.”
Write to Ying Xian Wong at [email protected]