[Click eStock] "OCI Holdings Expected to Deliver Q4 Earnings Surprise... Solar Power as Alternative to U.S. Power Crisis"

On January 7, DB Securities analyzed that OCI Holdings is expected to see a full-scale profit growth this year, following a turnaround in fourth-quarter results last year. Accordingly, the target stock price was maintained at 160,000 won.

Han Seungjae, a researcher at DB Securities, stated, "OCI Holdings' operating profit for the fourth quarter of last year is projected to reach 32.6 billion won, turning to profit both year-on-year and quarter-on-quarter, and exceeding the previous estimate of 27.6 billion won."

He added, "OCI TerraSus continued to face cost burdens until October due to operational suspension through August, but as of November, both the cost ratio and sales volume have normalized, allowing the operating margin to recover to 20%. The fourth-quarter operating profit for OCI TerraSus is expected to be 31.8 billion won."

According to DB Securities, the cash cost for OCI TerraSus is estimated to have dropped to around $11 per kilogram after October. Even if the average selling price (ASP) remains at $16 per kilogram, profitability above 20% is considered achievable.

On the other hand, temporary sluggishness is expected for some subsidiaries. OCI SE is projected to post a loss due to boiler replacement, while OCI E is expected to turn to a loss as there are no project sales. However, the parent company OCI is likely to return to profitability as one-off expenses reflected in the third quarter are removed and the yield of semiconductor-grade polysilicon increases. Han explained, "OCI is expected to turn profitable (7 billion won) due to the removal of one-off expenses reflected in the third quarter and improved semiconductor polysilicon yield."

The outlook for this year is even brighter. DB Securities forecasts OCI Holdings' operating profit for this year at 376.4 billion won, with OCI TerraSus contributing 223 billion won. The sales volume of polysilicon for OCI TerraSus is expected to surge from 19,000 tons last year to 31,000 tons this year. Considering the production capacity of 35,000 tons, the company is expected to shift to a full production system with an operating rate approaching 90%, enabling further improvement in cost ratios.

The increasing share of OCI polysilicon used within the domestic solar value chain is also seen as a positive signal. Han noted, "Given the sharp rise in wafer import prices since July last year and the increased share of Vietnam and Malaysia among wafer importers, the proportion of OCI polysilicon used by Korean module manufacturers is believed to have risen significantly. This supports the upward forecast for sales volume this year."

Attention is also being paid to the potential rebound in the U.S. solar market. Han stated, "The only short-term solution to the U.S. power crisis is solar power, and with strengthened regulations on Chinese products, an overall increase in prices for crystalline solar products is expected." He further predicted, "If Section 232 and additional AD/CVD measures for Southeast Asia take effect early in the year, the improvement could be even steeper."