Daqo 3Q26 review: Green shoots emerging, but recovery takes time; maintain OW

Daqo's 3Q26 net loss came in at US$53mn, below J.P. Morgan's expectations, suggesting the polysilicon earnings recovery is taking longer than previously anticipated, as realized pricing continues to lag quoted prices and anti-involution policy execution remains gradual. Management noted 3Q all-in cost including depreciation and VAT was ~RMB43/kg, with 3Q ASP of US$4.12/kg largely reflecting orders signed before late July. J.P. Morgan lowers 2026-28 earnings estimates and now expects Daqo to remain loss-making through 2027 before returning to a modest net profit in 2028. Early signs of improvement are emerging into 4Q: management expects higher realized ASP, lower inventory provisions and inventory destocking, with 4Q shipments to exceed production and output guided at 35-45kt versus 53.5kt in 3Q, while industry players discuss cutting overall utilization to ~35% to rebalance supply and demand. The Jun-27 price target is cut 16% to US$18.5, based on 0.2x target P/BV plus 12.5% of attrib