大全新能源 (DQ) 2022 Q2 法說會逐字稿

Good day, and welcome to the Daqo Second Quarter 2022 Financial Results Conference Call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Kevin He, Investor Relations. Please go ahead.

Hello, everyone. I'm Kevin He, the Investor Relations of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the second quarter of 2022, which can be found on our website at www.dqsolar.com. To facilitate today's conference call, we have also prepared a PPT presentation for your reference.

Today, attending the conference call, we have Mr. Longgen Zhang, our Chief Executive Officer; and Mr. Ming Yang, our Chief Financial Officer. The call today will feature an update from Mr. Zhang on market and operations and then Mr. Yang will discuss the company's financial performance for the quarter and the year. After all -- after that, we will open the floor to Q&A from the audience.

Before we begin the formal remarks, I would like to remind you that certain statements on today's conference 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. A number of factors could cause actual results to differ materially from those containing any forward-looking statements.

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 the 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.

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. We offer these translations into U.S. dollars solely for the convenience of the audience.

Without further ado, I now turn the call to our CEO, Mr. Zhang. Longgen, please go ahead.

Hello, good morning, good evening. We are very proud to deliver an excellent quarter with a record production volume and profits. Revenue reached $1.24 billion, gross profit was $947 million with gross margin of 76%. Net income attributable to Daqo shareholders was $628 million, an increase of 17.2% from $535.8 million in the first quarter of 2022 and an increase of 170% from $232 million in Q2 2021. Our cash position at the end of the quarter was $3.3 billion, an increase of approximately $2.2 billion from $1.1 billion at the end of Q1 2022, reflecting our strong cash flow generation. Cash and banking note receivable combined balances reached $4.6 billion. Operating cash flow was $1.1 billion for the first 6 months of this year.

During the quarter, we operated at full capacity and produced 35,326 metric tons of polysilicon. More than 99% of our production were high-purity mono-grade polysilicon products. We successfully ramped up our new Phase 4B facility to full capacity and further optimized its operational performance. Our sequential improvements in gross profit and gross margin were primarily driven by a 28% reduction in our polysilicon production cost.

With higher manufacturing efficiency and better economy of scale, we reduced our per unit electricity cost and depreciation cost by 7% and 13% in RMB terms quarter-over-quarter, respectively. In addition, our metallurgical-grade silicon cost in the second quarter was reduced by 37% as compared to the first quarter. With our facility in optimized stable operations, we believe we will be able to maintain, and possibly further improve our cost structure in Q3 and Q4 this year. We expect an even more favorable outlook for the cost at our new Inner Mongolia facility.

As a chemical refining facility, safe and stable operations are extremely important for polysilicon production, and our facilities perform the best under such conditions. In order to minimize the impact on operations, we will conduct our annual maintenance in phases spread throughout the third and the fourth quarters. During the same time, we will conduct some technology improvement projects, which are expected to further save energy and optimize efficiency.

As a result, we expect our polysilicon production volume in the third quarter to be in the range of 31,000 to 32,000 metric tons. With our better-than-expected operational performance in the first half of this year, we are increasing our guidance on annual production volume to 129,000 to 132,000 metric tons for the full year of 2022, up from our previous guidance of 120,000 to 125,000 metric tons.

In June 2022, our major operating subsidiary, Xinjiang Daqo, received a total gross proceeds of approximately RMB 11 billion from its private offering on the Shanghai Stock Exchange. Upon completion of the private offering, [Piper], Daqo New Energy beneficially owns approximately 72.68% of Xinjiang Daqo. Proceeds from the offering will be used primarily for our Phase 5A polysilicon project of 100,000 metric ton in Inner Mongolia. This new project is currently under construction and expected to be completed by the second quarter of 2023.

Driven by several favorable trends, the global solar industry saw robust demand in the first half of this year, and demand both in China and overseas continues to exceed market expectations. According to data from the China Photovoltaic Industry Association, China's production of polysilicon and solar modules in the first half of this year was approximately 365,000 metric ton and 123.6 gigawatts, respectively, an increase of 53.4% and 54.1% compared to the same period of last year.

While solar PV products' supply increased significantly compared to last year, ASPs kept rising across the entire solar value chain due to stronger-than-expected end market demand. Despite rising ASPs, during the first half of this year, solar PV installations in China reached 30.9 gigawatts, and China exported 78.6 gigawatts of solar modules, up 137% and 74%, respectively, over the same period of 2021. Driven by strong end market demand and increased orders from wafer suppliers, polysilicon ASPs and profitability improved continuously during the first half of this year despite increased supply.

According to the China Silicon Association, the average price included VAT for high-density mono-grade polysilicon increased significantly by 29.3% from RMB 229 per kg in the first week in January 2022 to RMB 296 per kg in the last week of July 2022. Nevertheless, our production is sold out for August and we have a strong order backlog for our products. We understand that many newly built wafer facilities are idle because of the shortage of polysilicon, as capacity expansion is much faster in downstream than in polysilicon sector.

Beyond the urgency the address -- to address climate change that is driving various supportive policies to accelerate the adoption of solar energy globally, the recent conflict in Europe has led to an energy crisis with substantially higher natural gas and oil prices. Solar PV is easy and fast to deploy and its cost, which has already reached grid parity, is locked in for the next 20 to 30 years. The rise in energy costs has made solar PV increasingly attractive, especially in the countries currently facing energy shortages and seeking energy safety and independence. For instance, in the second quarter, European solar PPA price increased substantially and the market saw a substantial increase in demand from Europe with module exports to Europe greater than 50% of total module export for China.

In June, our Board of Directors authorized the company to repurchase up to $120 million worth of its own issued shares on open market. As of today, we have already repurchased approximately $50 million worth of our ADRs and we will continue to do so as we believe our current ADR price is seriously undervalued and not reflective of our position as an industry leader with strong profitability and operating cash flow.

With growing global policy support and attractive economics, we are confident that solar PV market demand and prices will remain strong, providing sustainable and healthy profits to the solar manufacturing value chain. In the first half of this year, despite a 53.4% increase in production volumes in China over the same period of last year, polysilicon was still a drag on the entire solar PV manufacturing value chain and capacity expansion was meaningfully slower than in the downstream sectors. Challenges in getting energy consumption approvals, long construction times, and delayed ramp-up times, as well as the operational inexperience of new players, make polysilicon one of the sectors with the highest entry barriers and slowest expansion growth in the solar PV manufacturing value chain.

We expect this imbalance to continue for a while and help our sector greater -- greatly benefit from the robust market demand. We will continue to focus on our core business and further strengthen our industry leadership by increasing capacity, reducing our cost structure and improving product quality so as to continuously reward our shareholders. Our vision is that in the not-too-distant future, renewable energy will display -- displace fossil fuels to become the primary source of energy for humans, with solar energy playing the biggest role. And our mission is to help market -- to help make that vision a reality.

The company expects to produce approximately 31,000 metric ton to 32,000 metric ton of polysilicon in the third quarter of 2022 and approximately 129,000 metric ton to 132,000 metric ton of polysilicon in the full year 2022, inclusive of the impact of the company's annual facility maintenance.

Now I will turn the call to our CFO, Mr. Yang.

So, thank you, Longgen, and good day, everyone. Thank you for joining our earnings conference call today.

Now, I will go over our second quarter 2022 financial results. Revenues were $1.24 billion compared to $1.28 billion in the first quarter of 2022 and $441 million in the second quarter of 2021. The slight decrease in revenue as compared to the first quarter of 2022 was due to a slight decrease in sales volume, compensated by a slight increase in average selling prices.

Gross profit was $947 million for the quarter compared to $813.6 million in the first quarter of 2022 and $303 million in the second quarter of 2021. Gross margin was 76.1% compared to 63.5% in the first quarter of 2022, and 68.7% in the second quarter of 2021. The increase in gross profit and gross margin as compared to the first quarter was primarily due to lower production costs and higher average selling prices.

Selling, general and administrative expenses were $14.4 million compared to $15.5 million in the first quarter of 2022 and $9.3 million in the second quarter of 2021. SG&A expenses during the quarter included $2 million in noncash share-based compensation costs related to the company's share incentive plan. R&D expenses were $2.7 million compared to $2.1 million in the first quarter of 2022 and $2.1 million in the second quarter of 2021. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter, but most of the R&D activity during the quarter related to the development of our N-type polysilicon products.

Income from operations was $927.6 million compared to $796.9 million in the first quarter of 2022 and $292.4 million in the second quarter of 2021. Operating margin was 74.6% compared to 62.2% in the first quarter of 2022 and 66.3% in the second quarter of 2021. EBITDA was $955 million compared to $827 million in the first quarter of 2022 and $312 million in the second quarter of 2021. EBITDA margin was 76.8% compared to 64.6% in the first quarter of 2022 and 70.6% in the second quarter of 2021.

Net income attributable to Daqo New Energy shareholders was $627.8 million compared to $535.8 million in the first quarter of 2022 and $232 million in the second quarter of 2021. Earnings per basic ADS was $8.36 for the quarter compared to $7.17 in the first quarter of 2022 and $3.15 in the second quarter of 2021.

And as of June 30, 2022, the company has $3.3 billion in cash and cash equivalents compared to $1.1 billion as of March 31, 2022, and $270 million as of June 30, 2021. And as of June 30, 2022, notes receivable balance was $1.27 billion compared to $1.5 billion as of March 31, 2022, and $97 million as of June 30, 2022. And as of June 30, 2022, total bank borrowings were nil compared to nil as of March 31, 2022, and total bank borrowings of $156.6 million as of June 30, 2021.

And now on the company's cash flow. For the 6 months ended June 30, 2022, net cash provided by operating activities was $1.13 billion compared to $442 million in the same period of 2021. The increase was primarily due to higher revenues and a higher gross margin for the company. And for the 6 months ended June 30, 2022, net cash used in investing activities was $80 million compared to $255 million in the same period of 2021. Net cash used in investing activities in 2022 was primarily related to the capital expenditures of the company's 100,000 metric ton polysilicon project in Inner Mongolia and offset by $265 million in redemption of short-term investments.

And for the 6 months ended June 30, 2022, net cash provided by financing activities was $1.58 billion compared to net cash used in financing activities of $37 million in the same period of 2021. The net cash provided by financing activities in 2022 was primarily related to the net proceeds of $1.63 billion from Xinjiang Daqo's private offering in China Shanghai Stock Exchange.

And that concludes our prepared remarks. And now we will open the call for questions from the audience. Operator?

(Operator Instructions) Our first question comes from Philip Shen with ROTH Capital Partners.

Congratulations on the strong results here. Wanted to talk about your view for poly pricing. If you could share a little bit more color on how you expect it to develop in Q3 and Q4 with the announced capacity expansions from competitors? And then how do you expect poly pricing to trend in 2023 by quarter?

Thank you, Philip. I think today, because we didn't have any technology barrier for wafer, cell and module. So basically, polysilicon price is positive co-relationship with the module price. So today, the module price, I think, [RMB 7, $2.1]. So can support the poly right now, I think the market price is almost close, I think, 320, 310. So basically, we believe the module price will continue to keep at that level -- this level. So we think that the price -- I think right now, Q3 is very strong. But Q4, we think it will continue to keep maybe to the end of the year, it's dependent on the situation in China, with China in the rush installation.

If that's the case to continue, then also considering the new production -- polysilicon production will be, I think, produce, I think, salable polysilicon. But we believe the poly price will continue to keep higher for the end of -- for the, I think, rest of this year. And for the next year, we believe there's not too much new polysilicon come out as we see that, even though, just like I said, some new player come in because of the design time, because of construction time, because of the technology, because of the equipment, I think the made -- design/made and also installation, all these factors add together, I think at least, I think, a newcomer need taking 18 months to 24 months, the player.

So even though considering the polysilicon come out, the price, I think, jumped back last year, let's say, second half of last year, some new coming come in. So they, I think, well, maybe produce some new capacity in the second half of next year. So we consider the 2023, the first half of the year, price will continue to keep about $250 per kg. For the second half of next year, the price maybe will go down. I think maybe it will be $180 to $200. Then beyond next year, really, we cannot project the price will go to which direction. But considering the market potential is higher if the polysilicon price is correlated -- positive correlated with the module unless the polysilicon supply is totally higher than demand.

If that's the case, for the wafer sale and module production only taking 3 months to 4 months to in-store to put it into the production. So basically, only the module price go down, then the polysilicon price will go down. Considering that, if the module price go down, then the market demand will be higher. I think that will stimulate the demand of polysilicon. So I think at a certain time, it's some balance there. So basically, we're not thinking polysilicon will drop to below RMB 120 per kg. That's what we believe. Thank you, Philip.

That's a lot of detail. I appreciate the color. You talked about your capacity expansion Phase 5A. Congratulations on your recent capital raise and now you're funded for the expansion and you're targeting the Q2 '23 ramp-up of 5A. When do you think you make the decision on 5B? And can you remind us how much more capacity you could have in Inner Mongolia or elsewhere?

As you see that considering today, combined all the cash and the banking note, we almost have $4.4 billion sitting in our account. So even though, let's say, we're considering, I think Mongolia 5B, the 100,000 investment, that maybe considering around, I think, $1.2 billion or $1.3 billion investments. We still have enough cash sitting there. The reason why, one is we are going to do in the future, and based on Asia, the public company requirements to continue with distributing the dividends.

Second is during the whole industry, I think, lower circle, we are considering -- we really have a strong balance sheet to do consolidator. I think that's our major purpose. So basically, our planning is for the next 3 years, we're planning the capacity every year increase 50%. Just like this year, we've already given guidance. I think our guidance is 129,000 to 132,000 metric tons. So next year, as you can see, our Magnolia 5A will be put into production, we believe, I think, maybe around 70,000 tonnes will come out next year, come out from 5A.

Then by the end of next year, the 5A for the year 2004 -- '24 definitely is 1,000 tonnes plus Xinjiang 120 -- 130,000 tonnes. So total together is 230,000 tonnes. Then plus the 5B, we are planning starting maybe certain time depending on the board makes decision, but we are starting to do some prepared work. We are going to start, I think, the second half of this year. Yes. But we will announce that.

That's great color. And just to explore something you said earlier, Longgen, you talked about how you have a strong balance sheet to consolidate. Does that suggest that with some of your peers struggling to get the capacity online and efficient and low cost, are you open to potentially acquiring some facilities in addition to your greenfield 5B and 5A?

Yes, temporarily. I think, first of all, basically, our announcements, we will do the metal silicon, I think, in Mongolia -- Inner Mongolia (inaudible). So we also -- we're starting from, I think, the -- all, I think then from -- for the industry silicon then to the solar silicon, I think and hope for the production extremely, I think, to expansion to show all products always from Mongolia. That's first, I think. Then for all those products, we're now expanding in Inner Mongolia, we will use around 60% to 70% of green energy. So is that the question about the green energy?

No. I think, Longgen, it wasn't about green energy. It was about -- do you prefer to -- could you consider acquiring other polysilicon projects that are struggling? Is that something that you're open to? Or do you think you might -- to expand capacity, would you only do your own construction? Or do you think you might actually go out and buy other facilities that are under -- well, that has started production but are struggling?

Of course. It's only depending, I know, in which situation. Just like you said, if some under the -- what's it called?

Underperformance.

Underperformance or whatever, you see, the restructuring assets. Of course, we are waiting. That's why we keep a strong financial statements and balance sheet. Yes.

Great. Okay. Do you have a sense of timing as to when you could acquire another company's polysilicon assets?

We think the best time maybe, I think, in year 2024 or maybe next half of -- the second half of next year. It's no time schedule. Because right now, yes, we see -- already see 2 products in China for selling, but the price is still too high.

One last question and I'll pass it on. As it relates to the Chinese government, there have been some reports that maybe they get involved in the industry because the poly pricing is so high. What are your thoughts as to what they could do? Do you think that's actually possible? And what do you think happens next?

I think the Chinese government is encouraging, I think, a free market. Even last year, I think the price also has changed. But the government never say, come here and say, hey, you have to selling the product at a certain price. I think in whole solar industry, the value chain, I don't think the government will do anything on the price side. It only depends on the market, how much the module price you can sell, right?

Then the installation -- even the state-owned company right now is a step in the solar, I think power plant, the fuel plant or distributor plant. So I don't think the government will put their nose, I think, on the private sector, even the market -- the pre-market. I don't believe even though some news there, I think all those news, some are even fake. Some -- I don't know, some people may be intending to do that.

The next question comes from Gary Zhou with Credit Suisse.

And congratulations on the very strong second quarter results. So I've got 3 questions. So firstly, I want to ask, so recently, we have seen some of our polysilicon peers have signed long-term polysilicon supply contracts with some newcomers in the wafer industry. Just wondering if Daqo is also currently in negotiation, I mean with some other wafer companies in terms of polysilicon contracts.

Okay. The first kind -- the question is about the long-term contract with our downstream clients, the wafer producer. We're starting actually, I think, in the year 2020. Basically, we see the price -- polysilicon price will go up. So that's why we signed those long-term contracts. But Daqo is differentiated from our peers. Basically we sign the long-term contract is they cover -- the year is 3 years to 5 years long-term contracts, and we locked the quantity, but we also not lock the price, but we'll also collect the deposits, high deposits. So starting year 2020, we collect starting from RMB 3.6 per kg to right now is RMB 7.2 per kg.

So if the wafer producer is not paying the down payments, we don't think the contracts have strong combined legal combination. So that's why our policy, we stick on that. Today, we have, I think, 9 long-term contracts, I think, with our strategic, I think, clients. We will continue to sign. I think we will announce another big one. But we're different from other people. You see, if you see the market right now, release a lot of our peers, but those contracts, I'm not going to add comments, okay? They may be not received any -- even lower deposits. We still keep our principle. We have to collect a certain amount of deposits to keep the contract, long-term contract effective. Gary?

Yes. This is very helpful. And my second question is also on the kind of newcomers. So I think recently, there's news that there's one company in Qinghai province announced that they have kind of a permission that they have Phase 1 kind of a polysilicon project. So just wondering, comment, maybe share more on whether you believe those newcomers, their kind of a product needs to be industry center? And how -- and also second question, so usually, I think for us, it usually only takes around 2 to 3 months to ramp up our capacity. And how long do you think it may take these newcomers to ramp up the capacity to full utilization?

We know the comments in our downstream clients, basically, what you say is that one of the clients is our clients and we have been interested and focused on single module, even partial capacity on the sale. They announced big, I think, investments in Qinghai. So we're not going to comment on whether they're going to reinvest or not, whether they have the technology or not. But anyway, today, announced -- a lot of people announced and want to jump into the polysilicon, I think, production. But just like I said, because of polysilicon production, long-term investment construction period, either design and the equipments made and also, I think a lot of capital investments -- so technology, with technology and people, it's not that easy to jump into them to immediately, I think, ramp up of the products.

So we're not going to do any comments on that. But yes, I think today, polysilicon production or their expansion have a lot of products when they're there. If you account right now, maybe more than 10, I think, the size of 50,000 metric tons production line is working on that. But we don't know really how much will come out of real production capacity. But as we know, like at [Dachan], like Tongwei, like (inaudible), I think those 3 players, if they declare, I think, expansion as a schedule, I think because they already proved, I think, their production, their quality and their scale. I think maybe that will be true and believable.

Then other, we're not going to do any comments because really a lot of uncertainty there. So that's why I think today, the polysilicon price, a lot of people projecting polysilicon price change, maybe turn around in the near term. But we consider it different, just like I mentioned there. We think the polysilicon price is positively related to module price. And we think, I think, 1 year or more, I don't think the price will go down. So we think the price maybe will slightly go down is the Q4 2023. Then really back to maybe normal around $120 in 2024. Thank you, Gary.

So quickly, my last question is on the share repurchase. So just wonder -- want to ask if the company has any kind of guidance on what kind of share price range that we would consider to do more share repurchase. And also, I look at the company sell a number of shares in this first half, I saw that the number of shares actually increased a little bit. So just wondering why is that like we are currently doing repurchase.

So we have started our share repurchase program, and we have been repurchasing in the month of June and July and through the 10b5 program, for example. And so far, I think as of today, we repurchased approximately $50 million or so, and we will continue to repurchase in the coming months, especially in the open window period that's coming up. And definitely, we think the current share price level certainly is extremely attractive. We do see the company has almost $4.6 billion in capital and generating very healthy cash flow and you have (inaudible) the same as how much the company has in terms of cash on hand. And so definitely, we will continue to repurchase the current cycle or even higher than the current levels.

Then also, Gary, just like we know that, because we, right now, I think the (inaudible) is in the Asia listing. So we will continue to declare the dividend policy. So in the future, especially this year, high profit -- we will distribute a high, I think, quantity of capital of dividends. So we will continue to keep the repurchase program in order to protect the U.S. shareholders, and we're also considering the case of foreign accounting reporting act possible listing in China concept the stock. We're considering the dual primary listing in Hong Kong Stock Exchange, we are considering that also. Thank you.

Our next question comes from Chao Ji with Goldman Sachs.

Can you please share your view for the cost trend for the coming third and fourth quarter? And also when we ramp up our 5A project, what kind of production cost or cost level that we could be looking for?

Okay. Chao Ji, thank you for your question about our cost. So I think quarter-over-quarter for Q2 compared to Q1, you did see a 28% reduction in cost where our current cost structure is about $7.26 per kilogram. And the previous quarter in Q1, it was about $10 per kilogram. And I think a lot of this reduction is coming from a reduction in, for example, energy usage in terms of utility, electricity and steam, also reduction in both our usage of silicon powder on a per unit basis as well as a reduction in silicon power pricing.

And we continue to see -- I think based on our cost trends in June and July, for example, we continue to see our cost to decline. So for example, our June cost is below May and then July cost is below June, as an example, and benefiting both from economies of scale and manufacturing efficiencies as well as continued reduction in silicon metal cost in the market in our procurement. So -- and actually we've taken the opportunity to purchase some additional silicon metal supply, beneficial of the current lower pricing. So we would expect our Q3 cost to be lower than our Q2 cost in a beneficial trend. And Q4 is also looking very positive.

And now for Inner Mongolia cost, we would think that because of the scale of Inner Mongolia, in terms of manufacturing efficiency, it's a single 100,000 metric tons shy and with a lower number of employees, as an example, compared to our Xinjiang site. So we have a very competitive cost structure. So we would think Inner Mongolia at a minimum would be about the same cost as our Phase 4B, I think, which generally is about 3% to 5% than our -- lower than our overall average cost. So we would think that Inner Mongolia will have even better cost than our Xinjiang Daqo cost.

By the way, Inner Mongolia will produce our own silicon metal. I think we were starting projects this afternoon, the board -- I think Mongolia board makes a decision. And we think the -- our own silicon metal will produce maybe in the first half of next year. So if we use our own silicon metal, I think the cash cost there will be below RMB 30 per kg.

Our next question comes from Alan Lau with Jefferies.

Congratulations to management on the record-breaking results again. So my first question is in regards to -- it's a quick one, and it's regards to what is the target dividend payout ratio? Because last year, we have around -- we had around 20%. So what do you expect to be a reasonable payout ratio for this year?

Okay. First of all, I think I cannot give you exactly, I think, the target ratio. But basically, in the solar industry, in Asia, I think the ratio is around 20% to even 50%. So I think this year, 25% because we're also doing the offering. So we believe, I think, the ratio in the future will be between, I think, 20% to 30% or even 40%. So it's based on the board, I think make the decision.

Understood. And would you mind to share the progress on the plant in, first of all, the Phase 5A and also the project in Xinjiang Daqo -- sorry, it's the Phase 5B project. Like is there any approval or a progress on the way?

You mean the Phase 5A? The Phase 5A right now, I think is -- yes, I think we're starting the design last year October. I think really the field, I think study because of land issue, we started in the, I think, June, July. Right now, I think all the equipment we design and order will deliver to the sites during the August to the September, before the winter. So basically, we make a decision, I think. We were starting, I think, the primary production in Q1 -- after Q1. So ramp up in the Q2 of next year. So everything were now in schedule.

Then the Phase 2, you mean the 5B where possible, I think we're starting, I think, this year, maybe Q4, we're starting. We're already starting all the design already starting last week, then also all the improvements, applications we're already starting, I think, through the government. So basically, we believe, I think we can start in, I think, Q4 this year. So hopefully, we can starting production by the end of next year or even early 2024.

Okay. So my last question here is about in view of the N-type transition trend, so -- and I also heard just now, the management has mentioned there are some R&D costs in relation to N-type. So can you share with us what is the development as to now? And like what's the percentage of N-type product can the company offer in its, like, existing plant and new plant?

I think N-type, I think silicon for 5A, we can 100% manufacturing, I think annually 100,000 tonnes. If we produce manufacturing P-type or maybe the capacity more than that, maybe we can reach to, I think, 110,000, even 120,000 tonnes. So today, in Xinjiang, right now, I think if we manufacture an N-type, we can make -- basically we're now considering the equipment status and didn't do any improvements.

I think the technology improvements. We can produce 75% N-type polysilicon. The problem is right now, the N-type polysilicon in the market is not that big. Right now only, I think, one company right now put, I think, N-type production, I think, 16 gigawatts right now starting, 8 gigawatts, I think, last week and last month, this month, another 8 gigawatts starting production.

So the demand is not too much. Every month right now, I think N-type right now, we're selling around, I think, 800 to 1,000 metric tons. So the price only $3 -- RMB 3-plus compared to the P-type polysilicon price. So I don't think this year N-type will account too much, maybe around 5% to 10% this year. Next year, maybe around 15% to 25%. Really, I think P -- transfer P to N, the technology still, I think, potentially still take time, at least take, I think, 1 year and 1.5 year to reach the cost effective N-type sale production line.

Our next question comes from Rajiv Chaudhri with Sunsara Capital.

Congratulations, Longgen, on a great operational performance and great financial performance in the last quarter. I have a couple of questions. The first one is, what is the interest rate that you're getting on the cash that you have on the balance sheet? And what do you expect it to be over time because obviously, you will have a lot more cash accumulating in the next several quarters?

Okay. I think because we're also a listed -- Asia listed company here in China, I think there's more restrictions on the type of bank deposits we could do or a high yield to the investment products, which generally need to be what's considered principal protected or guaranteed by the issuing bank. So I would say generally, the current deposit rate is somewhere between 1.8% to about 2%. So that's the current average interest rate we're seeing right now.

Okay. And secondly, on the share buyback, should we expect that next year as well, when you announce the dividends and the dividend payout ratio may be higher than the 20% that we had this year that the share buybacks will be the primary way that you will return cash to shareholders in the -- who are listed in the United States, and it will not be a dividend in other words?

I think -- Rajiv, I think it depends on, first of all, I think we will consistently do the, I think, dividends policy because based on the Asia company, they will do that. I think this dividend, I think, declared percentage just targeted basically on the industry basically on the, I think, the experience, I think. We're between the profit and net profit -- attributable net profit, 20% to 50%, the range is there. Whether we continue going to do repurchase program or dividends to the U.S. shareholders, it's depending on the U.S. capital market, right?

If, let's say, the market value is higher, for example, is like, let's say, is 20 -- or whatever, $100 billion or $200 billion, then we may be declare dividends for the board considering. If the Daqo price, the valuation is under like today's situation, definitely, we'll do the repurchase program. So it all depends on market situation going. The valuation we consider.

Right. That's very helpful. Finally, you mentioned the possibility of a Hong Kong listing. Is that a decision that has already been made? Are you thinking about it? And can you tell us more about what the timeline might be for such an action?

We are considering that. The reason is because the -- it's possible, I think, U.S. foreign company reporting act, if possible, the agreements -- reach agreement in time between the U.S. and China governments. So in order to protect the U.S. shareholders, yes, the board is already considering to discuss this issue. So we already do some study. I think we got the banker, the investment banking proposal. Yes, we consider -- we'll consider very serious considering the due primary listing in Hong Kong Stock Exchange. If we're going to take, before selling we'll take quickly, I think maybe around -- under, I think, 6 months, we were down there. So basically, yes, in the near future, we will announce that.

This concludes our question-and-answer session. I would like to turn the conference back over to Kevin He for any closing remarks.

Thank you, again, everyone, for attending today's conference call. Should you have any further questions, please don't hesitate to contact us. Thank you, and bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.