SK Securities initiated a buy recommendation on Lotte Energy Materials on the 9th, maintaining its bullish stance while trimming its target price to 60,000 won, citing an anticipated shortage of circuit foil — a specialist copper product used in printed circuit boards — by 2027.
Analyst Park Hyung-woo wrote in his research note that "circuit foil supply will be unable to keep pace with substrate capacity expansion, making a shortage detectable as early as 2027." He added that South Korea's three main battery-foil producers have begun curtailing capacity and delaying expansion plans, reviewing options including converting and suspending domestic plants and selling or deferring overseas facilities.
Lotte Energy Materials is in the process of converting its battery-foil production lines at its Iksan factory into 16,000 tonnes of circuit-foil capacity. The entire converted output has been earmarked for AI network mainboards. Mass production of HVLP1 — a high-specification, high-frequency, low-profile circuit foil — has already begun, while HVLP3 is scheduled to begin shipments for AI applications in the third quarter.
For the second quarter, the company's operating loss is forecast to narrow to 20.1 billion won, with revenue of 193.1 billion won. Sales volumes are projected to rise 25% for circuit foil and 20% for battery foil compared with the prior quarter. Monthly utilisation rates in the second half are estimated to reach as high as 80%.
For the full year 2026, SK Securities forecasts revenue of 900 billion won and an operating loss of 40 billion won. The company is expected to return to profitability in 2027, with revenue of 1.47 trillion won and operating profit of 89.3 billion won.
The 60,000 won target price was derived by applying a price-to-earnings multiple of 15 times — the lowest among peers in the AI substrate sector — to an estimated 2028 earnings per share of 4,058 won. At the current share price of 32,050 won, that implies an upside of 87.2%. The stock has already fallen 59% from its peak this year.