KUALA LUMPUR (May 3): Lotte Chemical Titan Holding Bhd (LC Titan) is expected to face widening core losses in the second quarter ending June 30, 2024 (2QFY2024) from lower sales volume and weak product spread, according to TA Securities.

In a note on Friday, the research firm said that with around seven out of 12 plants in Malaysia scheduled for a statutory turnaround in April 2024, utilisation rate and sales volume are expected to drop quarter-on-quarter (q-o-q) in 2QFY2024, negatively impacting earnings for the quarter.

Thus, TA Securities cut its financial year ending Dec 31, 2024 (FY2024) to FY2026 average utilisation rate assumption from between 73% and 80% to between 66% and 75%, and trim its product average selling price (ASP) forecast by 3%-5%.

Following these, it forecasted wider losses of RM653.0 million (from RM41.4 million earnings) for FY2024, RM213.6 million (from RM410.1 million earnings) for FY2025, and RM213.9 million (from RM482.8 million earnings) for FY2026.

“The near-term earnings outlook remains challenging due to the supply glut despite the prospect of improving the global economic environment on the back of anticipated interest rate cuts by global central banks and stimulus measures in China,” it added.

The research firm kept a "sell" call on the counter, with a lower target price of RM1.03, from RM1.05 previously, pegged to 0.22 times 2025 price-to-book ratio.  

Meanwhile, TA Securities also noted that the group’s Lotte Chemical Indonesia New Ethylene (LINE) project’s main construction is mostly completed and is on schedule for commissioning in mid-2025.

TA Securities noted that LC Titan registered an eighth consecutive core loss in 1QFY2024, which came in below its expectations but within consensus forecasts.

“The earnings miss was due to lower-than-expected plant utilisation and poorer-than-expected product spreads. 1QFY2024 revenue increased 3.3% q-o-q due to improvement in ASP as the sales volume remained flat. After adjusting for the write-down of inventories, the group registered eight consecutive quarters of core loss,” it added.