LCTITAN: Financial Performance Aligns with Forecasts Amid Persistent Losses, Outlook Cautious
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
TA SECURITIES reported that Lotte Chemical Titan Holding Bhd (LCTITAN) recorded a 9-month core net loss of RM470.0 million for the financial year 2025. This performance was in line with TA Securities’ own expectations, though it represented a narrower loss compared to consensus estimates, accounting for 78% of the investment bank’s full-year loss forecast and 63% of the broader market consensus.
Performance Review
Quarter-on-quarter, LCTITAN’s revenue surged by 70.3% in 3QFY25, primarily propelled by a substantial increase in sales contribution from its LINE project, which boosted overall sales volume by 102.3%. Despite this significant revenue growth, the company’s Loss Before Tax (LBT) remained flat at RM190.9 million, as lower associate losses were counterbalanced by higher interest expenses.
Year-on-year, 3QFY25 revenue increased by 25.7%, supported by a 71.3% surge in sales volume. The LBT narrowed to RM190.9 million from RM378.4 million in 3QFY24, largely due to a reduced share of losses from LCUSA and lower depreciation charges within its Malaysian operations.
Operational Challenges and Outlook
The broader industry outlook suggests potential medium-term tailwinds. The “anti-involution” push in China, aimed at eliminating sub-scale and inefficient refinery/petrochemical capacity, could gradually ease margin pressure for LCTITAN. However, the actual benefit will depend heavily on the pace of enforcement and the strength of demand recovery.
Despite these potential tailwinds, the company continues to face headwinds. The average polymer price in 3QFY25 was USD971/mt, a decline of 8.8% year-on-year, indicating persistent pricing weakness. While softer feedstock costs and lower operating rates offer some marginal relief, LCTITAN is expected to remain in a loss-making position in the near term as product spreads are currently insufficient to cover fixed and operating costs.
Plant utilisation for the quarter stood at 50% and 47% year-to-date. Management anticipates utilisation to remain at similar levels going forward, in line with its full-year guidance of 45-50% for 2025.
Valuation and Recommendation
TA SECURITIES has maintained its “Sell” recommendation for LCTITAN, with an unchanged target price of RM0.49 per share. This valuation is based on 0.17x CY25 Price-to-Book (P/B), incorporating a 3% ESG premium. The last traded price for the company was RM0.535.
