KOSPIChemicals004000

LOTTE Fine Chemical

₩42,800▲ 0.47%2026-10-02 close

Market Cap

₩1.1T

Turnover

₩1B

Volume

20,000 shares

Shares out.

25.8M

PER

5.8×

PBR

0.5×

EPS

₩7,893

Dividend Yield

3.28%

PER, EPS, PBR and BPS are calculated in-house from the last 4 quarters (2025Q3–2026Q2) · Dividend yield is based on ₩1,500 per share · Prices as of the 2026-10-02 close

Report overview

Specialty Shift Rebuilds Earnings Power

A recovery in chlorine and ammonia markets, combined with the ramp-up of semiconductor material TMAC and expanded food and pharmaceutical cellulose capacity, has lifted quarterly operating profit for four straight quarters, yet much of the earnings stream still tracks global product prices and the won exchange rate.

1
In Q2 2026 revenue reached KRW 586.3bn and operating profit KRW 61.9bn, lifting the quarterly operating margin to 10.6% from 2.1% in Q2 2025.
2
On an annual basis operating profit fell from KRW 404.3bn in 2022 to KRW 50.4bn in 2024 before recovering to KRW 74.4bn in 2025, showing a wide cyclical swing.
3
For TMAC, the raw material for semiconductor developer solution, the company approved a KRW 13bn investment to expand capacity from 55,000 tons per year to 64,000 tons by Q2 2028, about 16%.
4
For food and pharmaceutical cellulose, the expansion was completed at the end of 2025, taking the company to the world's largest capacity, and sales of the added volume began scaling up from Q2 2026.
5
A 12.7% debt-to-equity ratio and KRW 300.9bn of operating cash flow in 2025 preserve balance-sheet flexibility, but the flip side is that commodity price declines also cut profits sharply.

Business structure

Lotte Fine Chemical is a specialty chemical maker split into a Chemical division and a Green Materials division. The Chemical division covers ECH (an epoxy resin feedstock), caustic soda, the Eurox urea-solution brand and ammonia, while Green Materials covers cellulose lines such as Mecellose, Hecellose and AnyCoat.

Mecellose is a construction additive that improves material properties, Hecellose an additive for water-based paints and personal care, AnyCoat an excipient for pharmaceutical capsules and coatings, and AnyAddy a food additive.

The company says cellulose lines are its core profit driver and that over 95% of key products such as Mecellose and AnyCoat are sold overseas. Its branded cellulose products are exported to some 110 countries.

In electronic materials, TMAC is supplied as the key raw material for TMAH, the developer solution used in semiconductor and display circuit patterning.

TMAC produced by the company is converted into TMAH at Handok Chemicals, 50%-owned by Lotte Chemical, and then supplied to customers including Samsung Electronics and SK Hynix.

For pharmaceutical cellulose, brokerage commentary noted that a long-term distribution agreement was signed with global distributor Colorcon in January 2024, with the added volume sold through that channel, while the food and pharma methylcellulose market is described as a field with only a few players including Dow Chemical and Shin-Etsu Chemical. The company disclosed a domestic-to-export sales mix of 52 to 48.

Earnings trend

Quarterly revenue · Operating profit

₩424.7B₩8.7B25Q2₩443.4B₩27.6B25Q3₩439.1B₩19.3B25Q4₩510.7B₩32.7B26Q1₩586.3B₩61.9B26Q2

RevenueOperating profit

Annual revenue · Operating profit

₩2.5T₩404.3B2022₩1.8T₩154.8B2023₩1.7T₩50.4B2024₩1.8T₩74.4B2025

RevenueOperating profit

Quarterly results · Last 5 quarters
Quarter	Revenue	Operating profit	Op. margin
2025Q2	₩424.7B	₩8.7B	2.1%
2025Q3	₩443.4B	₩27.6B	6.2%
2025Q4	₩439.1B	₩19.3B	4.4%
2026Q1	₩510.7B	₩32.7B	6.4%
2026Q2	₩586.3B	₩61.9B	10.6%

Annual results
Year	Revenue	Operating profit	Net income (parent)	Op. margin	ROE	Debt-to-equity
2022	₩2.5T	₩404.3B	₩146.2B	16.4%	6.4%	18.1%
2023	₩1.8T	₩154.8B	₩182B	8.8%	7.6%	12.6%
2024	₩1.7T	₩50.4B	₩36.4B	3.0%	1.5%	14.6%
2025	₩1.8T	₩74.4B	₩106.1B	4.2%	4.4%	12.7%

Consolidated basis (financial statements including subsidiaries) · Final figures from DART filings · Net income attributable to owners of the parent · Data as of 2026-09-04

Earnings analysis

Annual results mirror the cycle directly. From revenue of KRW 2,463.8bn and operating profit of KRW 404.3bn (16.4% margin) in 2022, profit shrank to KRW 154.8bn on revenue of KRW 1,768.6bn in 2023 (8.8%) and to just KRW 50.4bn on revenue of KRW 1,670.5bn in 2024 (3.0%).

In 2025 the direction turned, with revenue of KRW 1,752.7bn, operating profit of KRW 74.4bn (4.2%) and net profit attributable to owners of KRW 106.1bn; net profit exceeding operating profit points to a meaningful contribution from equity-method and financial income. The quarterly path is clearer still.

Operating profit bottomed at KRW 8.7bn (2.1% margin) in Q2 2025, then improved to KRW 27.6bn (6.2%) in Q3 2025, KRW 19.3bn (4.4%) in Q4 2025, KRW 32.7bn (6.4%) in Q1 2026 and KRW 61.9bn (10.6%) in Q2 2026.

Revenue also rose from KRW 424.7bn in Q2 2025 to KRW 586.3bn in Q2 2026, so the latest four quarters (Q3 2025 to Q2 2026) sum to revenue of KRW 1,979.5bn, operating profit of KRW 141.4bn (7.1%) and owners' net profit of KRW 201.0bn.

Management attributed the Q2 improvement to better market conditions from higher global product prices plus expanded specialty sales in food and pharmaceutical cellulose and TMAC, while Lotte Chemical's release cited higher global prices, a strong exchange rate and higher volumes.

On the balance sheet, end-2025 equity was KRW 2,435.7bn against liabilities of KRW 310.4bn for a 12.7% debt-to-equity ratio, and operating cash flow of KRW 300.9bn nearly doubled from KRW 160.0bn a year earlier.

That said, with Q2 2026 owners' net profit of KRW 94.2bn far above operating profit for the same quarter, investors need to separate out the contribution of non-operating items such as currency effects and equity-method gains.

Industry analysis

The company's end-markets run on different cycles.

ECH depends on epoxy resin, electronic substrate and coatings demand as well as glycerin and propylene feedstock prices, and brokerage analysis noted that glycerin strength persisted after late 2025 while propylene weakened on regional oversupply, improving the ECH spread.

Caustic soda tracks broad demand from alumina, pulp and electronics, and KB Securities said in its May 2026 report that global caustic soda prices were rising amid production disruptions at competitors. Semiconductor materials demand is comparatively more structural.

TMAH, the downstream product of TMAC, is used in circuit developing processes for semiconductors and displays, and Handok Chemicals is investing KRW 130bn to expand TMAH capacity in Pyeongtaek to build a supply chain near the metropolitan-area chip cluster, which feeds directly into raw material demand.

Within cellulose, food and pharma grades are supported by growing demand for health supplements and plant-based capsules, whereas construction-grade Mecellose faces intense competition, with company filings citing slower growth in key markets and aggressive selling by rivals.

Ammonia is closer to a distribution and logistics business, and the company is extending into clean ammonia and marine fuel on the back of Asia's largest ammonia terminal infrastructure adjacent to Ulsan Port.

On feedstock, KB Securities said in its May 2026 report that its methanol- and ethylene-based inputs put it in a more favorable position than rivals relying purely on crude-linked feedstock.

With commodity chlorine sitting alongside specialty and electronic materials, the cycle position has to be judged product by product.

Outlook

The confirmed pipeline is concentrated on the specialty side. In food and pharmaceutical cellulose, the end-2025 expansion made the company the world's largest by capacity, the expanded line entered commercial operation in March 2026, and sales of the added volume began scaling up in Q2 2026.

It was also disclosed that a 6,000-ton food and pharma cellulose plant was added in Incheon. For TMAC, the plan is a KRW 13bn investment lifting capacity from 55,000 tons per year to 64,000 tons by Q2 2028, about 16%.

In clean ammonia, the company made the world's first commercial supply of green ammonia as marine fuel in April 2026 and plans to supply about 3,000 tons to ammonia-fueled vessels this year, and it has stated a direction of strengthening eco-friendly businesses on the back of Asia's largest ammonia terminal infrastructure.

On the portfolio side, it also acquired Hecellose production facilities worth about KRW 127bn from Lotte Chemical's Yeosu plant. Longer term, management has set out a 2030 target of KRW 5tn in revenue, of which KRW 3tn is to come from Green Materials.

How quickly these milestones translate into profit, however, will depend on global ECH and caustic soda prices, the exchange rate and the pace of semiconductor capital spending.

Valuation

PER

5.8×

PBR

0.5×

ROE

8.2%

EPS

₩7,893

BPS

₩99,603

Dividend per share

₩1,500

Earnings-based multiples have compressed versus the levels seen during the 2024 profit trough as profits recovered, while on a book-value basis the shares trade at a meaningful discount to net assets.

For reference, KB Securities in its May 2026 report set a target price of KRW 67,000 with a Buy rating and stated that the target implied a 0.65x price-to-book and about 9.5x forward price-to-earnings, a lower multiple than specialty chemical peers trading above 10x earnings.

Cash dividends have been paid every year, and the 12.7% end-2025 debt-to-equity ratio together with KRW 300.9bn of operating cash flow can be read as support for dividend capacity.

Conversely, since non-operating items contributed materially to the KRW 201.0bn of owners' net profit over the last four quarters, earnings multiples would look different if recalculated on operating profit alone.

In short, two views coexist: a discount versus net assets, and a multiple that already reflects a cyclical profit recovery; which one carries more weight depends on the reader's view of ECH and caustic soda prices and the durability of the specialty expansion volumes.

PER, EPS, PBR and BPS are all calculated in-house (the same method as Naver and Toss) · Dividend yield = cash dividend per share from DART filings (supplemented by KRX) ÷ current price · As of 2026-09-04

Bull factors

Specialty Expansion Volumes Now Hitting the P&L

The food and pharma line expansion was completed at end-2025, making the company the global leader by capacity, and sales of that added volume began scaling up in Q2 2026. Brokerage commentary noted that the incremental volume is sold through a long-term contract with global distributor Colorcon.

According to Dealsite, cellulose-line revenue in Q1 2026 was KRW 142.1bn, up 15.4% year on year. As higher-margin food and pharma grades take a larger share, there is room for product-mix improvement.

Structural Demand for Semiconductor Material TMAC

TMAC is the key raw material for TMAH used in semiconductor and display developing processes, sitting in a value chain that runs through Handok Chemicals to customers such as Samsung Electronics and SK Hynix.

The company plans to invest KRW 13bn to lift its world-leading 55,000-ton annual capacity to 64,000 tons by Q2 2028. Business Post reported that other revenue in the chlorine segment, which includes TMAC, was KRW 61.5bn in Q2 2026, up 29.2% year on year. In a phase of continued chip capital spending, this demand curve differs from that of commodity products.

Low Leverage and Cash Generation

At end-2025 equity stood at KRW 2,435.7bn against KRW 310.4bn of liabilities for a 12.7% debt-to-equity ratio, while operating cash flow rose sharply to KRW 300.9bn from KRW 160.0bn in 2024.

EBN reported in March 2026 that cash and equivalents of KRW 172.0bn plus short-term financial assets of KRW 243.4bn gave total liquid assets of KRW 415.4bn, leaving room for further investment. Being able to fund expansion from internal cash also supports resilience through a downturn. How that cash is actually allocated, however, is a separate item to verify.

Bear factors

Profit Swings Driven by Commodity Prices

Annual operating profit fell from KRW 404.3bn in 2022 to KRW 154.8bn in 2023 and KRW 50.4bn in 2024, roughly one-eighth of the peak in two years, before recovering to KRW 74.4bn in 2025. The operating margin traced the same path, from 16.4% in 2022 down to 3.0% in 2024 and back to 4.2% in 2025.

Since management cited improved market conditions from higher global product prices as the Q2 2026 driver, the downside is symmetric when those same variables reverse. Even with the specialty mix rising, chlorine and ammonia market conditions still carry weight.

Reliance on Non-Operating Items

Owners' net profit of KRW 106.1bn in 2025 exceeded operating profit of KRW 74.4bn, and in Q2 2026 net profit of KRW 94.2bn again far surpassed operating profit of KRW 61.9bn.

KB Securities said in its May 2026 report on the first quarter that equity-method income from the INEOS joint venture was estimated at KRW 12.9bn, about double a normal year.

Currency moves and equity-method gains are largely outside the company's control, so judging core improvement from the net profit line alone risks overstating it. Underlying strength should be checked separately through the operating margin trend.

Softer Construction Demand and Rising Competition

Within Green Materials, company filings on construction-grade Mecellose cite slower growth in key markets and aggressive selling by competitors, with the stated response being greater sales into higher-value segments. Even as food and pharma volumes rise, weak industrial demand could dilute divisional growth.

Also, EBN reported Green Materials revenue of KRW 579.3bn in 2025, up 7.23% from KRW 540.2bn two years earlier, indicating a modest growth pace before the expansion. The key issue is what volume and pricing the expansion actually delivers.

Risk factors

Feedstock, FX and Logistics

Prices of feedstocks such as ammonia, glycerin and propylene, along with the won-dollar rate, directly affect margins.

KB Securities said in its May 2026 report that caustic soda and TMAC conditions had been improving even before the Strait of Hormuz disruption, and that the company was responding to the ammonia price spike by rerouting imports via the Red Sea and increasing purchases from Southeast Asia and Oceania.

Longer procurement routes driven by geopolitics can raise freight and inventory costs. Conversely, if the currency reverses, won-converted profitability weakens for the export-heavy cellulose lines.

End-Market Cycles and Payback on Expansion

The TMAC expansion runs through Q2 2028, so a slowdown in the chip investment cycle in the meantime could delay utilization ramp-up. Food and pharma cellulose likewise involved a combined KRW 116bn across two expansion phases, and if volumes fall short of plan, depreciation charges land first.

Paint-grade Hecellose carries its own cycle risk tied to coatings demand in markets such as China. If several product lines turn down at once, earnings volatility widens.

Affiliate Funding and Governance

The company has served as a cash generator within Lotte's chemical group, and Business Post reported that it went as far as committing KRW 200bn to Project Charlotte, a liquidity support fund for Lotte E&C. Affiliate support outlays can constrain both self-funded investment capacity and shareholder returns.

In addition, because TMAC sales route through affiliate Handok Chemicals, reliance on the group value chain exposes the business to changes in transaction terms. Related-party dealings and cash flows need to be checked in annual reports and ad hoc filings.

What to watch next

Late October to early November 2026
Q3 2026 results. The key checks are whether the operating margin that reached 10.6% in Q2 holds, and whether the food and pharma cellulose expansion volumes and TMAC sales growth continue into Q3.
During Q4 2026
Progress in the ammonia marine fuel business. Worth checking is delivery against the stated plan to supply about 3,000 tons to ammonia-fueled vessels this year, plus any additional supply contracts or expanded terminal utilization.
January to February 2027
Preliminary FY2026 results and the cash dividend decision. This is the point to check changes in cash generation versus the KRW 300.9bn of operating cash flow in 2025 alongside the dividend decision.
March 2027
The annual business report and AGM. Check the divisional revenue mix, any change in the domestic-to-export split (52 to 48 in the prior filing), and the disclosed capacity and utilization for cellulose and electronic materials.
During the first half of 2027
Progress on the TMAC expansion. The construction schedule for the KRW 13bn project taking capacity to 64,000 tons per year by Q2 2028 and the status of Handok Chemicals' KRW 130bn TMAH expansion in Pyeongtaek will shape visibility on raw material demand.

Overall view

Lotte Fine Chemical's recent results reflect two forces at once. One is the recovery in global prices for chlorine-chain products such as ECH and caustic soda; the other is expanded specialty volumes led by food and pharmaceutical cellulose and semiconductor material TMAC.

In numbers, operating profit turned from a trough of KRW 50.4bn (3.0% margin) in 2024 to KRW 74.4bn (4.2%) in 2025, and on a quarterly basis it improved for four consecutive quarters from KRW 8.7bn in Q2 2025 to KRW 61.9bn (10.6%) in Q2 2026.

On the confirmed pipeline, the end-2025 completion of the food and pharma expansion that made it the global capacity leader, the TMAC expansion running through Q2 2028 and the green ammonia marine fuel supply that began in April 2026 are set out as medium- to long-term pillars.

Against that, the history of annual operating profit falling from KRW 404.3bn in 2022 to KRW 50.4bn in 2024 shows how closely earnings still track global product prices and the exchange rate, and with recent net profit exceeding operating profit, the non-operating contribution needs to be assessed separately.

Financially, the 12.7% debt-to-equity ratio and KRW 300.9bn of operating cash flow at end-2025 leave room to fund expansion and dividends internally.

Ultimately the central question is how far the improving specialty mix offsets cyclical volatility; this report is for information purposes only and contains no buy or sell opinion and no target price.

Sources

Korea Exchange (KRX) — Prices · Market Cap · Volume
FSS electronic disclosure system (DART) — Financial statements · Dividend filings

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Report written 2026-09-05 · Data as of 2026-09-04

This content is AI analysis of market data and web search results, provided for information only. It is not a solicitation or recommendation to invest. Investment decisions and their consequences are the investor's own responsibility. Data may be delayed or contain errors.