Daqo New Energy Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 27, 2023

There are 9 speakers on the call.

Operator

Good morning, and welcome to the Daqo New Energy First Quarter 2023 Results Conference Call. All participants will be in listen only mode. After today's presentation, There will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Kevin Hung of Investor Relations for the company.

Operator

Please go ahead.

Speaker 1

Hello, everyone. I'm Kevin Hirt, the Investor Relations of Daqo Union Energy. Thank you for joining our conference Call today. Daki just issued its financial results for the Q1 of 2023, which can be found on our website at shekelw. You also can be, which also you can find in our website.

Speaker 1

Today attending the conference call, we have our CEO, Mr. Longgen Zhang and CFO, Mr. Ming Yang and myself. So today, before we begin the formal remark, I would like to remind certain statements on today's call, including expected future operational and financial performance and industry growth, All forward looking statements that are made under the Safe Harbor provisions of the U. S.

Speaker 1

Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. 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 Is included in the reports or documents we have filed with or 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.

Speaker 1

Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today's Conference call is as of today, and we undertake no duty to update such information except as required under Also during the call, we will occasionally reference monetary amounts in U. S. Dollar terms. Please keep in mind that our functional currency is the Chinese RMB.

Speaker 1

We offer these translations into U. S. Dollars Sorry for the convenience of the audience. Now without any further ado, I now will turn the call to our CEO, Mr. Long Gen.

Speaker 2

Thank you, Kevin. Good evening or good morning, everyone. Our efficient operation of polysilicon facilities In the Q1 of 2023 resulted in the production volume of 33,848 metric tons. Our production cost decreased by 5.5% in renminbi tons, primarily due to a reduction In the procurement cost of metallurgical grade silicon powder, For the quarter, we generated US490 $1,000,000 in EBITDA With strong operating cash flow and maintained a healthy balance sheet, our cash balance further improved To $4,100,000,000 and our combined cash and banking note receivable balance reached to US4.9 billion dollars In April, we completed the construction of our Phase 5A, which is 100,000 metric tons polysilicon project in Inner Mongolia And successfully started initial production of polysilicon. We expect to ramp up Production to full capacity by the end of June 2023, bringing our total polysilicon Nameplate capacity to 205,000 metric tons per annum.

Speaker 2

Therefore, we expect our total production volume to be approximately 44,000 to 46,000 metric tons of polysilicon in Q2 2023, an increase of 30% to 36% As compared to Q1 2023 and approximately 193,000 to 198,000 metric tons of polysilicon in the full year of 2023, an increase of 44% to 48% as compared to last year. In addition, based on the financial results schedule, our new semiconductor grade polysilicon project with 1,000 metric tons Annual capacity is expected to be completed and start pilot production by the end of September 2023, with its new fully digitized and highly automated production system, We believe our Phase 5a in the Mongolia project will bring in the company To the new level, in terms of the overall competitiveness, including its production capacity, lower cost structure And the superior product quality. Polysilicon demand was weak in January Due to the seasonal slowdown in the solar PV industry, in February, lower module prices stimulated end market Demand causing a meaningful recovery in demand and price improvement across the solid value chain. In March April, polysilicon ASPs declined gradually due to increased Supplies and constraints should turn demand for wafers caused by the limited supply of high period cores Used in silicon ingot production process, despite the ASP decline in the quarter, In our major operational subsidiary, Xinjiang Daqo, we still achieved a very strong gross margin of 71.4% And a robust net income after tax per unit of polysilicon sold of approximately 115 renminbiyanperkg, which we believe are significantly higher than Those for many of our competitors and reflect our outstanding quality and cost structure.

Speaker 2

Recently, we have seen a clear trend that the SP gap between the high quality and lower quality polysilicon has started to enlarge and the demand for high quality N type of products is increasing. We expect that this trend We enable us to differentiate ourselves from our competitors based on our high quality And lower cost of polysilicon ready for the next generation N type technology. We believe that the overall demand For solar PV, we continue to grow in the coming quarters and that continued Capacity expansions by downstream manufacturers will lead to further increases in polysilicon demand. In the Q2 of 2023, our Phase 5a project will start to continue A meaningful output of approximately 10,000 metric tons to 12,000 metric tons of polysilicon. We plan to reduce our inventory to approximately 5,000 metric tons by the end of the second quarter.

Speaker 2

To achieve these, we will need to increase our shipment to 59,000 metric tons to 61,000 metric tons In Q2, an increase of 133% to 141% as compared to Q1. In November 2022, our Board of Directors approved A US700 $1,000,000 share purchase program effective until December 31, 2023, as of now, we have already spent US85.1 million dollars and repurchased Approximately 1,680,000 ADS. On April 6, 2023, Our subsidiary, Xinyuan Darku's cash dividend plan for 2022 was approved by its shareholders' meeting. Therefore, as a 72.7% shareholder of Xinjiang Daqo, we expect Doctor. Newell urged to receive the dividend distribution in May with an amount of approximately renminbi4.96000000 after tax, which could be the financial results to implement the improved share repurchase plan.

Speaker 2

We believe a new era for solid PV has just begun. The continuous cost reduction in solid PVE products is expected to create substantial additional green energy demand, likely exceeding most analysis expectations. It is generally expected the solar PV will eventually We believe that the increasing needs for polysilicon of very high purity will help differentiate us From our competitors, thanks to our ability to produce the type of polysilicon required for the next generation of N type technology, We will continue to maintain solid growth and make sure to have one of the best balance sheets in the industry in order to capture the long term benefits of our global solar PV market. Now let's move to the outlook and the guidance. The company expects to produce approximately 44,000 metric tons to 46,000 metric tons of polysilicon during the Q2 of this year.

Speaker 2

The company expects to produce approximately 193,000 metric tons to 198,000 metric tons of polysilicon For the full year of 2023 inclusive of the impact of the company's annual facility maintenance, Now, I will turn the call to our CFO, Ming. Please.

Speaker 3

Thank you, Logan, and good day, everyone. Thank you for joining our earnings conference call today. Let me start with a discussion on our company's balance sheet and our strong cash position. As Longgen indicated, the company ended the Q1 of 2023 with cash balance of $4,100,000,000 which is an increase of more than $600,000,000 as compared to the end of 2022. Inclusive of the company's Bank note receivable balance of $791,000,000 Total cash and bank note receivable balance reached $4,900,000,000 at the end of the quarter.

Speaker 3

These bank note receivables are notes issued by major domestic banks Used for trade financing purpose and can be either immediately redeemed for cash or used to pay suppliers for raw materials and equipment purchases.

Operator

On a

Speaker 3

per share basis, reflecting Daqo New Energy Corp. 72.7 percent ownership of our operating subsidiary Xinjiang Daqo. This equates to $45.70 per share of ADS. This represents the value of the cash alone and excludes the value of our Property, plant and equipment, which at the end of the quarter has a $2,800,000,000 value on the balance sheet and is represented by our 2 World class polysilicon production facilities, which has combined nameplate capacity of 205,000 metric tons And continue to generate healthy operating cash flow on quarterly basis with our leading product quality and low cost structure. And this is witnessed by more than $800,000,000 in cash flow from operating activities in the Q1 of this year.

Speaker 3

With regard to our capital expenditure and capacity expansion plans, for the Q1 of 2023, purchase of PP and E was approximately 2 $77,000,000 which was primarily related to our polysilicon projects in Baotou City in Mongolia. At the end of March, approximately $1,200,000,000 had already been spent on the Inland Mongolia Phase 1 project With total planned CapEx of approximately $1,400,000,000

Operator

We expect

Speaker 3

the remaining $200,000,000 will be spent by the end of this year. For Inner Mongolia Phase 2, we expect total CapEx will be approximately $1,400,000,000 as well. We currently expect CapEx related to this project will be approximately $800,000,000 for this year and the remainder will be paid in 20242025. For the Inner Mongolia Phase 2 project, the project construction Schedule may be adjusted based on market conditions and we may adjust both project construction schedule and project progress and capital expenditure plans accordingly. Now, I will discuss the company's financial performance for the Q1 of 2023.

Speaker 3

Revenues were $709,800,000 compared to $864,300,000 in the Q4 of 2022 and $1,280,000,000 in the Q1 of 2022. The decrease in revenue compared to the Q4 of 2022 was primarily due to a decrease in average selling prices. Gross profit was $506,700,000 compared to $668,000,000 in the Q4 of 2022 $813,000,000 in the Q1 of Gross margin was 71.4% compared to 77% in the Q4 of 2022 and 63.5% in the Q1 of 2022. The decrease in gross margin compared to the 4th quarter is primarily due to lower average selling prices mitigated by lower production costs. SG and A expenses were $41,000,000 compared to $44,000,000 in the Q4 of 2022 and $15,500,000 in the Q1 of 2022.

Speaker 3

SG and A expenses during the Q1 includes $28,000,000 in non cash Share based compensation costs related to the company's share incentive plan compared to $28,400,000 in the Q4 of 2022. R and D expenses was $1,900,000 compared to $2,700,000 in the Q4 of 2022 And $2,100,000 in the Q1 of 2022. R and D expenses can vary from period to period and reflect R and D activities that take place during the quarter, which is primarily related to our quality improvement initiatives. Income from operation was $463,800,000 compared to $623,000,000 in the Q4 of $22,000,000 $796,900,000 in the Q1 of 2022. Operating margin was 65.3% compared to 72% in the Q4 of 2022 and 62% in the Q1 of 2022.

Speaker 3

Net income attributable to Daqo New Energy Corp. Shareholder was $278,800,000 compared to $332,000,000 in the Q4 of 2022 $535,800,000 in the Q1 of 2022. Earnings per basic ADS was $3.56 compared to $4.26 in the Q4 of $7.17 in the Q1 of 2022. Adjusted net income Attributable to Daqo New Energy shareholders, including non cash share based compensation costs, excluding non cash share based compensation costs Was $310,000,000 compared to $363,000,000 in the Q4 of 2022 $538,000,000 in the Q1 Adjusted earnings per basic ADS was $3.96 compared to $4.65 in the 4th quarter point 22 $7.20 in the Q1 of 2022. EBITDA was 400 and $90,200,000 compared to $648,500,000 in the Q4 of 2022 $826,800,000 in the Q1 of 2022.

Speaker 3

EBITDA margin was 69% compared to 75% in the Q4 of 2022 and 64.6% in the Q1 of 2022. Now on the company's financial condition. As of March 31, 2023, the company has RMB4.13 billion in Cash and cash equivalents and restricted cash compared to $3,520,000,000 as of December 31, 2022 And $1,120,000,000 as of March 31, 2022. And as of March 31, 2023, Notes receivable balance was $791,000,000 compared to $1,130,000,000 as of December 31, 2022 $1,500,000,000 as of March 31, 2022. Now on the company's cash flows.

Speaker 3

For the 3 months ended March 31, 2023, net cash provided by operating Activities was $807,000,000 compared to $231,000,000 in the same period of last year. And for the 3 months ended March 31, 2023, net cash used in investing activities was RMB268,900,000 compared to net cash provided by investing activities of $170,400,000 in the same period of 2022. And for the 3 months ended March 31, 2023, net cash provided by financing activities was 59,900,000 And this was 0 for the same period of 2022. The net cash provided by finance activities in the Q1 of 2023 Was primarily related to the net proceeds of $140,000,000 from bank borrowings, offsetting part by $80,100,000 spent And that concludes our prepared remarks. And now operator, we'd like to open the call for Q and A from the audience.

Operator

Okay. We will now begin the question and answer session. Our first question will come from Phil Shen with ROTH Capital Partners. You may now go ahead.

Speaker 4

Hi, everyone. Thanks for taking my questions. First one is on your shipment volumes. And I think why have volumes been so low as a percentage of production for 2 quarters in a row? We thought you might ship more than 100% of your production in Q2 because of the inventory sorry, In Q1 because of the inventory that you didn't ship in the prior quarter, when do you think you'll release that inventory?

Speaker 4

Thanks.

Speaker 2

I think Q1 still is Chinese New Year. I think January, The sales really is very slow. And also remember that the downstream, the wafer producer, the capacity In the last year, the November starting November, December, they almost reduced the capacity to the minimum Capacity, the maintenance capacity, recall, maybe 20% to 30%. So as their capacity quickly comes back, So we are starting selling actually in February March. And some March shipments To the end of the month, we have to move to Q2.

Speaker 2

So basically, so far, this quarter, today as of today, The April, we already signed contracts more than 20,000 tons right now. So we see second quarter, The selling volume should be high. So we expect we can reduce our inventory by the end of last quarter is 20,000 tons, By the end of this quarter, Q2 to the 5000 tons, just the regular shipping goods in the way. So basically, this month, we're sales volume mostly we're shipping to this quarter.

Speaker 4

And I did see your Q2 shipping guidance there, I think 59,000 to 61,000 Metric tons, so that's great. Can you talk about the outlook for poly pricing for Q2, Q3 And how you're seeing 2024 given the supply demand situation for poly? Thanks.

Speaker 2

Basically, I cannot give you the projection of the future. But basically, if you look at our Q1, Our selling price is $27 We see the selling price, especially the weather prices go down. Then if you look at China, the future Q3, Q4, the module selling price, the contract price, bidding price also is slowed down, you see. So basically, what that tells you is, if from silicon wafer cell module, the cost right now today is around like RMB0.98 Sense, renminbi. So you're selling module for Q4, you're selling like a $175 you divide by The value adding tax, so the net maybe is around like $1.50 So your gross margin, your whole industry is around like $0.50 Or even $0.45 compared to last year, you're selling last year is around $0.74 at the in the module selling price to renminbi per watt.

Speaker 2

So basically, we will see 2nd quarter, definitely, I think the ASP will slightly go down. And how much, I cannot tell you because we see right now the price is stable around RMB 180 per kg. Maybe in the next 2 months, we'll continue to slow down. But I think still The ASP will be, I think, between the U. S.

Speaker 2

Dollar around $20 to $25 In the 3rd quarter, It all depends on how many the new, I think, production come out, how big the demand pick up. So really, we think Q3, the selling ASP will be stable maybe as Q2. Then Q4 mostly is challenging every year, okay, not only because of holiday Western, but also I think in China, The traditional, I think the bargain between silicon and the waiver. So basically, Q4 is a challenging quarter. So maybe I think it will go down to 150, even 120.

Speaker 2

So I cannot tell you the exact figure. And if you look at 2024, as we said, The demand is continuing to grow. Of course, silicon output in China also continues to increase. So Daqo differentiate ourselves is to selling more high quality of n type silicon to differentiate ourselves from other people. So we're hopeful OASP can sell a little higher than our competitors in China.

Speaker 2

Today, Gua, OCI, they're still selling around like $35 $37 Per kg. The reason is because a use of their silicon outside of China can ship into U. S. Market. So The differentiator is already there.

Speaker 2

You see, that's a logistic differentiator. And we are efforts our efforts is our quality, Our cost. So even though we think 2024 is a challenging year, okay, let's say The industry maybe gross margin is around like 5% or even 10%. We hope Daqo can achieve premium 10%, 15% More, so we can do 15% to 20%. That's only I can tell you.

Speaker 4

Okay. That's a lot of Color. Thank you, Logan. You talked about the pricing premium that you think you might be able to get. I think you just talked through that a little bit, but specifically I think in Q1, I think your ASP was close to $27 per kilogram and the average spot price was closer to 24 Can you talk about the realize what your realized premium is due to your quality?

Speaker 4

Is that is it about $4 a kilogram or is that difference In the Q1, primarily due to better timing of your poly sales versus spot pricing? Thanks.

Speaker 2

Basically, right now, N type and P type, we already see the difference, I think, is there, around RMB15 to RMB20 Per kg. We think that difference will be enlarged maybe later As the top count capacity continue to come up, then the demand for N type were more. So basically, We think in the future, our selling price should be if we can selling 70% Our product is N type. So basically, I think the price may be $5 difference. It's possible.

Speaker 2

But I can tell you, it's exactly the future, how the future going. Really, It's a lot of challenge. Yes, okay. But the most important to us is we have a fortress As Ming just said, right now today, the banking notes receivable plus cash is almost US5 $1,000,000,000 We'll continue to generate the cash operating cash and we try to control our CapEx as the market continues going. For example, if the market go into more war scenario, then in the Mongolia 5B, We can slow down CapEx.

Speaker 2

So we are continuing to forecast our to, I think straighten our balance sheet. That's the most important, I think.

Speaker 4

Great. Okay. And given that this is my last question here. Are you planning to do additional buybacks this year beyond the $700,000,000 approved? What are your thoughts on that given The cash that you have?

Speaker 4

Thanks.

Speaker 2

At this moment, I think we just declared 7 100,000,000. We already used, I think, around 85,000,000. So we only left is 650,000,000. And the dividends, I think, To throw the foreign exchange, I think we're heated accounts, I think, the early of May. Even let's say we still have like RMB 650 1,000,000 compared to the capital market, it's almost 18% of our Total share, outstanding shares, that's a lot.

Speaker 2

So basically, you know that All the repurchase program, we have to change to from renminbi to foreign exchange. So the only right now reliable sources Is the dividends declared? So basically, I only can tell you, so far, only is the I think today, By the end of this year, we still just forecast $700,000,000 precious program.

Speaker 4

Okay. Thank you very much, Longgen. I'll pass it on.

Speaker 3

Great. Thanks, Phil.

Operator

Our next question will come from Gary Zhou with Credit Suisse. You may now go ahead.

Speaker 5

Hello, management. Thank you for taking my questions. This is Gary Zhou from Credit Suisse. So two questions from my side. So firstly, so also to follow-up on the buyback.

Speaker 5

So as Long Bin has mentioned, basically the rest of the amount is quite a significant amount to proceed. So just Amount to proceed. So just wondering if the company have kind of a more can give us more color On the timing, how we're going to proceed all those buyback? Or if there's kind of a price range that we would think We would have more do more kind of a share buyback. And secondly, quick question, just wondering if Can management can give us some color on the April kind of polysilicon sales?

Speaker 5

So have we kind of Start to see our inventory start to going down in April and basically just want to have more Kind of an idea on how confident the management believe that our inventory can reduce quite a lot

Speaker 2

I'll let Ming to answer your first question, buyback color. I'll answer your second question.

Speaker 3

Me? Okay. Hello, Gary. Thank you for your question. So as Lonza indicated earlier, so we do have Our $700,000,000 Assurity purchase program of which $85,000,000 has been used and there's 615 And this program is really through the end of 2023.

Speaker 3

So we did just receive the dividend distribution From Xinyang Bakugou is in route right now and needs to be transferred offshore. So in total, this will be approximately RMB 4.96 1,000,000,000 or RMB or just north of $700,000,000 So certainly, We do anticipate that this would be the financial source that could be used to fund our share repurchase plan. I think in terms of timing, we there's really no specific timing, except that it will be repurchased See, well, on the year and

Operator

we will

Speaker 3

definitely be take opportunity to look at the share price, Especially if share price is really attractive, we would look for opportunities to repurchase that.

Speaker 2

Gary, I think I just answered a few questions about the April, the I think shipment movement. By the end of Q1, we have an inventory around 20,000 tons. And in April, I think we saw the contract right now. So far today, it's more than 20,000 tons. So we see it's very quick right now the move out, especially we see a lot of customers come back, Book more silicon.

Speaker 2

Because today the scenario is different from the history. The history is every month we sign The contracts, right now almost every week we signed the contract with clients because most of the clients is a little worried to see the fluctuation of the silicon price. But we see right now the price is stable, almost stable between RMB170 to RMB200 RMB per kg. Hopefully, I think that price can stick on there or even gradually slow down. So basically, we think in May next month, we will be selling more.

Speaker 2

So our expectation, the guidance we already gave out. Think we will keep at the end of this quarter the inventory to 5,000 tons. That is the in the shipments, we cannot recognize as the Revenue, hopefully.

Operator

Yes. Thanks a lot. Yes, this is very clear.

Speaker 6

I will pass on. Thank you.

Speaker 3

Okay. Thank you, Gary.

Operator

Our next question will come from Alan Lau with Jefferies. You may now go ahead.

Speaker 7

Thanks management for taking my question. So, I would like to ask From a more long term perspective, so because some of the peers are having very aggressive capacity Action plan, more than 400,000 tons next year. And also some of the peers having very low With FBR technology, so I would like to know your strategy in maintaining your market share or will there be acceleration in Capacity expansion or there will be partnership with some of your peers to stabilize the price? Thanks.

Speaker 3

Okay. Thank you for your question. So we did see our peers' aggressive capacity expansion plan. I think it is subject to, for example, their funding from the Asia capital market in terms of their additional Capital raising. And also, I would say a lot of these projects also more or less will be subject To market conditions, for example.

Speaker 3

So as we indicated, right, so the market condition is good. For example, demand in the second half there remains strong and polysilicon pricing remain healthy, then we may Decide to, for example, move our Inner Mongolia Phase 2 project on track and looking at additional capacity plans. But let's say if, positive pricing does become less than attractive, then certainly we would delay our And we would not look to accelerate capacity expansions for us. And if that's the case, we also would think that a lot of the planned projects expansion would Slow down or cancel. And actually, some of the new capacities that do not reach either quality or Cost targets much especially mine shut down or closed down as the industry has seen in the past.

Speaker 3

Okay. And With regard to cost, we do believe that at least in terms of the Siemens process Type of polysilicon, where we are now more than 99% of our production is mono grade and we are also one of the largest Entype Poly in the market within China right now. So I think we continue to have some of the best quality And especially for the entire month, I think our products are really accepted by customers. I think Our understanding is even though maybe some manufacturer with different process might have lower cost, We do believe that the product, I think, one is going to N type Products, right, especially I think in the second half of this year and next year, we do believe that as quality becomes more important, Right. When positive become more available, we do think that quality will make a big difference, especially with regard to pricing.

Speaker 3

Right. And what we're seeing in the market already is that the lower quality product that does have Lower cost much lower pricing than the higher quality product. I think in fact what we are seeing in the past Months is that a lot of the price the gradual price decline that we saw in the market actually was The result of more of these lower quality product moving into the market and they had to offer a lower price To the market, but that is pulling down the overall average pricing of polysilicon in the market currently.

Speaker 7

Understood. Thanks a lot, Ming. So another question From my side, it is how do you see the costs going forward? Like do you think Our production costs can get below RMB50 eventually with the optimization and ramping up of new plants?

Speaker 3

Okay. Hello. So actually, Alan, so for example, right, so if you compare our Q4 production costs compared to our Q1, as we indicated, actually it went down almost 6% quarter over quarter on RMB basis. So I think in terms of RMB, our Q4 cost was close to RMB55 per kilogram. And then our Q1 cost is actually already close to RMB51 per kilogram.

Speaker 3

So I would say we do anticipate that Once we ramp up our Inner Mongolia facility, right, which has I think in terms of one single Site has in a similar or even better manufacturing efficiency compared to our Xinyuan facility with less people, Right. With an updated process. So we do think that we have very good opportunity to see additional price reductions As this facility ramps up. I think in terms of our internal planning, we do think that it has very Good opportunity to reach the price the cost targets that you've indicated.

Speaker 7

Thanks a lot. That's very clear. So I'll pass on the end. Yes, thank you.

Speaker 3

Great. Thank you.

Operator

Our next question will come from Rajeev Chukturi with Sunsera Capital. You may now go ahead.

Speaker 8

Thank you. Good morning and congratulations for producing a strong quarter in very challenging circumstances. I just want to follow-up on the cost question. You are also beginning to produce the raw material Internally now or at least the capacity is being built for that. How will that shape your cost structure in the coming quarters?

Speaker 2

I think originally we're planning to invest Silicon metal in Mongolia. So by the way, we're still In the processing to get to the license and the improvements, the energy improvements. So hopefully right now the schedule is all those licenses will maybe get by the end of the July. So Basically, if we got everything smoothly, then we're starting I think to build up the silicon metal Hopefully, by the end of this year or the Q1 next year, we can produce silicon metal. I think that will reduce dramatically reduce our Cost maybe right now I think silicon powder is around like 20,000 tons per 18,000 tons Per tonne, I think we can go down to 10,000 tons per tonne.

Speaker 2

So basically, I think the cash cost at least reduced I think $7 to $8 yes.

Speaker 1

Okay.

Speaker 8

So $7 to $8 so that would reduce

Speaker 2

your Let

Speaker 1

me repeat. Let me repeat.

Speaker 2

Let me repeat. Right now, for example, Our cash cost right now, Q1 is $45 So if we produce our own, I think,

Speaker 8

Got it. Thank you.

Speaker 3

Great. Thank you.

Operator

Our next question will come from Rocky Lin with AIIN Investments. You may now go ahead.

Speaker 6

Hey. Hi, congratulations for the good earnings. My first question is, could you tell me Our repurchase program the pace of our repurchase program. I mean, Will you report out your RMB600 1,000,000 in this year?

Speaker 3

Yes. I think the current plan is still to complete the program for the current year. And I think in terms of pace, it should be more or less stretched out over the year. At least that's the current plan right now.

Speaker 6

Okay. Got it. And my second question is, All your competitors are expanding their capacities, But I think it's maybe somehow oversupply. So is there any possible that You will stop your expanding plan for the second stage of Expanding plan in the longer layer?

Speaker 3

Okay. So I would say overall, there is no oversupply of polysilicon in the market today. I think right now the supply and demand is relatively balanced overall. And there's actually a very healthy demand From the end market? What we are seeing is because right now we're in April, right?

Speaker 3

So The peak market demand and installation timeframe has only reached generally in the summer and starts from June really through October. Okay. So we think really Q2 and certainly Q3 demand should be much stronger than Q1. And what we are seeing at least in the very near term is as a polysilicon manufacturer, we do sell our products to wafer manufacturers. And also wafer manufacturers are running at very high utilization levels.

Speaker 3

We're looking at production From industry estimates, somewhere in the range of 40 to 45 gigawatts per month. But because right now, their overall Capacity is actually production is actually constrained by the availability of high quality or high purity Courts used to make these quartz crucibles. So in the very near term, that's limiting their total Production and availability or the ability to utilize polysilicon to be made into a wafer. So we do estimate that the industry current consumption on a monthly basis of polysilicon is Somewhere between 100,000 to 110,000 metric ton. And that's actually similar to the amount of production Polysilicon currently in the market.

Speaker 3

So I think the demand and supply condition is relatively balanced Right now. And I think unless we see substantial, let's say, increase In polysilicon production availability, but without An increase in say end market demand or in wafer production capacity for example, then that Might have the kind of scenario that you've indicated, but we're not seeing that currently.

Speaker 6

Yes. I mean, the silicon price down really, really low, like less than Maybe less

Speaker 2

than 6 hours.

Speaker 6

Less than maybe Okay. I mean, will you stop your inspection plan?

Speaker 3

If the polysilicon pricing, let's say, yes, goes down to less than US10 dollars per kilogram As an assumption base, I think we will slow down our capacity expansion.

Speaker 6

That's all my questions.

Speaker 3

Great. Thank you.

Operator

Our next question will come from Chau Jie with Goldman Sachs. You may now go ahead.

Speaker 4

Hi. Thank you for taking my question. Can I ask If you would have any guidance for the production cost for the Q2? And also, would it be possible for you to share your Current and Q2 expected cash cost level. Thank you.

Speaker 3

Okay. Zhitong, thank you so much for your question. So this is Ming, the CFO. So I would say that for our Q2 costs, I think looking at the most recent trends of our raw materials, especially for silicon metal, As well as for electricity, for example, we expect these to be very stable. And So overall, we believe our Q2 costs, even though we're ramping up in Mongolia currently, we do think that our Q2 costs should be fairly similar In RMB basis compared to our Q1 cost structure.

Speaker 3

And actually going to Q3, the cost should decline as Inner Mongolia To be close to fully ramped.

Speaker 2

The Q2, the cash operation operating cash should be higher than Here, I think in Q1, the reason is because the sales volume is higher. It's almost 130 3% to 141% increase compared to Q1.

Speaker 4

Understood. Thank you so much.

Speaker 3

Okay. Thank you.

Speaker 4

Sure. Thank you.

Operator

This concludes our question and answer session. I would now like to turn it over back to Kevin Hall for any closing remarks.

Speaker 1

Thank you, everyone, again for participating in today's conference call. Should we have any further questions, please don't hesitate to contact us.

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Earnings Conference Call
Daqo New Energy Q1 2023
00:00 / 00:00
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