UPDATE: Piper Jaffray Lowers PT on Daqo New Energy from $2 to $1
Piper Jaffray reiterated a Neutral rating on Daqo New Energy (NYSE: DQ) and lowered its price target from $2 to $1.
Piper Jaffray commented, “We reiterate our Neutral rating on DQ but lower our PT to $1.00 (from $2.00 previously) following our reset expectations that global oversupply will likely remain through 2013. Previously, we expected poly pricing to stabilize for 2013 as poly inventory is being digested and non-competitive capacity is shut down. However, we now expect poly oversupply to grow from 14 GW to 20 GW next year, which implies potential downside risk to our current estimate of mid $20/kg for poly ASPs. We remain cautious on DQ based on 1) industry oversupply 2) lack of profit and 3) cost reduction slowdown. Our forecast for DQ to be unprofitable in FY13 leads us to move our valuation to P/Sales from EV/Sales previously. We apply a 0.1x multiple, below peers at 0.4x, as its margins underperform the group. This gives us a $1.00 PT based on FY13 sales of $283m”
Daqo New Energy closed at $0.93 on Wednesday.
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