Daqo New Energy’s recovery is slower than expected: fourth-quarter prices improve, but a return to profit may have to wait until 2028
Adjusted net loss narrowed from the previous quarter in the third quarter, but realized selling prices lagged market quotations. JPMorgan lowered its earnings forecasts and price target while monitoring fourth-quarter inventory reduction and industry production cuts.
Original source：J.P. MorganFirst published on Unhidea：Original source date：
Key takeaway
JPMorgan sees early signs of improvement in Daqo New Energy’s selling prices and supply conditions, but industry inventories and the pace of policy implementation are slowing the earnings recovery relative to previous expectations.
Why did the third-quarter loss narrow but still fall short of expectations?
Daqo New Energy reported an adjusted net loss of 53 million US dollars in the third quarter of 2026, narrower than the 81 million US dollar loss in the second quarter, but still below JPMorgan’s expectations. The bank had previously expected Daqo to roughly break even in the second half after polysilicon prices recovered to near the company’s full cost.
Management said full cost, including depreciation and value-added tax, was approximately 43 yuan per kilogram in the third quarter. Industry inventories were relatively high, and realized transaction prices continued to lag market quotations, so the rise in quotations did not translate promptly into company earnings.
Management expects the recovery of realized selling prices to the full-cost level to be gradual and to potentially take at least several months; the timing and strength of regulatory enforcement remain uncertain.
What signs of improvement are there in the fourth quarter?
Management expects realized average selling prices to rise quarter on quarter in the fourth quarter. The third-quarter average selling price of 4.12 US dollars per kilogram mainly reflected orders signed before late July; if current prices hold, inventory impairment charges are also expected to decline quarter on quarter.
The company expects fourth-quarter shipments to exceed production, with inventory reduction a priority. Production guidance is 35 thousand to 45 thousand tonnes, below the 53.5 thousand tonnes produced in the third quarter.
Industry participants are discussing lowering the overall operating rate to around 35% to rebalance supply and demand; Daqo is also preparing to participate in coordinated production cuts. JPMorgan sees this as a positive signal, but the pace of price recovery remains dependent on policy implementation.
How have earnings forecasts and the price target changed?
JPMorgan lowered its earnings forecasts for 2026–2028, citing lower assumptions for average polysilicon selling prices and shipments, as well as a slower recovery in industry profitability. The bank now expects adjusted net losses of 267 million and 109 million US dollars in 2026 and 2027, respectively, followed by a modest profit of 6 million US dollars in 2028.
The bank lowered its price target for June 2027 from 22 to 18.5 US dollars and maintained its Overweight rating. The price target is calculated using a target price-to-book ratio of 0.2 times, plus 12.5% of the attributable net cash value; the rating is maintained based on the company’s cost advantage, solid balance sheet and the potential for an eventual recovery in industry profitability.
