Auriga is out initiating coverage on Daqo New Energy (DQ) and is considerably bullish, calling the company highly profitable and undervalued.  The firm initiates Daqo with a Buy rating and $20 price target (about 40% higher than current levels).

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Daqo produces high quality, low cost polysilicon for use in solar products but as Auriga notes the company is trying to establish its wafer and module manufacturing business where it has the advantage of a significantly lower cost basis.  The firm believes that next year polysilicon production will make up more than half of revenues, but an increasingly larger portion will come from wafering. 

The firm notes that their model is quite conservative and assumes poly prices will drop from the current $75/kg level to $56, $52 and $42 over the next couple years.  Should poly prices remain where they are or rise, a $20 price target would be too conservative.

After breaking out to a new high this morning, Daqo has reversed sharply and closed in the red as the overall market deteriorates.  Daqo is an interesting company and one we will also begin coverage on here at GreenStocksCentral.com