[Click eStock] OCI, Undervalued Polysilicon Company

Hyundai Motor Securities Report

Hyundai Motor Securities on the 10th issued a buy rating and a target price of 160,000 KRW for OCI. Although earnings forecasts have been revised upward, the stock price continues to decline, indicating an undervalued state.

OCI plans to proceed with a spin-off on May 1 following the shareholders' meeting on the 22nd of this month. OCI Holdings will engage in businesses such as polysilicon for solar power, U.S. solar power operations, power generation, and urban development projects. The newly listed company, OCI, will operate businesses including polysilicon for semiconductors and basic chemicals. The split ratio is 68.8 to 31.2.

The newly established company is estimated to have recorded approximately 2 trillion KRW in sales and about 200 billion KRW in operating profit. The main carbon chemical product, Pitch, is used as a binder for electrode rods in aluminum smelting. With the recent strength in aluminum prices, Pitch is also maintaining a strong trend, and it is expected to record profits at last year’s level.

Kang Dong-jin, a researcher at Hyundai Motor Securities, explained, “The operating company plans to maintain a dividend payout ratio of over 30% after listing. Given the expected market capitalization of about 720 billion KRW at the time of listing and a dividend yield of over 6%, a high dividend is anticipated.”

The polysilicon market outlook expects the strong price trend of high-purity polysilicon to continue. Considering the downward stabilization of raw material prices and increased volume due to last year’s capacity expansion, even if polysilicon prices fall further in the second half, profits are expected to increase compared to the previous year. Researcher Kang stated, “Although solar panels that were held up by U.S. customs have started to be sold, the U.S. Uyghur Forced Labor Prevention Act (UFLPA) has not disappeared. Europe is also expected to maintain a premium on non-Chinese polysilicon due to the implementation of the Supply Chain Act.”

Currently, OCI is undervalued despite being a non-Chinese solar power company that should enjoy a premium. Researcher Kang said, “Through the spin-off, the value of business units that have not received much attention so far is expected to be highlighted. After the business company’s spin-off listing, the combined market capitalization of both companies will increase.”