Citigroup: It is expected that GCL Technology (03800) can benefit from the rise in polysilicon prices under the integration of industry production capacity, giving GCL Technology a “buy/high risk” rating

The Zhitong Finance App learned that Citibank released a research report saying that China's polysilicon industry is promoting anti-domestic sales. Beijing Guanghe Qiancheng Technology Co., Ltd. (Guanghe Qiancheng) was officially registered and established a few days ago and is regarded by the outside world as an integrated acquisition platform for polysilicon production capacity, while GCL Technology (03800) holds about 16.79% of the shares in the joint venture, making it the second largest shareholder. Citigroup gave GCL Technology a “Buy/High Risk” rating, with a target price of HK$1.72.

Citi sees the establishment of this joint venture as a step to acquire inefficient polysilicon production capacity and promote industry integration, pointing out that GCL's shareholding ratio in the joint venture entity seems to be lower than market expectations compared to its market share based on sales volume. If demand in the polysilicon market remains flat year on year, it is currently estimated that GCL's capacity utilization rate may drop from about 60% this year to about 50% next year. However, Citi still believes that if production capacity is successfully integrated, it is expected that polysilicon prices will rise, and GCL Technology can also benefit from profit margin expansion, and profits can still record growth at 50% capacity utilization.