Daqo New Energy (DQ) Q2 2025 Earnings Call August 26, 2025 08:00 AM ET Company ParticipantsJessie Zhao - Director - IRAnita Zhu - Deputy Chief Executive OfficerMing Yang - CFOAlan Hon - Head of Asia Power & Utilities and Renewables Equity ResearchMatthew Ingraham - Equity Research AssociateAlan Young - SVPGordon Johnson - Founder & CEOConference Call ParticipantsMengwen Wang - Securities Representative & AnalystZihui Hu - AnalystOperatorGood day and welcome to the DAACO New Energy Second Quarter twenty twen ...

Financial Data and Key Metrics Changes - Company recorded revenues of $75.2 million for Q2 2025, a decrease from $123.9 million in Q1 2025 and $219.9 million in Q2 2024 [17] - Gross loss was $81.4 million, with a gross margin of negative 108%, compared to negative 65.8% in Q1 2025 and negative 72% in Q2 2024 [18] - Net loss attributable to shareholders was $76.5 million, with a loss per basic ADS of $1.14, compared to $1.07 in Q1 2025 and $1.81 in Q2 2024 [20] Business Line Data and Key Metrics Changes - Total production volume for the quarter was 29,012 metric tons, with sales volume decreasing to 18,126 metric tons from 28,008 metric tons in Q1 2025 [10] - Cash cost per kilogram decreased by 4% to $5.12, while polysilicon unit production cost also decreased by 4% to $7.26 per kilogram [11][12] Market Data and Key Metrics Changes - Poly market prices trended downward, falling from RMB39-45 per kilogram in April to RMB32-35 per kilogram by June [13] - Despite a surge in installations in May, installations plummeted to 14 gigawatts in June, indicating volatility in demand [12] Company Strategy and Development Direction - Company aims to enhance efficiency through digital transformation and AI adoption, positioning itself as a low-cost producer with high-quality products [16] - The company is optimistic about the long-term growth of the solar PV industry and is focused on navigating current market challenges [16] Management Comments on Operating Environment and Future Outlook - Management noted that the solar PV industry is facing challenges due to overcapacity and low prices, but they expect a recovery supported by government initiatives [8][15] - The company anticipates a production volume of approximately 27,000 to 30,000 metric tons for 2025, with a full-year guidance of 110,000 to 130,000 metric tons [12] Other Important Information - The company has a strong balance sheet with no financial debt and a cash balance of CNY599 million as of June 30, 2025 [9] - A new share repurchase program of $100 million was authorized, reflecting management's confidence in the industry's future [40] Q&A Session Summary Question: Can you share updates on policy development regarding the consolidation fund? - Management discussed recent government meetings aimed at curbing irrational competition and promoting industry self-regulation [29][30] Question: How sustainable do you think the higher pricing can be with anti-involution initiatives? - Management expressed that selling below cash cost is unsustainable and emphasized the need for industry players to align on pricing above production costs [34][35] Question: What is the strategy behind the recently announced share repurchase program? - The program aims to strengthen shareholder confidence and reflects optimism about the industry's future [40][41] Question: How do you see the balance between price and inventory dynamics? - Management indicated that industry policies will help balance supply and demand, and they are actively managing inventory levels [55][56] Question: Will the company sell more polysilicon in Q3? - Management confirmed that they intend to adjust sales strategies based on market conditions and regulatory developments [70][71]

Financial Performance - Daqo New Energy recorded quarterly operating and net losses due to continued challenges in the solar PV industry with declining market prices[5] - Revenue decreased to $752 million in Q2 2025, compared to $1239 million in Q1 2025, a decrease of approximately 393%[10] - Gross loss was $814 million in Q2 2025, compared to $815 million in Q1 2025, with gross margin at -1083% and -658% respectively[10] - Net loss attributable to Daqo New Energy Corp shareholders was $765 million in Q2 2025, compared to $718 million in Q1 2025[10] - The company maintained a strong cash balance of $599 million, short-term investments of $419 million, bank notes receivables of $49 million, and fixed term bank deposit balance of $994 million as of June 30, 2025, totaling $206 billion in financial bank deposit and investment assets[5] Operational Highlights - The company operated at a reduced utilization rate of approximately 34% of its nameplate capacity[5] - Total polysilicon production volume for the quarter was 26,012 MT, within the guidance range of 25,000 MT to 28,000 MT[5] - Polysilicon sales volume decreased to 18,126 MT in Q2 2025 from 28,008 MT in Q1 2025[5] - Polysilicon average selling price (ASP) was $419/kg in Q2 2025, compared to $437/kg in Q1 2025[10] - The company expects its total polysilicon production volume in Q3 2025 to be approximately 27,000 MT to 30,000 MT, and full year 2025 production volume to be in the range of 110,000 MT to 130,000 MT[5]

20 August 2025 China Solar Equities Anti-Involution II: A clearer message China This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. Energy Equipment & Services Daniel Yang* A clearer message: On 19 August, the Ministry of Industry and Information Technology (MIIT) kicked off a new series of meetings with the solar industry on the "Anti Involution" campaign. After the first day, official guidance has been re ...

Summary of China Solar Industry Conference Call Industry Overview - **Industry**: China Solar Industry - **Date**: 15 August 2025 Key Points Polysilicon Prices and Production - Polysilicon price remained stable at Rmb44/kg as of the week starting 11 August 2025, with a current inventory of 24.2kt, reflecting a 4% week-over-week increase [1] - Monthly polysilicon production is projected to rise by 16% month-over-month to 125kt (equivalent to 54GW) in August [1] Wafer and Cell Prices - N-type wafer prices for M10/G12 remained unchanged at Rmb1.20/1.55 per piece week-over-week [2] - Utilization rates for tier-1 wafer manufacturers were stable at 50% and 46%, while vertical integrators operated at 50-80% [2] - TOPcon cell prices for M10/G12 also remained flat at Rmb0.29 per watt [2] - Module prices held steady at Rmb0.68 for TOPcon and Rmb0.76 for Back Contact modules, with module production flat at 52GW in August [2] Solar Glass Inventory and Pricing - Solar glass prices remained unchanged at Rmb10.75 for 2.0mm and Rmb18.75 for 3.2mm [3] - Soda ash prices were stable at Rmb1,350 per tonne [3] - Solar glass inventory decreased to 25.32 days, indicating a potential price increase in the coming weeks [3] Risks and Opportunities - **Downside Risks**: - Slower-than-expected growth in installed domestic renewable energy capacity [21] - Larger-than-expected tariff cuts for renewable energy projects [21] - Increased competition from other power resources due to future power reforms [21] - **Upside Risks**: - Faster-than-expected growth in installed domestic renewable energy capacity [22] - Smaller-than-expected tariff cuts for renewable energy projects [22] - Market share gains for solar energy compared to other power resources under future reforms [22] Additional Insights - The report emphasizes the stability in pricing across the solar supply chain, which may indicate a balanced market environment [1][2][3] - The increase in polysilicon production suggests a positive outlook for the solar industry, potentially leading to greater capacity and efficiency in solar energy generation [1] - The decline in solar glass inventory could signal upcoming price adjustments, which may impact overall project costs in the solar sector [3]

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Clean Energy, specifically focusing on solar products in China [1] - **Date**: August 6, 2025 [1] Core Insights and Arguments - **Price Stability**: Prices of polysilicon, wafers, cells, and modules remained stable week-over-week (WoW) [6][6] - **Polysilicon Prices**: - Average price: Rmb 44/kg, unchanged WoW - Price range: Rmb 42-50/kg [6] - **Granular Polysilicon Prices**: - Average price: Rmb 44/kg, unchanged WoW - Price range: Rmb 43-46/kg [6] - **Solar Films**: Prices dropped by 0-1.9% WoW, while EVA resin and POE resin prices remained stable [6] - **Monthly Changes**: - Polysilicon prices increased by 25.7% month-over-month (MoM) [2] - Wafer prices for 182mm and 210mm increased by 36.4% and 31.4% MoM, respectively [2] - **Yearly Changes**: - Polysilicon prices increased by 12.8% year-over-year (YoY) [2] - Prices of solar films decreased YoY, with transparent EVA film down by 9.5% [2] Additional Important Information - **Market Dynamics**: The report indicates a stable pricing environment for solar products, which may suggest a balanced supply-demand scenario in the market [6] - **Regional Pricing**: The report includes pricing for various solar products across different regions, indicating a diverse market landscape [2] - **Analyst Contact Information**: Analysts involved in the report include Eva Hou, Estelle Wang, and Evan Chen, providing avenues for further inquiries [3] Conclusion - The clean energy sector, particularly solar products in China, is experiencing stable pricing with some fluctuations in specific product categories. The overall market appears to be resilient, with year-over-year price increases in polysilicon and stable prices in other segments.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Polysilicon market in China - **Context**: The call discusses the recent buyout plan aimed at reducing excess polysilicon capacity and its implications for the market dynamics. Core Insights 1. **Buyout Plan Initiation**: Six low-tier polysilicon producers have agreed to exit the market, selling a total production capacity of 0.7 million tons (mt), equivalent to 350 gigawatts (GW) per annum. This is the first step towards forming a coordinated production strategy akin to "OPEC" for polysilicon [1] 2. **Capacity Reduction**: The buyout plan will reduce China's polysilicon production capacity from 3.2 mt (1,602 GW) to 2.5 mt (1,252 GW), which is below the initial target of a 1.0 mt reduction. The market is expected to remain oversupplied, with utilization rates projected to improve only slightly from 38% in 2025 to 41% in 2026, amid declining global demand [2] 3. **Price Control Impact**: Recent government price controls have resulted in a 37% increase in polysilicon prices within a month. This price recovery is crucial for the earnings of polysilicon producers, particularly for cost leaders like GCL, which is nearing breakeven [3] 4. **Investment Recommendation**: A "Buy" rating is maintained on GCL (3800 HK), identified as a cost leader in polysilicon. The company is expected to benefit from ongoing market consolidation and policy developments favoring a quicker consolidation process in 2026 [4][7] Financial Projections 1. **Earnings Scenario Analysis**: The analysis indicates that the average selling price (ASP) is a significant driver for recovery. Different scenarios project unit net profits for GCL Tech under varying ASPs (RMB/kg) and utilization rates, with potential profits increasing significantly if ASP reaches RMB 80/kg [18][19] 2. **Valuation Metrics**: GCL Tech's target price is set at HKD 1.65, implying a 32% upside from the current price of HKD 1.25. The valuation is based on a price-to-book (P/B) ratio of 1.14x for the solar materials segment [22][24] Risks and Considerations 1. **Downside Risks**: Potential risks include a significant drop in polysilicon prices, reduced demand from the US or other global markets due to trade disputes, and rising upstream raw material costs [22] 2. **Market Volatility**: Investor sentiment remains mixed, leading to share price volatility amid uncertain policy and recovery outlooks [4] Additional Insights - **Utilization Rate Projections**: The expected utilization rates post-capacity buyout are limited, with various scenarios suggesting rates of 41%, 47%, and 55% depending on global demand [12][14] - **Government Intervention**: The Chinese government's direct intervention in pricing is a new development, and its effectiveness in stabilizing the market remains to be seen [14] This summary encapsulates the key points discussed in the conference call regarding the polysilicon market in China, focusing on the buyout plan, financial projections, and associated risks.

Summary of Key Points from the Conference Call Industry Overview - The conference call focused on the **Basic Materials** sector in the **Asia-Pacific** region, particularly in **cement, steel, metals, and coal** industries [1] - There is a noted trend of **supply rationalization** and **demand boost**, although the near-term impact is expected to be limited [1] Core Insights and Arguments Supply Rationalization - The **Ministry of Industry and Information Technology (MIIT)** announced plans to stabilize growth in **10 key industries**, expanding to include metals and petrochemicals [1] - **Cement** sector capacity is to be cut to **1.6 billion tons (bnt)** from **2.1 bnt**, with a flexibility of 10% [2] - **Steel** production is expected to see a **3-5% supply cut** in FY25, with state-owned enterprises (SOEs) likely to cut **8-10%** from July to December [2][16] - **Lithium** production is facing disruptions, with a subsidiary of Zangge Mining ordered to suspend operations [36][37] Demand Boost - The announcement of a **RMB1.2 trillion** investment in the **Tibet mega-dam** is expected to positively impact market sentiment and drive demand for cement and steel [1][49] - The cement demand from the mega-dam project is projected at **30-40 million tons**, which is significant for local demand in Tibet [50] - The steel consumption from the mega-dam is estimated at **8-9 million tons** over the construction period [51] Price Trends - The average national cement price decreased by **0.5% week-over-week (WoW)** to **RMB330/ton** [11] - Steel margins are improving, with average rebar spot margin at **RMB99/ton**, compared to a loss of **RMB82/ton** in FY24 [16] - The price of imported iron ore increased by **2.3% WoW** to **US$99/ton** [23] Other Important Insights - The **solar sector** is undergoing significant changes, with a **30% production capacity cut** in solar glass and discussions of potential industry consolidation [26][30] - The **high-quality development action plans** for copper, aluminum, and gold industries aim to enhance resource assurance and technological innovation [32][33][34][35] - The **National Energy Administration (NEA)** is verifying coal production in eight provinces, but the impact on supply is expected to be limited [3][41][43] Conclusion - The **Basic Materials** sector is experiencing a shift towards supply rationalization and demand stimulation, particularly influenced by government initiatives and large infrastructure projects. However, the immediate effects on prices and production levels may take time to materialize, and ongoing disruptions in lithium and coal production could pose risks to supply stability [1][36][41]

Summary of the China Solar Sector Conference Call Industry Overview - The conference call focused on the **China Solar Sector**, particularly the implications of the **Draft Amendment to the Price Law** issued by the NDRC and the State Administration for Market Regulation on July 24, 2025, which aims to regulate "involutionary" competition in the market [1][2]. Key Points and Arguments 1. **Revised Low-Price Dumping Definition**: - The Draft Amendment clarifies that business operators are prohibited from engaging in dumping sales below cost prices to gain market dominance [2]. - This change is expected to standardize market pricing and prevent unfair competition, which has been prevalent in the solar sector [1]. 2. **Simplified Law Enforcement Procedure**: - The amendment simplifies the process for identifying illegal low-price dumping, allowing for more effective enforcement of the Price Law [3]. - This is anticipated to enhance the regulatory environment for solar companies, potentially stabilizing prices in the sector [1]. 3. **Positive Impact on Solar Sector**: - The amendment is viewed positively for the solar sector, as many solar products have been sold below cost since the second half of 2024 [1]. - Companies like **GCL Technology**, **Tongwei**, and **Daqo Energy** are expected to benefit from higher average selling prices (ASP) and potential capacity consolidation [1]. 4. **Downstream Segments**: - Downstream segments such as solar glass, wafers, and solar cell manufacturers are also likely to benefit from the regulatory changes [1]. - The focus is on cost leaders within each segment to capitalize on the improved pricing environment [1]. Company Valuations and Risks 1. **Daqo New Energy**: - Target price set at **US$27.00** based on DCF valuation, with a WACC of **11.7%** [9]. - Risks include slower-than-expected polysilicon capacity reduction and higher power costs [10]. 2. **GCL Technology**: - Target price set at **HK$1.70**, with a WACC of **9.1%** [11]. - Similar risks as Daqo, including polysilicon demand fluctuations [12]. 3. **Tongwei**: - Target price set at **Rmb25.00/share**, with a WACC of **9.7%** [13]. - Risks include potential government support for less efficient solar equipment makers [14]. Additional Insights - The conference highlighted the importance of regulatory changes in shaping the competitive landscape of the solar industry in China. - The focus on preventing dumping practices is expected to lead to a healthier market environment, benefiting both upstream and downstream players in the solar supply chain [1][2][3].

Summary of Key Points from the Conference Call Industry Overview - The focus is on the **Chinese market**, particularly the **new energy vehicles (NEV)**, **solar**, **coal**, and **cement** sectors, in the context of the **anti-involution initiative** aimed at reducing unhealthy competition and improving corporate profitability [2][3][7]. Core Insights and Arguments 1. **Anti-Involution Initiative**: - The initiative is gaining momentum, with calls for industries to self-regulate to avoid damaging competition. This is expected to improve supply-demand dynamics, drive price recovery, and enhance corporate profitability [2][3]. - China's Producer Price Index (PPI) fell by **2.8% YoY** in the first half of 2025, marking the **33rd consecutive month** of declines, alongside a **9.1% YoY drop** in industrial profit in May [2][12][14]. 2. **Market Reactions**: - Historical parallels are drawn to the **2015-16 supply-side reform**, which led to price increases in materials and a re-rating of relevant sectors. Sectors addressing unhealthy competition, such as solar and power batteries, have recently rebounded [3][4][21]. - Stock prices initially reacted positively to new policies during the supply-side reform, providing excess returns relative to the broader market for **1-2 months** [4]. 3. **Commodity Price Correlation**: - Stock prices initially moved in tandem with commodity prices and production changes, but later decoupled. Significant price increases for relevant commodities occurred during two periods in 2015-16 [5][26]. 4. **Corporate Profitability**: - The coal sector's profitability improved significantly in the second half of 2016, with nearly **90% of capacity** turning profitable by the end of Q3 2016, compared to **8%** in November 2015 [6][31]. 5. **Differences from Previous Reforms**: - The anti-involution push is expected to have a smoother and longer-lasting impact on stock prices compared to the supply-side reform, focusing more on downstream industries where non-state-owned enterprises (non-SOEs) are prevalent [7][9]. Indicators for Investors - Investors should monitor: - Specific capacity controls and recovery in product prices (e.g., polysilicon prices) - Capacity utilization rates in relevant businesses - Rebound in PPI - Indicators such as industrial profit growth and the proportion of profitable businesses, which may lag behind stock price movements [10][36]. Additional Important Insights - The report emphasizes the need for clearer guidelines and stronger support for domestic demand as the anti-involution initiative progresses [10]. - The potential risks facing China's equities include a hard landing in the property market and slow structural reform progress, which could shock the market if not adequately addressed [38]. This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the current state and future outlook of the relevant industries in China.