China Solar_ Polysilicon_ Roller-coaster ride provides trading opportunities. Fri Jan 10 2025

Summary of Key Points from the Conference Call Industry Overview - Industry: Polysilicon - The polysilicon industry cycle is believed to have hit the bottom, but immediate recovery is not visible. There are both positive and negative events anticipated in 1Q/2Q25 that may provide trading opportunities [2][4] Core Insights - Negative Outlook: - Significant impairment losses are expected for polysilicon producers in 4Q24, leading to worse-than-expected earnings for FY24. By the end of 2024, polysilicon inventory levels continued to rise, with prices under pressure at approximately Rmb 40/kg [4][2] - Producers have been reducing production capacity utilization throughout 2024, which may lead to impairment risks for production facilities [4] - Positive Outlook: - Polysilicon prices may overshoot in mid-to-end 2Q25 due to declining supplies and decreasing inventory levels. Major producers have reduced capacity utilization to support prices [4] - Expected polysilicon supply in January 2025 is projected at 98,000 tons, while demand is estimated at 101,000 tons, indicating a potential inventory reduction in the coming months [4][6] Company Ratings - Daqo (DQ US): - Rated Overweight (OW) due to cost leadership, strong balance sheet, and attractive valuation at 0.3x FY25 Price-to-Book Value (P/BV) [4][9] - Tongwei (600438 CH): - Rated Underweight (UW) due to high valuation at 1.7x FY25 P/BV [4][9] Additional Insights - The current polysilicon inventory is estimated to be between 300,000 to 400,000 tons, and it takes approximately 2 to 3 months for a polysilicon plant to resume production, indicating a potential time gap for any supply increase [4] - The report emphasizes the importance of monitoring inventory levels and production capacity as key indicators for future price movements in the polysilicon market [4][2] Conclusion - The polysilicon industry is at a critical juncture with potential trading opportunities arising from both negative and positive developments. Investors should closely watch the earnings reports and inventory levels as indicators of market direction [2][4]