Last Update 14 Dec 25

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.

Regulatory support and disciplined cost management enhance profitability and resilience, allowing Daqo to withstand industry volatility and maintain strong operational performance.
Advancements in N-type polysilicon technology and robust solar demand position Daqo to capture premium market share and benefit from sustained growth in the solar sector.
Prolonged industry oversupply, reliance on unstable policy support, operational losses, and concentrated product risks threaten Daqo's revenue stability, margins, and long-term viability.

Catalysts

About Daqo New Energy

Manufactures and sells polysilicon to photovoltaic product manufacturers in the People’s Republic of China.What are the underlying business or industry changes driving this perspective?

Recent regulatory interventions by Chinese authorities to curb irrational competition and enforce sales above production costs are expected to stabilize polysilicon prices and improve industry profitability, directly supporting future revenue and margins for Daqo.
Global momentum in solar installations-driven by policy incentives and increasing cost-competitiveness of solar power-remains robust, positioning Daqo to benefit from sustained long-term demand growth, which supports a recovery in sales volumes and top-line growth once market conditions normalize.
Daqo's strategic focus on enhancing N-type polysilicon technology and ongoing cost reduction (through operational efficiency, digital transformation, and AI adoption) is expected to expand its market share in the premium segment and improve net margins as technology demands evolve.
Daqo's strong balance sheet with ample cash, no debt, and disciplined cost management provides resilience to weather short-term industry volatility, enabling the company to maintain or even increase capacity utilization and earnings as market supply-demand balance recovers.
The launch of a $100 million share repurchase program indicates management's confidence in near-term industry stabilization and Daqo's undervaluation, which can improve shareholder returns (EPS) as earnings normalize.

Daqo New Energy Earnings and Revenue Growth

Daqo New Energy Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Daqo New Energy's revenue will grow by 58.5% annually over the next 3 years.
Analysts assume that profit margins will increase from -65.6% today to 9.6% in 3 years time.
Analysts expect earnings to reach $226.9 million (and earnings per share of $3.41) by about September 2028, up from $-389.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $298 million in earnings, and the most bearish expecting $-106 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.2x on those 2028 earnings, up from -4.6x today. This future PE is lower than the current PE for the US Semiconductor industry at 30.1x.
Analysts expect the number of shares outstanding to grow by 1.41% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 11.0%, as per the Simply Wall St company report.

Daqo New Energy Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent industry overcapacity and continued low utilization rates (around 30–35%) highlight the risk of prolonged supply/demand imbalance in polysilicon, putting downward pressure on selling prices and threatening long-term Daqo revenues and margins.
Daqo's financials reveal recurring operating and net losses, negative EBITDA, and shrinking cash balances despite significant liquidity; sustained losses may erode shareholder value and jeopardize the company's ability to fund reinvestment, directly impacting future earnings.
Heavy reliance on government intervention (anti-involution, price regulation, capacity consolidation) creates uncertainty-if policies are delayed, ineffective, or reversed, excess inventory and supply gluts could persist, damaging pricing power and revenue sustainability.
Market discipline initiatives may mandate production curtailments or further utilization cuts, limiting Daqo's ability to scale and causing underutilized assets, which would worsen return on invested capital and compress future operating profits.
The company's core focus on high-purity polysilicon exposes it to structural risks if technology shifts (e.g., rapid adoption of alternative solar materials) or global trade barriers (e.g., anti-dumping claims, import restrictions) alter demand trends, potentially leading to revenue instability and margin erosion.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $24.434 for Daqo New Energy based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $35.54, and the most bearish reporting a price target of just $14.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.4 billion, earnings will come to $226.9 million, and it would be trading on a PE ratio of 10.2x, assuming you use a discount rate of 11.0%.
Given the current share price of $26.56, the analyst price target of $24.43 is 8.7% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Policy Shifts And Rising Demand Will Drive A Turnaround In Polysilicon