KUALA LUMPUR (April 6): Maybank Investment Bank (Maybank IB) has upgraded Lotte Chemical Titan Holding Bhd (KL:LCTITAN) to a 'hold', its sole non-sell call, on the strength of a short-term earnings boost from lower-cost naphtha inventories. In its note, it said the boost in earnings could help narrow its losses in the first quarter ended March 31, 2026 (1QFY2026) and even make it profitable in the second quarter.
Maybank IB raised its target price on the stock from 21 sen to 35 sen, adding that it saw a window of trading opportunity for LCTitan in its near-term earnings rebound. The stock was trading at 35 sen earlier, up 1.45%, valuing the group at RM797.15 million.
However, this advantage is expected to be short-lived with feedstock shortages due to the Middle East conflict likely forcing either a production cut or halt from June 2026.
Maybank IB does not exclude the possibility of the group declaring “force majeure” after May 2026 due to insufficient naphtha feedstock or an unusual production environment where the feedstock spreads are below US$300.
The research house noted that the petrochemical group is currently benefitting from a six-week lag between feedstock procurement and consumption, allowing the group to capture a stronger spread as petrochemical product prices have already adjusted upward following Middle East supply disruptions.
However, this advantage is expected to fade once higher-cost naphtha flows into production. With much of LCTitan’s feedstock sourced from the Middle East, inventories may only support operations until May.
“At the point of writing, accounting for a six-week lag for naphtha, HDPE-naphtha spread stands at about US$900, where LCTitan’s breakeven is at about US$550-600, based on our estimates. As such, we believe LCTitan may see narrowed quarter-on-quarter losses in 1QFY2026 and may turn profitable in 2QFY2026.”
“Prolonged disruption may force lower cracker utilisation or temporary production stoppages, leading to suboptimal operating rates,” Maybank IB further added in a note on Monday.
The research house has cut LCTitan’s FY2026-FY2027 net loss forecasts by 14% and 12%, respectively, assuming high density polyethylene (HDPE) average price of US$1,400 a tonne for FY2026 and production halts beginning June 2026 till December 2026. LCTitan has been making gross losses per unit sales and production halts across its major operating plants will cap those losses.
There are now three 'sell' calls and one 'hold' call on the stock. The average target price is 37 sen across four research houses, according to Bloomberg.