Global PV Installation Demand Surging
The author is an analyst of KB Securities. He can be reached at yc.baek@kbfg.com. -- Ed.
Maintain BUY, raise target price 10% to KRW165,000
We maintain BUY on OCI and raise our TP by 10% to KRW165,000 on OCI. We revise up 2022E-23E NP (attributable to controlling interests) by 18.7%/8.0% to reflect an increase in 2022E polysilicon ASP (USD18.40/kg→USD26.30/kg). Derived using the P/B-ROE model, our TP represents 9.0x 2022E implied P/E, 1.15x P/B.
2Q22 earnings to miss market consensus
We forecast 2Q22 revenue/OP at KRW1.11tn (+44.6% YoY, +10.3% QoQ)/KRW192.3bn (+15.7% YoY, +18.7% QoQ); our OP estimate is below the KRW241.4bn market consensus (FnGuide; Jun 20). Basic Chemicals revenue/OP should be KRW391.8bn (+14.1% QoQ)/KRW104.8bn (+35.8% QoQ) thanks to a top-line boost from a slight increase in polysilicon ASP and completion of routine maintenance at the Malaysia plant (+15% QoQ in sales volume); we revise down our sales volume estimate because of production line issues in Malaysia this month. Petrochemicals & Carbon Materials revenue/OP should be KRW415.3bn (-0.3% QoQ)/KRW35.3bn (+4.1% QoQ); despite an increase in key product ASP (e.g., pitch/carbon black), revenue should be flat, as sales volume was hit by two weeks of routine maintenance at the Pohang/Gwangyang plants.
Polysilicon supply remains tight
Contrary to our initial prediction, global polysilicon supply remains tight on (1) a surge in global PV installation demand and (2) delays in capacity increases in China. We revise up 2022E PV installation demand from 230GWh to 245GWh (+33.2% YoY) while our estimated capacity increase was reduced from 280k tons to 180k tons on capex delays (e.g., GCL-Poly). Given polysilicon demand is projected to increase by 170k tons this year, supply should remain tight for some time.