Lotte Chemical Pakistan Limited (LOTCHEM) has released its financial results for the 9MCY23, reporting a profit after tax (PAT) of PKR 4,840mn (EPS: PKR 3.20). This marks a 40% decline compared to the SPLY, where they had a PAT of PKR 8,106mn (EPS: PKR 5.35). During 3QCY23, earnings also dropped by 27% YoY to PKR 1,987mn (EPS: PKR 1.31). However, there was a notable 538% increase in earnings on a QoQ basis due to higher sales volumes.

Result Highlights

Net sales for 9MCY23 were down by 22% YoY to PKR 62.1bn, primarily because of reduced sales volumes. The plant of LOTCHEM was temporarily shut down from Mar 15, 2023, to Apr 30, 2023, due to raw material shortages caused by import restrictions. During 3QCY23, sales also decreased by 20% YoY while up by 44% QoQ. The rise in sales on a QoQ basis is witnessed mainly due to lower volumetric sales during 2QCY23 amid plant shut down.

During 9MCY23 gross margin arrived at 15.9%, down from 18.6% during SPLY mainly due to a 25% YoY decline in PTA margins. Gross margins also dropped by 178bps during 3QCY23 to 14.5%, due to the aforementioned reason. However, a 23% YoY PKR depreciation during 3QCY23 cushioned the decline.

Other income saw an increase of 32% YoY to PKR 1,884mn during 9MCY23, driven by higher interest rates.

Finance cost increased by 234% QoQ to PKR 467mn, we await further clarity on this.

Result Highlights

Currently, we have a “HOLD” call on the stock with a Jun’24 TP of PKR 26.3/share.

Courtesy – AHL Research