Mirae Asset Securities on July 24 raised its target price for OCI Holdings stocks to 460,000 won from 320,000 won while maintaining a 'BUY' rating. Analyst Lee Jin-ho cited long-term supply agreements (LTA) with Take-or-Pay clauses and advance payment terms that provide contractual backing for earnings projections through 2029. The brokerage changed its valuation methodology to sum-of-the-parts (SOTP) and applied 2029 EBITDA estimates to reflect enhanced earnings certainty from agreements tied to US solar supply chain expansion.
Mirae Asset Securities Raises OCI Holdings Target Price to 460,000 Won
Lee Jin-ho of Mirae Asset Securities stated in a report that "the core point is that long-term supply contracts were signed with Take-or-Pay and advance payment receipt conditions, meaning the reliability of 2029 earnings is backed by contracts." He added, "Reflecting this, we changed the valuation method to sum-of-the-parts (SOTP) and applied 2029 EBITDA." The target price increase from 320,000 won to 460,000 won represents a 43.75% upward revision.
OCI Holdings Plans Capacity Expansion to 70,000 Tons Polysilicon by 2029
OCI Holdings announced during its Q2 earnings conference call plans to expand polysilicon production capacity from the current 35,000 tons to 70,000 tons and wafer production capacity from 2.7GW to 11.5GW by 2029. Total investment amounts to approximately 1.42 trillion won for polysilicon and approximately 500 billion won for wafers. About one-third of this investment will be funded through advance payments from customers.
Long-Term Contracts Secure 2028-2029 Sales with Wafer Supply Focus
Lee stated, "The proportion of long-term supply contracts is gradually expanding from 2027 to 2029, and volumes for 2028-2029 are virtually sold out." He explained that "70-80% of existing contracted volumes will be supplied in wafer form rather than polysilicon, resulting in improved profit structure as wafer processing margins are added to polysilicon margins." The analyst projected OCITS's operating profit margin (OPM) at approximately 31% in 2029. He added that "if the US Section 232 measure is announced in early August, additional upside potential for the stock price is expected."
Q2 Operating Profit Misses Consensus at 108.1 Billion Won
OCI Holdings' Q2 operating profit reached 108.1 billion won, falling approximately 11% short of the consensus estimate of 120.9 billion won. Lee assessed that "customer wait-and-see attitudes toward polysilicon purchases continued as the US Section 232 announcement scheduled for late June was delayed, causing OCITS to record an operating loss." However, he evaluated the earnings shortfall as temporary, noting that "normal operating rates were maintained and inventory increased by an estimated 2,000-3,000 tons."
FAQ
What did Mirae Asset Securities do regarding OCI Holdings stocks on July 24?
Mirae Asset Securities raised its target price for OCI Holdings stocks to 460,000 won from 320,000 won while maintaining a 'BUY' rating, citing long-term supply agreements with Take-or-Pay terms that provide earnings visibility through 2029.
How much capacity expansion did OCI Holdings announce by 2029?
OCI Holdings announced plans to expand polysilicon production capacity from 35,000 tons to 70,000 tons and wafer production capacity from 2.7GW to 11.5GW by 2029, with total investment of approximately 1.42 trillion won for polysilicon and 500 billion won for wafers.
Why did OCI Holdings' Q2 operating profit miss consensus estimates?
Q2 operating profit of 108.1 billion won missed the consensus of 120.9 billion won by approximately 11% because the delayed US Section 232 announcement caused customers to adopt wait-and-see attitudes toward polysilicon purchases, leading OCITS to record an operating loss.
