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Daqo New Energy: At A Pivotal Buying Moment

Mar. 01, 2023 10:00 AM ETDaqo New Energy Corp. (DQ)45 Comments


  • Daqo New Energy's latest earnings report reveals a concerning trend: the growth of its polysilicon prices has slowed further.
  • The projected surge in production for 2023 may spell trouble, as it could cause price levels to plummet even further.
  • While management exudes confidence in its profitability, the critical question is whether DQ can ramp up production fast enough to mitigate the pricing downturn.
  • The hype surrounding DQ stock has subsided, presenting a prime opportunity for investors to buy and add more exposure.
  • I do much more than just articles at Ultimate Growth Investing: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

Pieces of polycrystalline silicon on a polysilicon wafer with microchips.

Anatoly Morozov

Daqo New Energy Corp. (NYSE:DQ) released its FQ4'22 earnings report on February 28. It demonstrated that the growth in its polysilicon average selling prices or ASPs has continued to normalize, justifying the steep pullback from its highs in

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This article was written by

JR Research profile picture

JR Research is a seasoned investor with a background in economics. He focuses on identifying 3 main things - leading growth companies, emerging market trends, and secular growth opportunities. His approach combines price action with fundamentals investing.

He runs the investing group Ultimate Growth Investing which specializes in identifying high-potential opportunities across various sectors. The group is designed for investors seeking to capitalize on emerging, high-growth opportunities, and investors looking for sustainable growth opportunities at a reasonable price.

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (45)

BABA is cheap! Tencent is cheap! DAQO is cheap!! Your returns will be cheap!!! Its cheapness all the way down!!!
daydreamer profile picture
If they never pay a dividend, what is it worth?
@daydreamer exactly

The pivotal moment was not so pivotal after all. Dividends however would be such moment.
@kukukki The stock is a joke. The company doesn't pay dividend but does the dubious buyback instead, which is completely meaningless if the stock were to be delisted.
@typecheck HK listing or dividend…
Looking at DAQO's valuations, it looks like a total loss in the near future is more likely than unlikely. What do you think? What is the biggest risk and how likely is it?
Pierre Rossouw profile picture
Not much useful investment information here, mostly political views.
jadboustani profile picture
you should mention the book value, the stock is quite cheap!
JR Research profile picture
@jadboustani The market already knows.
Friso Alenus profile picture
Banning exports from China??? So where would countries get their solar panels? 80-90% polysilicon is made in China. Solar wafers 97% out of China :) Why is polysilicon price growth important?? Is 80% EBITDA margins not enough? Long term stabilised polysilicon prices are better so that solar panels are affordable. Nothing said about valuation, weird we give any rating without considering price. Clueless...
@Friso Alenus Solar panels are the tea of the 19th century. The only choice for America is to start an opium war of the 21st century.
JR Research profile picture
@Friso Alenus
1. Not the first time we cover DQ. Valuation has already been discussed in our previous article, there's no need to rehash, with the article linked.

2. The market is not dumb. The market knows the cyclicality and commoditized nature of the polysilicon business.

3. Price action is forward-looking, because the market is forward-looking. Which is why it had already anticipated the slowdown, despite cheap valuations. Consider that it fell more than 50% from its August highs to its January lows. The market priced in the slowdown in August, even as ASPs growth was strong. Market looks forward all the time. Which is what we cautioned in August: seekingalpha.com/...

4. Don't be clueless. There's always something to learn for everyone. We are all learning.
@JR Research
2. The market is not dumb. The market knows the cyclicality and commoditized nature of the polysilicon business.

For the past 18 months there is no cyclicality in DQ EPS so the market gotta be dumb.

DQ EPS did not change so the 50% drop was market's mistake? I am not really sure what market participants expected that DQ earning will drop. What I have been trying to point out for over a year in my comments is that DQ stock movements have absolutely nothing to do with financials. Even if their EPS drop in half (and nobody who knows DQ expected that for the past 18 months) DQ's PE would still be 4, grossly undervalued solely by financial standards. It was known already 18 months ago DQ earnings will be massive, because poly pricing is not secret and DQ's capacity running at max is known. Yet for 18 months the stock is grossly undervalued. So not sure why would now be some pivotal moment it all changes. Financially nothing will change at least not this year so if anything changes it will be non-financial matter.
I wish they pay dividend instead of buying back shares.
I do understand why they do buy back since it is a convenient way to pay their executives in dollars.
Company has more cash by share than it's share price, cheap!
@ANILB1 True and yet it's important what are they going to do with that cash ;)
@Labybamapa The cash for is for constructing the second plant in Inner Mongolia. The share price should be 5X as much if DQ pays dividend instead of doing buybacks.
@typecheck still patiently waiting for something to happen with really low avg. price. According to all my DCF analysis, PE, EV/EBIT analysis this should be really at least 3-4x from current price. Will wait a bit more.
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