Is Lotte Chemical Pakistan (LOTCHEM) a good investment for 2025?
Lotte Chemical Pakistan Limited (LOTCHEM) has maintained stable earnings despite industry challenges. The company is set to report a profit after tax (PAT) of PKR 559 million for 4QCY24, translating into an EPS of PKR 0.37. For the full year, PAT is projected at PKR 3,221 million, with an EPS of PKR 2.13.
Investors can also expect a dividend of PKR 1 per share for this quarter, bringing the annual payout to PKR 1.5 per share.
Earnings Performance and Margins
Despite lower PTA sales volumes due to plant maintenance, LOTCHEM has managed to sustain its earnings. The gross margin for 4QCY24 is expected to improve to 7%, up from 2% in 4QCY23.
However, on an annual basis, margins are projected to decline from 13% in CY23 to 6% in CY24 due to lower PTA-PX margins, which averaged USD 100/ton compared to USD 110/ton in CY23.
Key Financial Highlights (PKR Million)
| Metric | 4QCY24E | 4QCY23 | YoY | CY24E | CY23 | YoY |
|---|---|---|---|---|---|---|
| Net Sales | 18,942 | 19,484 | -3% | 107,919 | 81,619 | 32% |
| Gross Profit | 1,369 | 388 | 253% | 6,398 | 10,244 | -38% |
| PAT | 559 | 237 | 136% | 3,221 | 5,077 | -37% |
| EPS (PKR) | 0.37 | 0.16 | – | 2.13 | 3.35 | – |
| DPS (PKR) | 1.00 | 1.00 | – | 1.50 | 4.00 | – |
Impact of Gas Price Hike
Rising gas prices have been a concern for LOTCHEM. Effective February 1, 2025, the gas price for captive power plants has increased to PKR 3,500 per MMBtu.
However, given that LOTCHEM’s costs and margins are primarily influenced by international PTA-PX margins, the impact of this increase is expected to be manageable.
PTA-PX Margin Trends
PTA-PX margins play a crucial role in determining profitability. Over the past year, these margins have averaged USD 100/ton, lower than the previous year’s USD 110/ton.
Since PTA prices are linked to the global petrochemical market, these fluctuations impact LOTCHEM’s ability to maintain strong profit margins.
Outlook and Investment Perspective
LOTCHEM’s earnings have shown resilience despite operational disruptions and margin pressures. The company’s improved gross margins in 4QCY24 indicate better cost management. However, external factors like gas price hikes and global PTA-PX spreads will continue to influence profitability.
Investors looking for stable dividends may find LOTCHEM attractive, with an estimated yield based on its projected payout. The company remains well-positioned in the industry, but careful monitoring of global commodity trends will be essential for future growth.
What are the analysts saying?
A total of 5 analysts have given their Dec-25 price targets for LOTCHEM.
This includes the highest target price of Rs. 25 by Pearl Securities and the lowest target price of Rs. 17 by Foundation Securities.
According to Arif Habib Limited, the dividend payout of the company is expected to be Rs. 1.5 in 2025 and Rs. 2 in 2026. At current price levels, this translates to a forward dividend yield of 7.5% and 10% respectively.
Considering the fact that the company relies on international margins for profitability, and the outlook for the chemical sector isn’t very promising, LOTCHEM continues to be a risky investment even at current depressed levels.
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