Is Daqo A Two Trick Pony?


Summary

After reaching our target price in less than four months, Daqo Energy stock dropped to our initial entry point during the last semester.
On the positive side, DQ has delivered on its capacity expansion guidance and production cost while aiming to double production to 70,000 MT by 2020.
On the negative side, in May new Chinese regulation limiting subsidies came out triggering the drop of polysilicon prices below international prices.
Taking into account the actual global cost curve of polysilicon, the planned 150,000 MT-industry capacity expansions and the future global demand, I do not believe current polysilicon prices to be.
I recommend buying DQ for a target price of $59.00 USD/share, offering a 1.4x upside from current levels.

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