Lotte Chemical Pakistan Limited (LOTCHEM)

Research Team

Table of Contents

The company posted PAT of PKR1.9bn (EPS: PKR1.31/sh) during 3QCY23, portraying a decline of 27% YoY, compared to PKR2.7bn (EPS: PKR1.79/sh) in SPLY.

Topline of the company reached at PKR23.6bn, marking a decline of 20% YoY in 3QCY23. However, the revenue increased by 44% QoQ primarily due to the resumption of plant operations in 3Q following a closure in 2Q due to raw material shortages. The YoY decline is due to reduced PTA
sales volume stemming from weak demand in the polyester industry.

Domestic sales volume dropped by 35% YoY to 82,427 MT. The decline was attributed to decreased demand and the prior quarter’s increased PTA imports by downstream entities. Similarly, production volume also witnessed a drop of 17% YoY to 105,395 MT, derived by adjusting the plant
operating rate to align with sales.

During the quarter, Crude Oil (WTI) prices experienced a significant surge driven by extended OPEC+ production cuts. The average price for the quarter reached USD81.84 per barrel, reflecting a notable 10.6% increase compared to the previous quarter.

The Paraxylene (PX) market followed an upward trend in 3QCY23, followed by the increased Crude Oil prices. The market was characterized by robust demand in the downstream PTA sector and a constrained prompt supply. Reflecting this trend, the average PX price for the quarter rose to USD1,072.41/MT, indicating a 4% increase from the preceding quarter.

Additionally, the PX-Naphtha spread averaged USD426/MT. PTA prices aligned with the PX market, benefiting from high operating rates in China. Despite robust operations, the PTAPX spread remained below breakeven levels. The average PTA price for the quarter was USD796.17/MT.

The total local demand for PTA is around 697K MT, while the peak demand stands at 730K MT, respectively. The management highlighted that the recent substantial rise in gas prices poses a challenge for the company, as it directly affects the company’s’ bottom-line.

Moving Forward, the managements expects that, crude Oil (WTI) prices expected to rise in Q4 due to a continuing supply deficit from OPEC+ and Russian export restrictions, alongside changing consumer spending preferences.

Whereas, International Paraxylene (PX) prices are also anticipated to increase next quarter supported by Crude Oil prices, but potential limited upside due to a seasonal pause in downstream PTA production.

Domestic Polyester market likely to face challenges due to macro-economic issues, lower seasonal demand, high inflation, and difficulties in the export market.

Important Disclosures
Disclaimer: This report has been prepared by Chase Securities Pakistan (Private) Limited and is provided for information purposes only. Under no circumstances, this is to be used or considered as an offer to sell or solicitation or any offer to buy. While reasonable care has been taken to ensure that the information contained in this report is not untrue or misleading at the time of its publication, Chase Securities makes no representation as to its accuracy or completeness and it should not be relied upon as such. From time to time, Chase Securities and/or any of its officers or directors may, as permitted by applicable laws, have a position, or otherwise be interested in any transaction, in any securities directly or indirectly subject of this report Chase Securities as a firm may have business relationships, including investment banking relationships with the companies referred to in this report This report is provided only for the information of professional advisers who are expected to make their own investment decisions without undue reliance on this report and Chase Securities accepts no responsibility whatsoever for any direct or indirect
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