Lotte Titan’s 3Q23 results are tentatively scheduled for release on 26 Oct 2023 and Maybank IB says it expects core loss for the quarter to range between -MYR150m200m, barring any unforeseen swings in cost/expenses. The house also adds that based on findings, it estimates polymer prices to be lower QoQ by -3% to -5% in 3Q23 but input naphtha prices (booking in a 6-week lag) were down substantially by -17% throughout the quarter. This essentially means that the group should register significant cost reductions despite expectations of lower ASPs in 3Q23.
The core loss estimate indicates that 9M23’s cumulative losses would range from -MYR651m to -MYR701m, making up
about 65-70% of our revised FY23E full-year forecast. …but losses are expected to expand again in 4Q23 As at the point of writing, accounting for a 6-week lag, naphtha prices (based on the Naphtha Japan Index) have risen 14% from mid-July till midOct 2023. On the flipside, polymer prices have been relatively flat which effectively caps the upside to ASPs throughout the quarter. With the expectations of heightened costs coupled with weak ASPs in 4Q23, Maybank thinks that the group’s net losses will expand again in 4Q23, underscoring the fact that the group is not yet out of the woods, in its view.
High oil price environment bane
Based on the in-house Brent Crude Oil price ASP forecast of USD85-80 for 2023-2024E, Maybank thinks that the operating environment will still be tough for the chemical giant as input naphtha prices will continue to remain elevated. With that, the house is of the view that Lotte Titan will still be loss-making in FY24E. It maintain a SELL call on the stock.
