DQ: Industry Stabilization And Anti Involution Policy Will Test Margin Recovery Prospects

Analysts have raised their price target on Daqo New Energy by $11 to $25 per share, citing expectations that industry stabilization and potential cash cost breakeven in Q3 could mark an earnings inflection point, despite recent below-cost sales and lowered 2025 production guidance.

Analyst Commentary

Street research points to a more constructive outlook on Daqo New Energy, even as near term fundamentals remain challenging. The recent price target increase reflects a recalibration of expectations around industry stabilization and the company’s ability to defend its balance sheet and earnings power.

Bullish Takeaways

• Bullish analysts view the higher price target as recognition that valuation now better reflects downside risk, with potential upside if earnings recover from a Q3 cash cost breakeven inflection.
• Expectations that the "anti involution" policy support in China could curb irrational pricing and excess capacity underpin a thesis of gradual margin normalization and improved industry discipline.
• The willingness to raise targets despite a Q2 earnings miss is seen as a signal that the worst of below cost selling may be behind the company. This supports a more favorable risk reward skew over a multi quarter horizon.
• Analysts highlight Daqo’s ability to navigate the downturn without aggressive balance sheet strain, which preserves optionality for future growth and potential re rating if polysilicon pricing stabilizes.

Bearish Takeaways

• Bearish analysts emphasize that the rating remains neutral, indicating limited conviction that industry capacity will right size quickly enough to drive a sustainable recovery in pricing and profitability.
• The Q2 miss and continued below cost sales reinforce execution risk, with concerns that any earnings inflection could be shallow if competitive pressure and oversupply persist longer than expected.
• Slightly lower 2025 production guidance is seen as a signal that growth ambitions are being tempered. This raises questions about long term volume leverage and the pace of earnings expansion.
• Some analysts caution that until margins normalize and visibility on industry consolidation improves, valuation may stay range bound, leaving investors exposed to volatility without a clear near term catalyst.

What's in the News

• Daqo New Energy reported unaudited third quarter 2025 polysilicon production of 30,650 MT, up from 26,012 MT in the second quarter, signaling continued volume growth despite pricing pressures (company announcement of operating results).
• The company issued fourth quarter 2025 production guidance of approximately 39,500 MT to 42,500 MT of polysilicon, implying a substantial sequential ramp in output (corporate guidance).
• Full year 2025 polysilicon production is now expected to be in the range of 121,000 MT to 124,000 MT, highlighting the scale of Daqo’s operations as the industry works through oversupply and pricing normalization (corporate guidance).

Valuation Changes

• Fair Value Estimate: Unchanged at $31.31 per share, indicating no adjustment to the intrinsic value assessment despite recent operating updates.
• Discount Rate: Risen slightly from 11.38% to 11.39%, reflecting a modest uptick in perceived risk or required return.
• Revenue Growth Assumption: Stable at approximately 42.10%, suggesting no change in the long term topline growth outlook.
• Net Profit Margin: Essentially unchanged at around 7.62%, indicating a consistent view on long term profitability despite current margin pressure.
• Future P/E Multiple: Edged up marginally from 21.37x to 21.38x, implying a negligible shift in valuation multiples applied to forward earnings.