A MEMBER OF THE TA GROUP
Wednesday, August 06, 2025
FBMKLCI: 1,538.64
Sector: Oil & Gas
Lotte Chemical Titan Holding Bhd: Improved Spreads Offer Breathing Room, but Profitability Still Elusive
Tel: +603-2167 9606
yllee@ta.com.my
www.taonline.com.my
Review
- Lotte Chemical Titan Holding Bhd’s (LCTITAN) 1HFY25 results registered a narrower core net loss of RM292.5mn, against ours and the consensus’s full-year net loss estimates of RM898.1mn and RM670.7mn, respectively. The positive variance was largely driven by better-than-expected product spreads.
QoQ
2QFY25 revenue decreased by 3.7%, primarily attributed to lower ASP (average price of polymer: -4.6% QoQ). This is despite an increase in sales volume (+5.2% QoQ). LBT increased from RM128.0mn in 1QFY25 to RM190.9mn in 2QFY25 due to lower margin that resulted from changes in write-down of inventories to net realizable value and increase in the share of losses from associate company.
YoY
2QFY25 revenue dropped 19.2% YoY mainly due to lower ASP (average price of polymer: -7.4% YoY) and lower sales volume (-2.6% YoY). Despite that, LBT improved from RM331.7mn in 2QFY24 to RM190.9mn in 2QFY25 due to margin improvement, lower distribution and administrative expenses, along with a one-off insurance claim in respect of a business interruption that occurred in 2022.
Impact
- We lowered our naphtha feedstock price assumption on the back of modest improvements in product spreads. Consequently, we revised our FFY25, FY26 and FY27 earnings forecasts to -RM603.0mn/-RM335.0mn/-RM39.7mn (from -RM898.1mn/-RM504.5mn/-RM66.8mn).
Outlook
- In late July, China intensified its ‘anti-involution’ efforts to phase out outdated refinery and petrochemical capacity, targeting smaller and inefficient plants. We view this rationalization as a medium-term positive for regional product spreads, which could gradually ease margin pressures for LCTITAN, though the timing and extent of benefits hinge on implementation pace and demand recovery.
- The average polymer price for 2QFY25 stood at 989.0 USD/mt (-7.4% YoY), reflecting persistent pricing pressure. While lower feedstock costs and reduced operating rates may offer slight margin relief, we believe LCTITAN is likely to remain in the red over the coming quarters, as product spreads show little sign of meaningful recovery to cover fixed and operating costs.
- For the current quarter, utilisation rate stood at 46%. Moving forward, management has given 2025 full-year utilisation rate guidance of approximately 45-50%, reflecting softer demand—a view we share. Consequently, we anticipate an overall decline in revenue.
Share Information
| Bloomberg Code | TTNP MK |
| Stock Code | 5284 |
| Listing | Main Market |
| Share Cap (mn) | 2,278 |
| Market Cap (RMmn) | 1,629 |
| 52-wk Hi/Lo (RM) | 1.06/0.35 |
| 12-mth Avg Daily Vol (‘000 shrs) | 3,077.8 |
| Estimated Free Float (%) | 18.9 |
| Beta | 1.1 |
| Major Shareholders (%) | Lotte Chemical Corp – 75.9% |
| Amanah Saham – 2.6% |
Forecast Revision (%)
| FY25 | FY26 | |
|---|---|---|
| Forecast Revision (%) | 32.9 | 33.6 |
| Core Net Profit (RM mn) | (603.0) | (335.0) |
| Consensus | (670.7) | (580.5) |
| TA/Consensus (%) | 89.9 | 57.7 |
| Previous Rating | Sell (Maintained) | |
| Consensus Target Price (RM) | 0.39 | |
Financial Indicators
| FY25 | FY26 | |
|---|---|---|
| Net Debt/Equity (x) | 1.73 | 1.93 |
| ROA (%) | (2.7) | (1.5) |
| ROE (%) | (9.4) | (5.5) |
| NTA/Share (RM) | 2.8 | 2.7 |
| P/NTA (x) | 0.3 | 0.3 |
Scorecard
| % of FY | ||
|---|---|---|
| vs TA | n.m | Above |
| vs Consensus | n.m | Above |
Share Performance
| Price Change (%) | LCTITAN | FBMKLCI |
|---|---|---|
| 1 mth | 50.5 | (0.7) |
| 3 mth | 62.5 | (0.1) |
| 6 mth | 25.4 | (2.3) |
| 12 mth | (24.7) | 0.1 |
Valuation
In line with our revised earnings forecast, we revised our target price upward to RM0.49/share (from RM0.41/share), based on 0.17x CY25 P/B, incorporating a 3% ESG premium. Maintain Sell.
Figure 1: Quarterly Results Analysis
| FYE Dec (RM mn) | 2QFY24 | 1QFY25 | 2QFY25 | QoQ (%) | YoY (%) | 1HFY24 | 1HFY25 | YoY (%) |
|---|---|---|---|---|---|---|---|---|
| Revenue | 1,778.0 | 1,491.1 | 1,436.0 | (3.7) | (19.2) | 3,695.7 | 2,927.1 | (20.8) |
| Core EBITDA | (106.9) | (44.0) | (43.3) | (1.6) | (59.5) | (192.6) | (87.4) | (54.6) |
| Depreciation | (131.4) | (90.3) | (89.7) | (0.6) | (31.7) | (257.4) | (180.0) | (30.1) |
| Net Finance Costs | (11.9) | (12.9) | (16.3) | 26.7 | 36.7 | (19.6) | (29.2) | 48.8 |
| Associates | (32.8) | 5.4 | (29.0) | n.m | (11.5) | (51.6) | (23.6) | (54.4) |
| EI | (48.7) | 13.8 | (12.6) | n.m | (74.2) | (24.1) | 1.2 | n.m |
| Pretax Profit | (331.7) | (128.0) | (190.9) | 49.2 | (42.4) | (545.3) | (318.9) | (41.5) |
| Taxation | 70.3 | 0.6 | 1.6 | >100 | (97.7) | 94.8 | 2.2 | (97.7) |
| Minority Interest | 12.5 | 9.1 | 16.2 | 77.6 | 30.2 | 23.6 | 25.4 | 7.5 |
| Reported Net Profit | (248.9) | (118.2) | (173.1) | 46.4 | (30.5) | (426.9) | (291.3) | (31.8) |
| Core Net Profit | (200.2) | (132.0) | (160.5) | 21.6 | (19.8) | (402.8) | (292.5) | (27.4) |
| Core EPS (sen) | (8.8) | (5.8) | (7.0) | 21.6 | (19.8) | (17.7) | (12.8) | (27.4) |
| DPS (sen) | 0.0 | 0.0 | 0.0 | n.m | n.m | 0.0 | 0.0 | n.m |
| %-points | %-points | %-points | ||||||
| Core EBITDA Margin (%) | (6.0) | (3.0) | (3.0) | (0.1) | 3.0 | (5.2) | (3.0) | 2.2 |
| Core Net Margin (%) | (11.3) | (8.9) | (11.2) | (2.3) | 0.1 | (10.9) | (10.0) | 0.9 |
Figure 2: Segmental Analysis
| FYE Dec (RM mn) | 2QFY24 | 1QFY25 | 2QFY25 | QoQ (%) | YoY (%) | 1HFY24 | 1HFY25 | YoY (%) |
|---|---|---|---|---|---|---|---|---|
| Revenue | ||||||||
| Olefins & Derivatives | 390.2 | 361.6 | 355.6 | (1.7) | (8.9) | 795.5 | 717.2 | (9.8) |
| Polyolefins | 1,387.8 | 1,129.5 | 1,080.4 | (4.3) | (22.1) | 2,900.2 | 2,209.9 | (23.8) |
| Group | 1,778.0 | 1,491.1 | 1,436.0 | (3.7) | (19.2) | 3,695.7 | 2,927.1 | (20.8) |
| PBT | ||||||||
| Olefins & Derivatives | (101.3) | (47.1) | (82.9) | 75.9 | (18.1) | (110.7) | (130.1) | 17.4 |
| Polyolefins | (168.7) | (72.8) | (84.5) | 16.1 | (49.9) | (328.2) | (157.3) | (52.1) |
| Eliminations | (61.7) | (8.0) | (23.5) | >100 | (61.9) | (106.4) | (31.5) | (70.3) |
| Group | (331.7) | (128.0) | (190.9) | 49.2 | (42.4) | (545.3) | (318.9) | (41.5) |
| PBT Margin | ||||||||
| %-points | %-points | %-points | ||||||
| Olefins & Derivatives (%) | (26.0) | (13.0) | (23.3) | (10.3) | 2.6 | (13.9) | (18.1) | (4.2) |
| Polyolefins (%) | (12.2) | (6.4) | (7.8) | (1.4) | 4.3 | (11.3) | (7.1) | 4.2 |
| Group (%) | (18.7) | (8.6) | (13.3) | (4.7) | 5.4 | (14.8) | (10.9) | 3.9 |
Figure 3: Earnings Summary
| FYE Dec (RM mn) | 2023 | 2024 | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Revenue | 7,646.2 | 7,435.0 | 6,043.6 | 6,661.4 | 7,297.1 |
| Core EBITDA | (468.4) | (312.1) | (73.8) | 174.2 | 542.7 |
| Core EBITDA Margin (%) | (6.1) | (4.2) | (1.2) | 2.6 | 7.4 |
| Pretax Profit | (999.6) | (1,064.5) | (809.6) | (460.0) | (54.5) |
| Reported Net Profit | (780.3) | (758.5) | (603.0) | (335.0) | (39.7) |
| Core Net Profit | (891.6) | (306.0) | (603.0) | (335.0) | (39.7) |
| Core EPS (sen) | (39.1) | (13.4) | (26.5) | (14.7) | (1.7) |
| Core EPS growth (%) | 47.1 | (65.7) | 97.0 | (44.4) | (88.2) |
| PER (x) | (1.8) | (5.3) | (2.7) | (4.9) | (41.1) |
| DPS (sen) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Dividend Yield (%) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Sector Recommendation Guideline
OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.
NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
BUY : Total return of the stock exceeds 12%.
HOLD : Total return of the stock is within the range of 7% to 12%.
SELL : Total return of the stock is lower than 7%.
Not Rated: The company is not under coverage. The report is for information only.
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
ESG Scoring & Guideline
| Environmental | Social | Governance | Average | |
|---|---|---|---|---|
| Scoring | ★★★★ | ★★ | ★★★★ | ★★★★ |
| Remark | Production of polymers indirectly contribute to pollution. This is given its usage as raw material for plastics. However, environmental audits, certification and policies are aptly competent. | Fair management of labour service workforce. Community activities are sufficient. | Corruption busting initiatives are commendable. Monitoring of board and audit functions are aptly in-place. | |
| ★★★★★ (≥80%) | Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions. | +5% premium to target price | ||
| ★★★★ (60-79%) | Above adequate integration of ESG factors into most aspects of operations, management and future directions. | +3% premium to target price | ||
| ★★★ (40-59%) | Adequate integration of ESG factors into operations, management and future directions. | No changes to target price | ||
| ★★ (20-39%) | Have some integration of ESG factors in operations and management but are insufficient. | -3% discount to target price | ||
| ★ (<20%) | Minimal or no integration of ESG factors in operations and management. | -5% discount to target price | ||
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.
As of Wednesday, August 06, 2025, the analyst, Lee Yun Leon, who prepared this report, has interest in the following securities covered in this report: (a) nil
