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Arrowhd

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About Arrowhd

  1. Arrowhd

    Daqo (DQ)

    Hi Klothilde, virtually all of my positions end up being a trading position because you never know what is around the corner. Last year at this time we had a robust market move up and then in February it cratered. I am quick to pull the trigger so what I hoped was a long term position became short term. We could see the same pattern this year with a February retest of the 4Q lows but in the meantime I think DQ and JKS are constructive. DQ maybe to the low/mid 30s and then comes back in if there is weakness of some kind later this quarter. The analysts that have a rating are either a hold or an accumulate. Often the trend line of a recovering stock starts to move up before its industry bottoms. The market discounts the bottoming process as a known event and focuses on the future. Anyway, Philip Shen is the analyst who is most wired in to DQ and I listen to all of the DQ CCs. Shen has the 4Q EPS at 0.12 and revenue at 72 million. Shen is often the only published analyst so his estimates become the street estimate. He is always conservative so I would post an EPS of about 0.20 on the Estimize site of which I belong. The 3Q CC was rather morose with depressed spirits. At the end of the year and now into 2019 the DQ IR team is much more optimistic. Phase 3B went great and they see a turnaround in Chinese solar manufacturing requiring DQ poly. They are still the low cost manufacturer so their umbrella is the biggest one. The consensus of $4.23 for 2019 is old data. Right now Shen, who is about the only one who projects out a year at a time, has the 4Q 2018 number at 0.12, 1Q at 0.60, 2Q at 0.75, and 3Q at 0.93. If this is accurate that is a trailing EPS of $2.40. The 1Q number of .60 may be a bit high but DQ does have some pricing power over competitors because they are the low cost manufacturer and the most likely to survive any catastrophe. Buyers of poly will pay up to secure commodity from a reliable source which is the least likely to disappear. Nothing puts a going concern in jeopardy more than an interrupted supply chain of critical commodity. Beyond that it gets cloudy in a positive way since Phase 4 is a current work in progress by then. Add to that the possibility of a stronger world market for Chinese solar products, a stronger Chinese domestic market, and the continuation of the import restrictions on poly into China which were implemented prior to the tariff issues and most likely will survive post tariff resolutions. A wild card that you point out are the new low cost capacities that would be on line in 2019 but again, DQ is the low cost manufacturer so in a price war, they can drag everyone in to un-profitability, take market share if they have the inventory and still make money. Then the better future is just moved out to the right, and if some of these poly competitors go belly up, the future may even look brighter. Regarding JKS, Shen has the 4Q at 0.40 EPS and 1,285 million for revenue. Last year JKS made a stealth move like this nearly doubling if my memory is correct so I took a trading position in it to along with the other stuff I posted above. (edit: Looking at the charts I think the stealth move was in 2017)
  2. Arrowhd

    Daqo (DQ)

    Hi all, I have lurked here for a while but since the demise of the Contrarian Investor this seems to be the place where thoughtful comments are found so I joined but not posted yet. Currently I own DQ and JKS buying them last week. (also own, HUYA, MOMO, ACRGF, ROKU, KSHB. Had MU and CGC but got stopped out). Regarding DQ: --The Phase 3 ramp exceeded expectations. Originally DQ felt they would reach full capacity at the end of Q1 2019. They performed much better than their guidance. --The current ASP for poly is still challenging due to China domestic market. The expectation is for the market to start to recover in late Q1 or early Q2 as China markets start to recover. --Global markets will grow very fast in 2019 due to the significant cost reduction achieved in 2018. --Phase 4 will double capacity over Phase 3. Short term I think China will rebound some once they get the tariff issues smoothed out. Stabilization will be good. Solar should start to look attractive again. So I am mildly optimistic at this point but not expecting the participation that we saw last year when it was up in the 60s. First stop may be in the 30s but constructive buying will be important. I think both DQ and JKS can do well this year. JMHO of course, lots of good opinions on this.
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