[Click eStock] "OCI, Concerns Over Polysilicon Oversupply Are Excessive"

Intensifying US-China Conflict Over Solar Value Chain
Hyundai Motor Securities Maintains OCI Target Price at 190,000 Won

[Asia Economy Reporter Gong Byung-sun] OCI is expected to post fourth-quarter earnings this year that exceed market consensus. Although concerns have recently arisen about an oversupply of polysilicon, Hyundai Motor Securities' analysis suggests that the likelihood of oversupply is low due to power issues and human rights concerns.

On the 16th, Hyundai Motor Securities estimated OCI's Q4 sales to increase by 45.7% year-on-year to 822 billion KRW, and operating profit to rise by 562.9% to 218.6 billion KRW. The operating profit is about 9.25% higher than the consensus. The rise in polysilicon prices and profits from urban development projects are believed to have contributed to the performance.

Concerns about oversupply are emerging for next year. Global polysilicon production capacity is expected to increase by 228,000 tons next year, and if demand reaches around 200 gigawatts (GW), utilization rates may decline starting from the second quarter of next year.

However, Hyundai Motor Securities considers these concerns to be limited. Kang Dong-jin, a researcher at Hyundai Motor Securities, explained, "The U.S. 'Uyghur Forced Labor Prevention Act' recently passed the House of Representatives, and its passage in the Senate is also likely in the near term. Exports of Chinese solar products to the U.S. will become even more difficult."

China's power shortage is also a positive factor for OCI. Most of the expanding Chinese facilities use electricity generated from coal-fired power plants in the Xinjiang and Inner Mongolia regions. However, as China pursues 'Net Zero,' aiming for the sum of carbon emissions and removals to be zero, it is difficult to continuously increase coal-fired power generation. Considering the power shortage, the utilization rate of the expanding facilities is expected to be low.

Researcher Kang said, "The conflict between the U.S. and China centered on the solar value chain is intensifying," and predicted, "OCI will reach a point where it can reverse its previously diminished position in the polysilicon market."

Accordingly, Hyundai Motor Securities maintained its investment opinion on OCI as 'Buy' and set the target price at 190,000 KRW. The closing price on the previous day was 105,500 KRW.

This content was produced with the assistance of AI translation services.