Daqo New Energy Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 30, 2023

There are 9 speakers on the call.

Operator

Good morning, and welcome to Daqo Energy Third Quarter 2023 Results Conference Call. All participants will be in listen only mode. After today's presentation, there is an opportunity to ask questions. Please note that this event is being recorded. I'd now like to turn the call over to Ms.

Operator

Anita Zhu, Investor Relations Director, please go ahead.

Speaker 1

Hello, everyone. I'm Anita Zhu, the Investor Relations of Daqo New Energy. Thank you for joining our conference call today. SODAPO NIO Energy just issued its financial results for the Q3 of 2023, which can be found on our website at www.dqsolar.com. Today, attending the conference call, we have our Chairman and CEO, Mr.

Speaker 1

Xiang Shu CFO, Mr. Ming Yang and myself. The call today will begin with an update from Mr. Xu our market conditions and company operations, and then Mr. Young will discuss the company's financial performance for the quarter the year.

Speaker 1

After that, we'll open the floor to Q and A from the audience. Before we begin the formal remarks, I would like to remind you that certain statements on today's call, including expected future operational and financial performance and industry growth, are forward looking statements that are made under the Safe Harbor provisions of the U. S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties.

Speaker 1

A number of factors could cause actual results to differ materially from those contained in any forward looking statement. Further information regarding these and other risks included in the reports or documents we have filed with were furnished to the Securities and Exchange Commission. These statements only reflect our current and preliminary view as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today's call is as of today, and we undertake no duty to update such information, except as required under applicable law.

Speaker 1

Also during the call, we will occasionally reference Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into U. S. Dollars solely for the convenience So now we would like to welcome our CEO, Mr. Xiaoying Zhu for the opening remarks.

Speaker 1

Thank you, everyone, for joining the conference call today. Anita will serve as my translator during the call. And if you have any questions addressed to the company or to me, please I'll address the questions at the end of the call. So now on behalf of Mr. Xu, I'll now read off his remarks regarding current market conditions and the market and the company performance.

Speaker 1

So during the Q3, continued optimization of operations at our 2 polysilicon facilities resulting in a total production volume of 57,664 metric tons, an increase of 12,300 and 58 metric tons or 27% compared to the previous quarter. Our inner Mongolia 5A facility, which is now in for production, contributed approximately 40% of our total production volumes. So meanwhile, our production costs further decreased by 5.8% from quarter second quarter to $6.52 per kilo, primarily due to improvements in manufacturing efficiency as well as a reduction in the cost of raw materials, particularly metallurgical grade silicones. So compared to our Q1 average production cost of US7.55 dollars per kilo, cost has declined by more than $1 per kilogram. So based on the company's most recent production data, we expect our 4th quarter cost to continue to trend downwards from the 3rd quarter levels.

Speaker 1

So we shipped a total of 6 to 2967 metric tons of polysilicon in 3rd quarter, An increase of 9,465 metric tonne over our 2nd quarter shipments and significantly higher than our quarterly production volume. This has resulted in significant decrease in polysilicon product inventory across our 2 facilities, now at a level of less than 1 week of production volume. So for the Q3, the company generated $70,000,000 in EBITDA. Net cash provided by operating activities for the 1st 9 months of the year totaled US1.5 billion dollars was more than US711 million dollars in the 3rd quarter. The company continues to maintain a very strong balance sheet with no financial debt.

Speaker 1

At the end of the 3rd quarter, the company had a cash balance of 3.3 $1,000,000,000 and a combined cash and banknote receivable balance of $3,600,000,000 So our total annual Polysacchar nameplate capacity has reached 205,000 metric tons across our two facilities. For 4th quarter, we expect total poly production volume to be approximately 59,000 metric tons to 62,000 metric tons, a continued increase over our Q3 levels. Full year production is expected to be approximately 196,000 metric tons to 199,000 metric tons, representing an increase of 46% to 49% compared to 2022 levels. With more than a decade of experience in poly production as well as a fully digitalized and integrated production system that optimizes operational efficiency, We are confident that we can strengthen our position as one of the dominant polysilicon manufacturers in the industry. At the end of the second quarter, after polyprices reached bottom, customers began reordering and taking delivery of products, Significantly reducing industry inventory levels, polysilicon pricing recovered gradually over the Q3.

Speaker 1

And in July, as module makers intensified competition, Module prices fell from RMB1.5 per watt in June to RMB1.3 per watt in July. Meanwhile, the high demand in the module sector coupled with lower utilization rate for poly due to power rationing and system Maintenance drove a marginal recovery in polysilicon prices. According to industry statistics, mono grade polysilicon prices rebounded from the lowest level of less than RMB60 per kilo in June to RMB63 to RMB68 per kilogram by end July and an average of RMB87 per kilogram by the end of September. Furthermore, as the current price range is unlikely to be profitable for new engines given their cost structure, We have seen delays in the production plants. Going into the Q4, production volumes in poly sector are unlikely are likely to increase marginally as from new capacities come online.

Speaker 1

During the Q3, we saw an acceleration in the transition from P type to n type cell technology With strong growth in entire product demand volume and the entire product average selling price premium expanded to RMB 10 to RMB 12 per kilo in the 3rd quarter. Going forward, we expect this transition to further accelerate as Enchi products expand market share, leading to continued demand growth. To give an update on the company's 700,000,000 share buyback program announced in November 2022, By the end of this September, the company had already purchased 8,100,000 ADS for approximately US328 $1,000,000 with an average cost of approximately $40.58 per ADS. Combined with the program completed in 2022 in aggregate, The company has already purchased approximately 10,000,000 ADS for approximately US448.8 million dollars While basic weighted average ADS outstanding for the 3rd quarter were 74,000,000 shares, total outstanding shares at the end of the 3rd quarter were approximately 70 1,800,000 shares after fully reflecting our recently completed share repurchases. With the urgent need to address climate change, We're still at the very early stage of the energy transition from fossil fuel to renewable energy for humans' energy needs on earth.

Speaker 1

As one of the most competitive forms of power generation, the continuous cost reduction in solar PV products and the associated reduction in solar energy generation costs are expected to create substantial additional green energy demand, which we believe is unlikely to exceed Most analysts' expectations. Solar PV is generally expected to eventually become one of the most important energies to power the world. In addition, as solar PV technology keeps evolving, we believe that the increasing needs for very high purity polys such as our entai polysilicon will help differentiate us from most of our competitors. While many of our competitors will likely struggle in the current market environment, Doctor. New Energy has one of the best balance sheet in the industry with no financial debt.

Speaker 1

And we as a whole are confident that we will navigate the near term market volatility successfully. We're optimistic that as the solar end market continues to grow And as our customers continue to transition to higher efficiency N type technology, we will benefit from this trend. Danso will continue to strive to maintain solid growth and capture the long term benefit of the growing global solar PV market. So regarding future outlook and guidance, we expect to produce approximately 59,000 metric tons to 52 1,000 metric tons of poly during the Q4 of 2023. And for full year 2023, we expect to produce approximately 196,000 metric tons to 199,000 master tons of policy accounts.

Speaker 1

So now I turn the call to our CFO, Mr. Ming Yang to delve deeper on the financial performance. Ming, please go ahead.

Speaker 2

Thank you, Anita, and hello, everyone. Thank you for joining our Q3 earnings conference call today. Now I will discuss the company's Q3 financial performance. Revenues were RMB484.8 million compared to RMB636.7 million in the Q2 of 2023 at RMB1.2 billion in the Q3 of 2022. The decrease in revenue compared to the Q2 of 2023 was primarily due to The decrease in average selling prices, mitigated by an increase in sales volume.

Speaker 2

Gross profit was 67,800,000 compared to $258,900,000 in the Q2 of 2023 $978,600,000 in the Q3 of Gross margin was 14% for the quarter compared to 40% in the Q2 of 2023 and 80% The decrease in gross margin compared to the Q2 of 2023 was primarily due to lower average selling prices, which was partially mitigated by lower production costs. Selling, general and administrative expenses were $89,700,000 compared to $43,300,000 in 2nd quarter of 2023 and $280,000,000 in the Q3 of 2022. I will give a little bit more details about the increase SG and A expenses for the quarter as compared to the previous quarter and this is primarily related to the resignation expenses and the recognition of the remaining share based compensation expenses led to the company's recent management change. The recognition of the remaining non cash share based compensation expenses consists of approximately 330,000 shares, which will be vested based on the vesting schedule over the next 2 years. And based on the current share price, this is approximately $8,000,000 In terms of expense, however, U.

Speaker 2

S. GAAP rules requires that the company recognize facility expenses based on the share price at the time of grant, And this will be approximately $23,000,000 In addition, our SG and A expenses during the Q3 includes a total of RMB46.3 million in non cash share based compensation costs, which includes That is related to recent management changes as I had mentioned. And so and this compares to A total of $27,500,000 of share based incentive expenses in the Q2 of 2023. For the Q4, we would expect our SG and A expenses to normalize and will be in the range Approximately $35,000,000 to $38,000,000 per quarter, inclusive of non cash share based compensation costs. Research and development costs were $2,800,000 compared to $2,200,000 in the Q2 of 2023 and $2,500,000 in the Q3 of 2022.

Speaker 2

R and D expenses vary from period to period as we reflect R and D activities that take And most of our R and D activities currently is focused on Increasing the percentage of N type polysilicon for the company's product mix. For foreign exchange gain was $3,100,000 for the quarter compared to a loss of $19,700,000 in the Q2 of 2023. And this is attributed to the volatility and probably fluctuation in the U. S. Dollar and RMB exchange rate during the quarter.

Speaker 2

And as a result of the above mentioned, income from operations was RMB22.5 billion compared to RMB213 1,000,000 in the Q2 of 2020 is RMB693 1,000,000 in the Q3 of 2022. Operating margin was 4.6% compared to 33.6% in the Q2 of 2023 and 56.8% in the Q3 of 2022. Net loss attributable to Falcon Fuel Energy shareholders was $6,300,000 compared to net income of 100 and $3,700,000 in the Q2 of 2023 $323,000,000 in the Q3 of 2022. Loss per basic ADS for the quarter was $0.09 per share compared to earnings per basic ADS of $1.35 in the Q2 of 2023 at $4.28 in the Q3 of 2022. And adjusted net income or non GAAP attributable to Daqo New Energy shareholders, excluding non cash share based compensation costs was RMB44 1,000,000 compared to RMB 134,500,000 in the Q2 of 2023 has found $90,400,000 in the Q3 of 2022.

Speaker 2

Adjusted earnings per basic ADS was $0.59 compared to $1.75 in the Q2 of 2023 and $7.81 in the Q3 of 20 22. EBITDA was $70,200,000 compared to $230,000,000 in the Q2 of 2023 and $220,000,000 EBITDA margin was 14.5% compared to 36.1% in the Q2 of 2023 That's to be 9% in the Q3 of 2022. Now, I would like to provide some additional color related to our Operations, so from a pure operation perspective, this would exclude the impact of the one time resignation costs and the non cash share based compensation costs of the U. S. LIFCO.

Speaker 2

For our operating subsidiary Xinjiang dotco is recorded a pre tax earnings of RMB888 1,000,000 or approximately US121 million dollars And net income of RMB689 1,000,000 or approximately US94 million dollars Saco New Energy currently owns approximately 72.4 percent of Xinjiang dotco and Saco New Energy shareholders' allocation of the operating Net income should be approximately $32,400,000 excluding the above mentioned GAAP accounting related expenses. And now on the company's financial condition. As of September 30, 2023, the company had 3 $280,000,000 in cash and cash equivalents and restricted cash compared to RMB3.17 billion As of June 30, 2023, it's $2,050,000,000 as of September 30, 2022. And as of September 30, 2023. Notes receivable balance of the company was $276,000,000 compared to $799,000,000 as of June 30, Thank notes with maturity within 6 months.

Speaker 2

And now the company's cash flow. For the 9 months ended September 30, 2023, Net cash provided by operating activities was RMB1.49 billion compared to RMB1.7 dollars 7,000,000,000 in the same period of 2022. And for the 9 months ended September 30, 2023, Net cash used in investing activities was RMB954 1,000,000 compared to net cash used in the expected activities of RMB605 1,000,000 in the same period of 20 Net cash used in investing activities in the Q3 of 2023 were primarily related to Capital expenditures on the company's polysilicon project in Baodou City in Mongolia, inclusive of both Phase 1 and Phase 2. And for the 9 months ended September 30, 2023, net cash used in finance activities was R602 1,000,000 Compared to net cash provided by financial activities of RMB1.4 billion in the same period of 2022. Net cash received finance activities for the 1st 3 quarters of 2023 was primarily related to RMB322 1,000,000 in share repurchases and RMB303 1,000,000 in dividend payments made by the company Xinjiang Daikou, a subsidiary to its minority shareholders.

Speaker 2

The company continued to maintain a very strong balance sheet with consistent cash balances and no financial debt as well as healthy operating cash flow. And with that, concludes our prepared remarks. Operator, we will now open the line to questions from the audience.

Operator

Thank you. We'll now begin the question and answer session. First question will be from Philip Shen, ROTH MKM. Please go ahead, sir.

Speaker 3

Hi, everyone. Mr. Xu, Ming, thanks for taking my questions. Wanted to explore Your view on polysilicon pricing for Q4, you came in with About $7.70 for Q3 for Kilogram and wanted to see what your expectations are for Q4. And then also for the beginning of next year, and then by year end 'twenty four, do you see a recovery or do you expect polysilicon pricing

Speaker 2

Okay. Mr. Xu will provide commentary first and then

Speaker 1

So Mr. You have commented that for the Q4, the price should stay somewhat similar to now. And for P type, it should remain around RMB per kilo and for N type, there's a RMB 10 premium, which is around RMB 80 per kilogram. And in December, the price should stay somewhat consistent as of now. And going into the Q1, Because of demand, the price should lower to around RMB65 to RMB70 per kilogram, around that range.

Speaker 1

But going to Q2 and beyond, it should go rise above 70 and plus.

Speaker 3

Okay, great. So The price to 55 to 70 kilograms lower in Q1, what is driving that? And is that Price, are you talking about P type? And so should we expect n type to be 10, maybe higher? And what will cause The price to go higher in Q2 and what does he think the year end 'twenty four price might be?

Speaker 3

Thanks.

Speaker 1

The Price in the Q1 around $65 to $70 The price range is primarily driven by seasonality. So Christmas and Chinese Lunar New Year And that caused us lower demand. So that's primarily priced in January February, but price should recover starting in March. And that's the price for P type. For N type, we see a price premium of around RMB 5 to RMB 10 per kilogram.

Speaker 3

Okay, got it. Thank you. One more question for me and then I'll pass it on. As it relates to the industry structure and given these low prices, There are a lot of companies that might be having trouble with driving profit. So just curious if you can talk about what he sees ahead?

Speaker 3

And can he Talked through, does he expect certain companies to stop production or even accelerate the stoppage of production shutdown? What does he see for the evolution for the industry in the coming 6 months? Thanks.

Speaker 1

In terms of the industry structure, first of all, we want to highlight that we have a very competitive cost advantage in producing polysilicon, And we see that the price goes down to $65,000 to $70,000 There's roughly 50,000 to 60,000 of production volume that's at the that are not going to be profitable. And for the new entrants, your costs are obviously a lot higher than us, which is around RMB75000 to RMB80000. So given that they don't have enough cash not enough cash and the financing route is still to be limited now, They will be struggling in the coming quarters.

Speaker 2

So we certainly see industry supply adjustments going In the coming months as well as the industry rebalancing and normalize.

Speaker 3

Okay, got it. Thank you for the color. I'll pass it on.

Speaker 2

Great. Thank you, Phil.

Speaker 3

Thank you.

Operator

Thank you. Next question will be from Alan Liao of Jefferies. Please go ahead.

Speaker 4

Thanks a lot. Thanks a lot for taking my question. Thanks, Mr. Xu and also Ming for the prepared remarks. So I'd like to have more clarity on the share based expense list.

Speaker 4

This seems to be the item which has a major change quarter over quarter. So I would like to know what is the breakdown on the 89,700,000 of SG and A, because in the prepared remarks there were 46,300,000 Of non cash share based compensation, but in reconciliation it's $50,000,000 So we'd like to know like how much is The original share based compensation and how much is related to the resignation of Ms. Luo Zhang Wengen?

Speaker 2

Hi, Alan. This is Ming. I will discuss the increase in SG and A expenses. So For the quarter, we had a total of $46,000,000 in non cash share based compensation expenses. And of that approximately half or approximately $23,000,000 is related to limitations of our previous CEO, Mr.

Speaker 2

Longgen And this actually is approximately, again, 303,000 shares of His previous equity grant which would be vested over the next 2 years, but because of GAAP accounting rules And we are required to recognize this expense during the Q3 based on Designation as we saw and this also would be recognized in terms of at the time of the grant, Right, which was around $70 per share or so. So that's how we recorded the additional $23,000,000 in additional share based Compensation costs. So and the remaining is also primarily related to his other The recognition expenses as well. We do expect this to normalize for the next quarter and we expect next quarter's Xining Expense to be in the range of $35,000,000 to $38,000,000 per quarter.

Speaker 4

Understood. Thanks a lot. So because it seems that other than These expenses because the increase in expenses quarter over quarter is like $46,000,000 So Probably this $23,000,000 is one off, so it seems there are also other increase in expenses. So are those cash expenses?

Speaker 2

Yes, yes. So I mean some of it is expenses related to, for example, shipping costs as we ship more volume for the quarter. Yes. But the remaining is primarily to the resignation costs.

Speaker 4

Understood. So, and the next question, switching gear to our buyback plan. So, we have already Buyback a major portion of our $700,000,000 buyback plan, but still we have quite a lot of bullets. So are we planning to declare dividends or what is our plan to execute the remaining of the make use of the remaining funds for the buyback or dividends.

Speaker 1

Regarding the 700,000,000 share We have a remaining 7, 3.80 1,000,000 left. And because our CEO has just Been in the position for a quarter and we've been in talks with our Board and our management team and we have decided that we will We continue to pursue the share repurchase program, and we're committed to repurchase during the last quarter To whatever the upper limit would be based on what we can do to repurchase on a daily basis. But overall, we will continue to repurchase. Yes, we will buy back as much as we can in the last quarter.

Speaker 4

Thank you. So effectively means RMB 380 1,000,000 in the remaining 2 months? Okay. Thank you.

Speaker 1

Yes, we see the price as being very low at this point, so we are very committed to repurchase At this point.

Speaker 4

Understood. So As communicated before, the company may also consider to cancel those shares. So is this still the plan or when will the company cancel those shares?

Speaker 2

Yes, this is Alan. So it is the company's intention that I think by year end we would cancel the So the company intention is to cancel those shares, repurchase shares.

Speaker 4

Yes. That would definitely help a lot in increasing the EPS as well. So yes, yes, thanks a lot. So I think my last question here is, So what is your view on the next year, like what do you think will be your Production plan, is it full capacity based on the current capacity? And lastly, what is the progress on your

Speaker 1

For the production volume for next year, we forecast around 80,000 metric tons to 300 metric tons, but that will also be contingent upon the progress of our construction. And for semiconductor, we'll start pilot production at the end of this year. So for next year, The capacity will just be 1,000 metric ton.

Speaker 2

So, I want to write on a high level, right, so we will have full production on our Xinjiang Facility which is around 130,000 metric ton and then also full production on our Indo Mongolia Phase 1, which is also additional 100,000 And finally, we expect our Inamigolia Phase 2 to start production around mid year next year. So approximately based on 100,000 metric ton capacity around 50,000 metric ton production. So that's why we think next year range $280,000,000 to $300,000,000 Obviously, this is a very preliminary estimate. It's not an official guidance and we will have a more formal numbers based on 1R in the Mongolia Phase 2 is more closer to completion and start of production. Okay, thank you.

Operator

Thank you. Our next question comes from Andrei Corparade from the Andrei Corparade Corporation. Please go ahead.

Speaker 5

Hello, sir. Just so I understand, repurchasing in the last I like that the total share outstanding decreased finally. I want to ask one question more questions. The first question is, how much more will Shares be issued for management compensation plans in the next 1 year or 2 years. Will we see $40,000,000 or something like that as share based compensation?

Speaker 5

That's the first question. And the second question,

Speaker 2

you have

Speaker 5

$3,350,000,000 or something like At repurchasing last quarter you were stating that you will finish it by the end of the quarter by the end of the year. So will we Thank you for for you to deploy all of this capital or as much as possible and at an accelerated pace compared to the Until your quarters, so till now you bought in 3 quarters like $300,000,000 Are you telling us that you will buy $200,000,000

Speaker 1

Regarding the share repurchase, Yes. I think we can repurchase based on the rule, we can repurchase around US220 million dollars to US250 million dollars in the last quarter, and we'll definitely accelerate. We'll keep that, please. So we

Speaker 5

will Okay. And how many in quarter 4, I don't know the exact number, but You have it on the top of your head or something around that. What how many shares will be issued for share based compensation? If I'm not wrong, this quarter it was like $45,000,000 but last quarter, So Q2, you had like $120,000,000 or something like that. You had a larger one time.

Speaker 5

So my question is for Q4, how many shares will be issued for share based compensation for management?

Speaker 2

In aggregate around 350,000 shares.

Speaker 5

300,000 shares, something like that. So That's $300,000 times $24 today's price. It's okay, not even $1,000,000 in share based compensation. Okay. Okay.

Speaker 5

Last question is actually, I have two questions left. You stated in last quarter, and I really like that In the transcript and the earnings call, you stated in August that you will consider issuing shares in 2024 In the Shanghai listed shares, the 75% ownership that New Energy has, And you would consider selling shares there to buy shares on the New York Stock Exchange. So my question is, when will that be available? Is it 2 years after the IPO or In what month of next quarter next year, sorry?

Speaker 1

Yes, we will we yes, thank you for the suggestion and we will consider that Proposal and in fact, I think by July next year, we are able to sell the shares in Asia and then use that Amount to continue maybe deploy another share repurchase plan for 2024.

Speaker 5

Do you have any idea, not an estimate of what this share repurchase after you finish this share repurchase of this year, the 750,000,000 So you have like $300,000,000 left or $350,000,000 left. So my question is, what will the scale of the 2024 repurchase program B or other dividend yields for investors in the New York Stock Exchange shares, I'm talking in the queue on your stock exchange. If you have any idea or if you could comment on that? And thank you very much for all your answers. Very nice for you.

Speaker 2

Hello. Thanks for your questions. So, it is So early to say or to know what the program size might be like, but Starting in July of 2024, after the 3 year lockup period for our Asia listing, So the U. S. Daqo New Energy is able to start to sell down some of its shares of the Asia listing.

Speaker 2

So I'll just start with some numbers, right? So let's assume that we say fell down even a minor 10% Based on the current valuation of Asia listing, which is roughly RMB70 1,000,000,000, right. So we could potentially raise Somewhere in the range of $7,000,000 on BRL7 capital and I would expect that majority of this could be used For share repurchase in the U. S. NYSE listing.

Speaker 2

That's the current

Speaker 5

Very nice way how you stated it. So, Darko New Energy, just for all shareholders and for me also to understand, we own 75% of Shanghai listings, right? It's such a rudimentary question, but I just want to make it clear. It's the stupidest question ever, but yes.

Speaker 2

That's right. 72.4% to be exact. Yes, that's right.

Speaker 5

Yes. Yes, the discount is the same. Okay. And the last question and final one, what will the free cash flow be for 20 Before or how much CapEx last quarter? I really liked how management talked in the earnings call and I just want to make a revamp of what happened last quarter.

Speaker 5

So CapEx you talked last quarter, actually Ming Yang talked, I think the last CEO if I'm or whatever, he talked that How much CapEx is left in 2024? What will the outflow? What will the CapEx be for 2024 Around how much is left to invest?

Speaker 2

Okay. So as of the end of the third quarter, So total CapEx remaining for the company's major projects including Innamangulya Phase In the Mongolia Phase 2 annual semi project is approximately RMB6.5 billion For approximately $900,000,000 or so. And of that, we expect for the Q3, Total CapEx planned CapEx is around RMB2.7 billion or roughly $300,000,000 Yes. And the remaining would be for the next year. Yes.

Speaker 2

So that's the total CapEx plan right now.

Speaker 5

So what is left in 2024 is $900,000,000 right? Or that is minus the 300,000,000 that?

Speaker 2

So $600,000,000 to $700,000,000 yes, approximate.

Speaker 5

Okay. And in 2025, do you have any major plans yet or is any CapEx in 2025, which is eccentric like above $500,000,000

Speaker 2

No plan right now currently.

Speaker 5

Okay. So, Mongolia Phase 2 or Phase 1, whatever is Balaji. Okay. Thank you very much. You were very kind, very nice to hear you.

Speaker 2

Thank you. Thank

Operator

you. Next question will be from Jack Ng, LC Capital. Please go ahead.

Speaker 6

I want to query about the cancellation of the shares. Just now You said that at the end of the year, there might be cancellation of the shares. We would like to know that will you cancel all of it By the end of the year or is at the end of the year, you will start to cancel it. So what is the schedule of the cancellation of the

Speaker 2

Okay. Most likely, it will be a one time At around the end of the year and we would likely cancel almost all, if not majority, if not all of the shares that we I think most of the officers that we repurchased at that time will be canceled.

Speaker 6

Okay. Thank you. And we also want to know, Do you consider any dividend option dividend for the company?

Speaker 1

For this year, we are our priority this year would still be the share repurchase plan. As we just stated, we'll continue to We purchased our shares as much as we can. And for next year, we will contemplate between share another share repurchase program or Issuing dividends, but that will be contingent of onboard approval and we'll need to I'll deeper into that and consider the plan. But as of now, our primary goal is to complete as much as we

Operator

Thank you. Our next question will be from Gordon Johnson, GLJ Research. Please go ahead.

Speaker 7

Hey, thanks for taking the questions. So a lot of my questions have been answered, but there seems to be some concern Amongst some of our on the ground contacts in China that there could be grid issues with respect to The massive amount of solar that's been installed this year. I mean, I think over the 1st 9 months, we're close to 130 gigawatts in China, Suggesting we could get 172 gigawatts for the full year 2023. That's amazing. That's great for you guys.

Speaker 7

But what we're hearing is that could potentially cause issues with 2 questions. Number 1, have you heard this?

Speaker 2

Okay. Let me transfer it for Mr. Shi. So even though this year Approximately 130 gigawatts is already getting installed. Red Messaging is still very optimistic about the overall installation Here within China.

Speaker 2

So the expectation that and again, he's actually an expert on the grid. So he's been a Tire of equipment to the grid for many, many years. So he expects that overall Next year could be approximately 200 gigawatts. And what's happening here in China is one is it is the Chairman of Xi Jinping's Goal and its mandate that China to deploy significant amounts of renewable energy And also the National Energy Administration is very proactive in terms of allowing and requiring actually local grids To accept as much renewable energy as possible. And at the same time, China is building significant amount of capacity in energy storage, Expected that storage could reach as high as 15% of the overall pathogenation for China over time.

Speaker 2

And even in the near term, China exploring technology, including not just battery storage, but also in terms of hydrogen storage As well as hydro or water based type of energy stores. So these are happening within China. So I And combining all these factors including the mandate from Chairman, Xi Jinping, we do believe that China renewable energy particular solar market will continue to grow for

Operator

next year. Okay, that's helpful.

Speaker 7

And then one last one for me. And again, congratulations on your prior execution guys, really good in the poly market. So we've heard that there was in September, There was roughly 60 gigawatts of output, yet the market only absorbed 40 gigawatts. And again, we're hearing that Could be caps on the market of 200 gigawatts in 2024. So just wanted to hear your thoughts on if indeed Those numbers are accurate.

Speaker 7

Is there the potential for some of your competitors to potentially shut down capacityidle capacity that's making the market better as we enter the first half of twenty twenty four. Thanks again.

Speaker 1

Yes. So for this quarter, we've seen that wafer has some inventory due to seasonality reasons. So for instance, our downstream players, our customers like Sholion, TCL, Gaoxin, we from what we've known that their utilization rate has Drop to 50%, but overall for wafer, the utilization rate is still around 78%. And because module price have kept Falling down, we've seen that there should be around 20 gigawatt of inventory by year end and also at the beginning of the year, but There should be some new changes going forward into next year. And we forecast that China should be able to reach and even exceed 200 gigawatts next year because there are some new policies launched in Xinjiang, Gansu, Inter Mongolia, etcetera.

Speaker 1

And regarding the question on our competitors, those who don't have any competitive advantage would Have no edge in this market given the low price. And yes, they would be they would have some struggles.

Speaker 2

So I think shutdown including managed shutdown and idling up some capacity is actually a likely situation for non competitive players within the industry.

Speaker 1

Yes. For players and our industry, cost and quality are the 2 primary key factors in gaining an edge in this competitive landscape. And As a company, we have the lowest cost and they are high quality. So we believe that we can sustain our position in the market.

Speaker 7

Thanks again, guys.

Speaker 2

Great. Thank you. Thank you. We'll take our last question. There's one more.

Operator

Thank you. The next and final question will be from Frank Fon of Nomura. Please go ahead.

Speaker 8

Thanks, Mr. Xu and Mr. Yang for taking my question. I think this question has been addressed in the 2nd quarter earnings. I just want to reconfirm that we do not consider any privatization In this year and also in the next year, right?

Speaker 8

And the second question is, are the voting rights of shares

Speaker 1

Sorry, Frank, can you repeat the second question?

Speaker 5

And my second question

Speaker 8

is about voting rights of shares hold by management or the Board I wonder if the voting rights is similar at 1 to 1 ratio to those shares hold by minority common shareholders. Thank

Speaker 4

you.

Speaker 1

Yes, we don't have any plans in terms of privatization at this But we will see how the market evolves. But as of now, we don't have any plans in terms of prioritization this year and in the coming years.

Speaker 2

Okay. And regarding your second question regarding voting rights, so the majority shareholder does not Have super voting rights. So they do have the same one to one voting rights as the minority shareholders or the public Shareholders, so the voting rights are the same amongst shareholders. Okay. Operator, I think that concludes the session.

Operator

Yes, that concludes the question and answer session. Now I'll turn back to management's side for

Speaker 2

closing remarks.

Speaker 1

Thank you everyone again for participating in today's conference call.

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Earnings Conference Call
Daqo New Energy Q3 2023
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