"The Essence Is Capacity Expansion" This Stock’s Target Price Soars 65% in Ten Days [Weekend Money]

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Despite OCI Holdings' weak performance in the first quarter of this year, expectations for mid- to long-term growth are emerging. Kyobo Securities has adjusted its target price upward by 65%, from 2.6 million won (as of April 14) to 4.3 million won, citing expansion plans and changes in business structure.

Kyobo Securities researcher Jo Hyebin stated, "OCI Holdings recorded first-quarter sales of 892.4 billion won (down 5.9% year-on-year) and operating profit of 10.8 billion won (down 77.8% year-on-year)," adding, "Although the results fell short of market consensus, this was expected as it is the lowest point of the year. The key is the upward revision of the expansion scale." She continued, "Discussions to expand capacity from the previous 20,000 tons to over 30,000 tons demonstrate that non-Chinese polysilicon is being redefined from a general-purpose material to a strategic material."

Performance is expected to rebound from the second quarter. Jo explained, "From the second quarter, the normalized operation of Terasys and the profit from the sale of OCI Energy's 500MW project will be reflected simultaneously, marking an inflection point for profit." Regarding the renewable energy segment, she noted, "Terasys recorded sales of 100.9 billion won and an operating loss of 26.6 billion won," and analyzed, "This was due to a temporary decrease in sales volume from scheduled maintenance, compounded by a 13 billion won inventory valuation loss." She added, "There is a possibility that the reversal will be reflected in the second quarter."

The policy environment is also acting positively. Jo commented, "So far, Section 232 has been favorable for OCI Holdings," and said, "Since the U.S. administration is focusing its tariff policy on this provision, similar measures are expected to be applied to polysilicon as well."

The core issue is capacity expansion. Jo stated, "Currently, discussions are underway to expand production capacity to more than 30,000 tons, and a decision is expected within the first half of the year," explaining, "Once confirmed, production capacity in 2028 will double compared to the present, which is expected to lift profit levels."

She further stated, "In addition to solar energy, demand sources are diversifying with the addition of space solar power and semiconductor silicon photonics as new end markets." She also added, "Neo Silicon is scheduled for completion in May and is entering the cell testing phase for customers, so it is expected to serve as an integrated supply chain from non-Chinese polysilicon to wafers."

By business segment, additional profit is expected from the energy solutions division. Jo explained, "OCI's operating profit increased by 17.8 billion won year-on-year to 27.8 billion won, mainly due to the expansion of the carbon chemicals spread." Regarding other segments, she said, "SE experienced temporary sluggishness due to equipment trouble but is expected to normalize in the second quarter, and DCRE recorded an operating profit of 8.9 billion won due to deferred tax expenses."

She concluded, "Considering the shift of non-Chinese polysilicon to a strategic material and the potential for profit upgrades if the expansion is confirmed, we have raised the target multiple," emphasizing, "We maintain our top pick recommendation within the solar sector and advise an aggressive buying approach."

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