| Valuation method | Value, £ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 26.60 | 8 |
| Intrinsic value (DCF) | 21.64 | -12 |
| Graham-Dodd Method | 30.30 | 23 |
| Graham Formula | 178.30 | 625 |
Daqo New Energy Corp. (LSE: 0I74) is a leading Chinese manufacturer of high-purity polysilicon, a critical material used in the production of solar photovoltaic (PV) products. Headquartered in Shanghai, the company supplies polysilicon for ingots, wafers, cells, and modules, playing a pivotal role in the global solar energy supply chain. Founded in 2006, Daqo New Energy operates in the specialty chemicals sector, catering to the booming renewable energy market. With a strong presence in China, the company benefits from the country's dominance in solar manufacturing and government support for clean energy initiatives. Despite recent financial challenges, Daqo remains a key player in the polysilicon industry, leveraging its production scale and cost efficiencies. Investors tracking the solar sector should monitor Daqo's performance as a bellwether for polysilicon market dynamics.
Daqo New Energy presents a high-risk, high-reward proposition for investors. The company operates in a cyclical industry where polysilicon prices can be volatile, as evidenced by its recent net loss of $345 million. However, with zero debt and $1.04 billion in cash reserves, Daqo maintains a strong balance sheet to weather industry downturns. The stock's low beta (0.58) suggests relative stability compared to the broader market, but investors should be cautious about the negative operating cash flow and significant capital expenditures. Long-term prospects may be favorable given global solar energy expansion, but near-term profitability remains uncertain. The lack of dividend payments makes this suitable only for growth-oriented investors comfortable with commodity price risks.
Daqo New Energy competes in the highly concentrated polysilicon market where scale and production costs are critical competitive factors. The company benefits from China's integrated solar supply chain and typically lower production costs compared to Western competitors. However, it faces intense competition from larger domestic players who benefit from even greater economies of scale. Daqo's competitive advantage lies in its focus on high-purity polysilicon for the solar industry, but this specialization also makes it vulnerable to solar market cycles. The company's lack of downstream integration (into wafers or modules) leaves it more exposed to raw material price fluctuations than vertically integrated competitors. Recent financial struggles suggest it may be losing ground to more efficient producers, though its debt-free status provides flexibility. The competitive landscape is further complicated by international trade policies and potential anti-dumping measures in key markets.