Polysilicon Prices Rising... Institutions and Foreigners Buying OCI

[Asia Economy Reporter Minji Lee] As the upward trend in polysilicon prices is expected to continue, OCI's stock price has surged about 35% in the past month. Although OCI has maintained a long-term deficit, it is anticipated to improve its performance this year based on the strong polysilicon prices.

According to the Korea Exchange on the 3rd, OCI's stock price rose from 69,100 won to 93,000 won, an increase of about 35%, from the 1st to the 30th of last month. Buying by foreigners and institutions drove the stock price increase. Foreigners and institutions purchased stocks worth 39.5 billion won and 51 billion won respectively over the past month. They accumulated a total of 90.4 billion won in stocks, ranking 13th among the top net purchase stocks.

The factor stimulating the stock price rise is the price of polysilicon, a basic raw material and core component of the solar power industry. According to PV Insights, a solar market research firm, as of the 30th of last month, the weekly spot price of high-purity (9N or higher) polysilicon averaged $10.570 per kilogram, up 2.13% from the previous week. The price of grade 2 (6N~8N) polysilicon averaged $5.250 per kilogram, rising 2.14% during the same period. With increasing demand for solar installations, the polysilicon market is expected to tighten more than before this year.

The fact that the number of players who can enter the polysilicon business and expand facilities is limited supports the price strength. Major domestic companies include OCI, while major overseas companies include GCL-Poly, Wacker, TBEA, and Daqo New Energy. Compared to other solar production processes such as wafers, cells, and modules, polysilicon is the most basic stage, making the industry’s entry barriers high and leading to oligopolization compared to other production processes.

Yang Hyung-mo, a researcher at DS Investment & Securities, said, “The polysilicon business is a capital-intensive industry, and the investment amount is larger than other processes, so at this point, there is no place that can newly enter the industry or increase investment scale.” He added, “OCI’s polysilicon price is attractive even compared to other companies, with a cost of about $7.”

A notable area is the expansion of the Malaysian plant facilities. Recently, the company announced plans to expand the factory using existing Korean facilities in Malaysia, and it is expected to produce 35,000 tons in 2022 (currently 30,000 tons). Kang Dong-jin, a researcher at Hyundai Motor Securities, said, “The plant expansion will further reduce costs,” adding, “The Malaysian plant mostly relies on hydropower, an eco-friendly energy source, so its value will be highlighted amid the carbon footprint expansion phase.”

The market expects operating profit in the fourth quarter to be 31.4 billion won, turning positive from a loss of 64.2 billion won in the same period last year. Following the third quarter, the strong polysilicon prices increased the performance of the Basic Chemicals division, but due to exchange rate effects, the profit size is estimated to be smaller than expected. On an annual basis last year, an operating loss of 87.6 billion won was recorded, continuing the deficit from the previous year, but this year, it is expected to achieve a profit of 170.4 billion won, successfully turning to black.

Market expectations are also rising. While previous securities firms set target stock prices in the 70,000 to 90,000 won range, recently DS Investment & Securities set a target price of 110,000 won. Mirae Asset Daewoo raised its target price by 9% to 95,000 won, and Hyundai Motor Securities set it at 110,000 won.