[Alpha Biz= Paul Lee] Heungkuk Securities said on Tuesday that improvements in Lotte Holdings’ pretax profit and net income are likely to remain limited due to continued weak earnings at its affiliate, Lotte Chemical.

While maintaining its “Buy” rating on Lotte Holdings, Heungkuk Securities lowered its target price to 35,000 won, down from the previous estimate. Lotte Holdings closed at 28,800 won in the previous trading session.

The brokerage noted that although Lotte Holdings is expected to see a gradual increase in earnings before interest and taxes (EBIT) next year, equity-method losses stemming from Lotte Chemical’s poor performance and excessive net interest expenses will continue to weigh on pretax and net profit growth.

“Improving financial soundness through aggressive group-wide restructuring and company-wide efforts to enhance earnings will be essential,” said Park Jong-ryeol, analyst at Heungkuk Securities.

For the fourth quarter of this year, Heungkuk Securities forecasts consolidated revenue of 3.9 trillion won and operating profit of 26.2 billion won for Lotte Holdings. Revenue is expected to rise 2.6% year-on-year, while operating profit is projected to return to positive territory.

The improvement is attributed to a low base effect from the previous year, along with stronger performances at food and beverage subsidiaries such as Lotte Wellfood and Lotte Chilsung Beverage, as well as improved results at Lotte Innovate.

Despite stable EBIT generation from consolidated subsidiaries, Park noted that operating losses from new business segments, including Lotte Biologics, as well as the underperformance of equity-accounted affiliate Lotte Chemical, continue to act as a drag on overall earnings.

Excessive interest expenses are also limiting improvements in pretax profit. Heungkuk Securities maintained its full-year 2025 consolidated forecasts for Lotte Holdings at 15.7 trillion won in revenue and 371 billion won in operating profit.

However, the brokerage revised down its outlook for next year, projecting 2026 consolidated revenue of 16.2 trillion won and operating profit of 514.2 billion won, lower than its previous estimates.

 

 

 

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