Daqo New Energy Corp. Q1 FY2025 earnings call

Key Sections

• Market Challenges: The solar PV industry faced significant challenges in Q1 2025 with overcapacity and polysilicon prices below cash cost levels.
• Financial Health: Daqo's losses narrowed sequentially, maintaining a strong balance sheet with no financial debt. Quick assets totaled $2.15 billion as of March 31, 2025.
• Operational Activity: Operated at ~33% utilization rate, produced 24,810 metric tons of polysilicon, sold 28,008 metric tons, reducing inventory. Polysilicon unit production cost increased to $11.57 per kg, cash cost up 5% to $5.31 per kg.
• Industry Outlook: Expected Q2 production 25,000 - 28,000 metric tons, full-year 2025 production 110,000 - 140,000 metric tons. Industry capacity utilization ~50%, domestic production in Jan-Feb below 100,000 mt.
• Policy Impact: Chinese new energy on-grid tariff reform introduced, affecting electricity prices and downstream installations. Solar PV installations in China grew 30.5% YOY in Q1 2025.
• Long-Term Position: Daqo positioned to capitalize on long-term growth via N-type tech and cost optimization.

In the first quarter of 2025, revenues were $123.9 million. Gross loss was $81.5 million with a gross margin of negative 66%. SG&A expenses were $35.1 million. Loss from operations was $114 million. Net loss attributable to shareholders was $71.8 million. EBITDA was negative $48 million. As of March 31, 2025, the company had a cash balance of $792 million, short-term investments of $168 million, bank notes receivable of $63 million, and a fixed-term bank deposit balance of $1.1 billion, with quick assets totaling $2.15 billion.

Forward-Looking Statements

• Anticipates Q2 production volume in the range of 25,000 to 28,000 metric tons.
• Full-year 2025 production volume expected to be in the range of 110,000 to 140,000 metric tons.
• Polysilicon prices stable at ~37-42 RMB per kg in Q1, expecting price level to sustain before May 31 policy cutoff, then potentially suppress to 35-40 RMB per kg for remainder of 2025.

Risks Identified

• ADR Delisting: ADR delisting risk amid U.S.-China trade tensions, with consideration of options like Hong Kong listing if forced delisting occurs.
• Policy Uncertainty: Uncertainties around future electricity prices and revenue generation due to market-based on-grid tariff reform.
• Trade War Impact: Potential downside risk from Trump administration's trade war 2.0 affecting demand.

Q&A Session

• Q: Phil Shen asked about when overcapacity might be eliminated, which players have exited, and near-term exits. A: Anita Zhu responded that rebalancing of supply and demand would take longer than previous cycles, industry utilization rate ~40%-50%, no companies completely exited yet, and rebalancing would be affected by shareholder bases and financing of incumbents and new players.
• Q: Phil Shen asked about industry utilization rate trend by quarter. A: Anita Zhu said inventory depletion of polysilicon would take at least four months, prices supported at current level before May 31, then demand might trend down, with pricing potentially suppressed to 35-40 RMB per kg for remainder of 2025.
• Q: Phil Shen asked about demand after May 31 in China. A: Anita Zhu said China demand in 2025 still expected to be strong at 250-300 gigawatts, but potentially stagnant due to uncertain solar project returns from February's policy.
• Q: Alan Lau asked about ADR delisting risk strategy. A: Anita Zhu said considered dual listing in Hong Kong in 2022, PCAOB issue resolved, Hong Kong listing could take ~six months, monitoring market and regulatory developments, evaluating options like Hong Kong listing if forced delisting occurs.
• Q: Alan Lau asked about cash cost outlook. A: Anita Zhu said cash cost edged up ~5%-6% in Q1 due to maintenance of Inner Mongolia phase two, incurring additional costs, expecting similar or slightly lower cash costs in subsequent quarters depending on production level.