大全新能源 (DQ) 2025 Q3 法說會逐字稿

Hello and welcome to the Daqo New Energy third quarter 2025 results conference call. (Operator Instructions) . Please note this event is being recorded. I would now like to turn the conference over to Jesse Zhao, Investor Relations Director. Please go ahead.

Hello everyone, I'm Jessie Zhao, the Investor Relations Director of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the third quarter of 2025, which can be found on our website at www.dqsolar.com.

Today attending a conference call, we have our Deputy CEO, Ms. Anita Zhu; our CFO, Mr. Ming Yang; and myself. Our Chairman and CEO, Mr. Xiang Xu is on a business trip now. So, Ms. Anita Zhu will deliver our management remarks on behalf of Mr. Xu.

Today's call will begin with an update from Mr. Xu on market conditions and company operations, and then Mr. Yang will discuss the company's financial performance for the quarters. After that, we will open the floor to Q&A from the audience. Before we begin with the formal remark, I would like to remind you that certain statements on today's call, including expected future operational and financial performance and the industrial growth, are forward-looking statements that are made under the Safe Harbor provisions of the US Private Security 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 this and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission. This statement only reflect our current and preliminary view as of today and may be subject to change.

Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today's call is as of today, and we undertake no duty to update such information except as required under the applicable law. Also during the call, we will occasionally reference monetary amounts in US dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into US dollars solely for the convenience of the audience. Now I will return the call to our Deputy CEO, Ms. Anita Zhu. Ms. Zhu please go ahead.

Hello everyone. This is Anita. I'll now deliver our management remarks on behalf of our CEO, Mr. Xu. So with the recovery of market prices across the solar PV value chain in the third quarter of 2025, we believe the industry is gradually recovering from its cyclical downturn. In particular, the policy silicon sector reached an inflection point during the quarter, with prices rebounding significantly. As a result, we're pleased to report that for the third quarter, Daqo New Energy recorded positive EBITDA of $45.8 million, as well as adjusted net income of $3.7 million.

Moreover, our strong balance sheet is further reinforced. As of September 30, 2025, the company had a cash balance of $552 million, short-term investments of $431 million, bank notes receivables balance of $157 million and total fixed term bank deposit balance of $1.1 billion.

In total, our bank deposit and financial investment assets readily convertible into cash if needed at $2.21 billion representing an increase of $148 million compared to the end of the second quarter. Our solid financial foundation provides us with confidence and strategic flexibility to navigate the ongoing market recovery and capture long-term opportunities.

Operationally, the company implemented proactive measures to counteract the continued market oversupply, maintaining a nameplate capacity utilization rate of 40%. Total polysilicon production for the quarter was 30,650 metric tons, slightly above our guidance range of 27,000 to 30,000 metric tons. We also capitalize on favorable pricing conditions to sell not only our current quarter's output, but also a significant portion of our existing inventory, leading to a sharp rising of sales volume to 42,406 metric tons from 18,126 metric tons in the previous quarter.

The strong increase in sales volume reflects both our customers' confidence in Daqo's product quality and their continued preference for a product in the new pricing environment. As a result, our sales volume far exceeded production, bringing our inventory down to a healthy level.

Another positive note, production costs declined significantly during the third quarter, extending our ongoing cost reduction trend. Total production costs declined by 12% to $6.38 per kilogram in Q3, 2025 from $7.26 per kilogram in the second quarter of 2025.

Total idle facility related costs, primarily non-cash depreciation expenses, also fell to 1.18% in Q3 from 1.38 in Q2, driven by higher production levels. In particular, our cash costs decreased by 11% from $5.12 per kilogram in Q2 to $4.54 per kilogram in Q3, the lowest in the company's history.

Cash cost includes approximately $0.16 per kilogram of idle facility maintenance related costs. In light of the current market conditions, we expect our total silicon production volume in the first quarter of 2025 to be approximately 39,500 metric tons to 42,500 metric tons. As a result, we anticipate our full year 2025 production volume to be in the range of 121,000 metric tons to 124,000 metric tons.

At the industry level, according to industry statistics monthly supply of polysilicon in Q3 remained in the range of approximately 100,000 to 130,000 metric tons. On September 24, President Xi announced China's new 2035 environmental targets at the UN climate summit. These targets include increasing the share of non-fossil fuels in total energy consumption to over 30% and expanding the installed capacity of wind and solar power to over 6 times the 2020 level, aiming to reach an accumulative capacity to 3,600 gigawatts by 2035.

The official announcement reaffirmed China's ambitious strategy to transition toward a new low carbon energy structure with solar PV playing a pivotal role in the process. Entering the third quarter, China's anti-evolution initiative to restrict low price competition in the poly silicon sector continued to impact the industry. Market expectations of consolidation, tighter supply have improved overall industry fundamentals.

In particular, on August 19, the Ministry of Industry and Information Technology, the Central Ministry of Social Work, the NDRC, the State Council's state-owned Assets Administration Commission, the General Administration of Market Supervision, and the National Energy Administration jointly held a symposium on the photovoltaic industry.

The meeting emphasized the need to strengthen industrial regulation, curb disorderly low price competition, standardize product quality, and promote industry self-discipline. On September 16, the Standardization and Administration of China released the draft of a new mandatory national standard setting energy consumption limits per unit of polysilicon production.

Once implemented, poly manufactured with unit energy consumption higher than 6.4 kilogram must implement corrective improvements within a specified period. Those failing to comply or meet the entry threshold after rectification will be ordered to cease operations. According to China's Silicon Industry Association, China's effective capacity and power silicon production is expected to climb to $2.4 million metric tons per year, a decrease of 16.4% from the end of 2024, and of 31.4% from total install production capacity.

We expect the implementation of this new energy consumption standard will substantially ease the issue of energy overcapacity. As a result of these more thoughtful measures, polysilicon price rose sharply to RMB45 to RMB49 per kilogram in July from RMB32 to RMB35 per kilogram in June. And further climb to RMB49 to RMB55 per kilogram at the end of the quarter.

The solar PV industry continues to demonstrate strong long-term growth prospects. In the medium term, we believe that the combination of industry self-discipline and government anti-evolution regulations will help foster a healthier and more sustainable industry. In the long run, as one of the most cost effective and sustainable energy resources globally, solar power is expected to remain a key driver of the global energy transition and sustainable development.

Looking ahead, Daqo New Energy is well positioned to capture the long-term growth in the global solar PV market and further strengthen its competitive edge by enhancing its higher efficiency and type technology and optimizing its cost structure through this digital transformation and AI adoption.

As one of the world's lowest cost producers of the highest quality and type products and with a strong balance sheet and no bank loan, we're confident in our ability to capitalize on the market recovery and emerge as an industry leader, well positioned to seize future growth opportunities.

So now I'll turn the call to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter. Ming, please go ahead.

Thank you, Anita, and hello everyone. This is Ming Yang, CFO of Daqo New Energy. We appreciate you joining our earnings conference call today. I will now go over the company's third quarter of 2025 financial performance.

Revenues were $244.6 million compared to $75.2 million in the second quarter of 2025 and $198.5 million in the third quarter of 2024. The increasing revenue compared to the second quarter of 2025 was primarily due to an increase in both sales volume and average selling price.

Gross profit was $9.7 million compared to gross loss of $81 million in the second quarter of 2025 and growth loss of $60.6 million in the third quarter of 2024. Growth margin was 3.9% compared to 108% in the second quarter of 2025 and negative 30% in the third quarter of 2024.

The increasing gross margin compared to the second quarter of 2025 was primarily due to the increase in the average selling prices of polysilicon, a decrease in our production cost, as was write-off of provision for inventory impairment.

So in general and administrative expenses were $32.3 million compared to $32.1 million in the second quarter of 2025 and $37.7 million in the third quarter of 2024.

SG&A expenses during the third quarter included $18.6 million in non-cash share-based compensation costs related to the company's share incentive plan, compared to $18.6 million in the second quarter of 2025.

R&D expenses were $0.6 million compared to $0.8 million in the second quarter of 2025 and $0.8 million in the third quarter of 2024. R&D expenses vary from period to period reflect R&D activities that take place during the quarter. As a result of the foregoing loss from operations with $20.3 million compared to $115 million in the second quarter of 2025 and $98 million in the third quarter of 2024.

Operating margin was negative 8% compared to negative153% in the second quarter of 2025 and negative 4.9% in the third quarter of 2024. Net loss at to Daqo New Energy shareholders was $14.9 million compared to $76.5 million in the second quarter of 2025 and $60.7 million in the third quarter of 2024. Loss per basic ADS was $0.22 compared to a dollar $0.14 in the same quarter of 2025 and $0.92 in the third quarter of 2024.

Adjusted net income attributable to Daqo New Energy shareholders, excluding non-cash share-based compensation costs was $3.7 million compared to just the net loss at to Daqo New Energy shareholders of $57.9 million in the second quarter of 2025 and $39.4 million in the third quarter of 2024.

Adjusted earnings per basic ADS was $0.05 per share compared to adjusted loss per basic ADS of $0.86 in the second quarter of 2025 and $0.59 in the third quarter of 2024. EBITDA was $45.8 million compared to negative $48 million in the second quarter of 2025 and negative $34 million in the third quarter of 2024. EBITDA margin was 18.7% compared to negative 64% in the second quarter of 2025 and negative17% in the third quarter of 2024.

Now on the company's financial condition. As of September 30, 2025, the company had $551.6 million in cash, cash equivalents, and restricted cash compared to $598.6 million as of June 30, 2025 and $853 million as of September 30, 2024. And as of September 30, 2025, short-term investment was $431 million compared to $418.8 million as of June 30, 2025 and $245 million September 30, 2025.

As of September 30, 2025, bank notes receivable balance was $157 million compared to $49 million as of June 30, 2025 and $83 million as of September 30, 2024. No receivable balance bank notes with maturity within six months. And as of September 30, 2025, the balance of fixed term deposits within one year was $1.03 billion compared to $960.7 million as of June 30, 2025 and $1.2 billion as of September 30, 2024.

Now on the company's cash flow. For the nine months ended September 30, 2025. Net cash used in operating activities was $50 million compared to $356 million in the same period of 2024. And for the nine months ended September 30, 2025. Net cash using investing activity was $448.9 million compared to $1.7 billion in the same period of 2024.

The net cash used in investing activities in 2025 includes $120.3 million for the purchase of PP&E and $328.6 million in net purchase of short-term investments and fixed term deposits. For the nine months ended September 2025, net cash using financing activities was $32,000 compared to $48.5 million in the same period of last. And that concludes our prepared remarks.

We will now open the call to Q&A from the audience. Operator, please begin.

(Operator Instructions)

Philip Shen, Roth Capital Partners.

Hi everyone, thank you for taking my questions. First one is on the gross margins. It looks like you guys had positive gross margins for the first time in a while, maybe supported by the impairment, and so, wanted to get a feel for what kind of we see positive gross margins in Q3 or Q4 and how would you expect that trend in 2026? Thanks.

Hello, Phil. This is me, Yang, the CFO. Thanks for your question, and we're very pleased to report that we were able to record a positive gross margin for the third quarter. A lot of it is driven by, the increase in selling prices. The quite significant increase that we saw in Q3 and as well as the significant reduction in our per unit cost and also helped by some of the benefits from an earlier write down of inventory.

But we do expect that our Q4 gross margin, as of today, should be positive as well, should be positive, I think based on our current expectation for trends for both ASP as well as for our cost continued cost reduction as well.

Great thanks thing and so, maybe Q3 remains negative, Q4, flips positive. And then, through '26, do you see potential for the year to be positive as well?

As of today, yeah.

Okay, great. Shifting over to some bigger picture questions. Last week we hosted a couple of webinars, one with Clean Energy Associates and the other one with the Crew Group, the Commodities Research Unit that acquired Exawatt based out of London.

In any case, they were talking about a lot of the overhaul efforts. And the anti-evolution efforts in China for polysilicon and downstream, but they're saying that even after the overhaul in the polysilicon segment, there could still be instead of maybe 3x overcapacity for poly, now just 2x, so still substantial overcapacity. How do you guys continue to work to better match capacity with the lower levels of demand?

What other actions can you and the industry take? And then how much capacity might you and the industry acquire over time and then shut down? Thanks.

Thank you, Phil. So regarding the overall capacity, first of all, I think it's correct that even with the exit of some capacity, there would still be a relative oversupply compared to demand. However, I think how it's going to work is that although you still have more supply in terms of the nameplate capacity, they'll try to balance that with demand in terms of the production volume, meaning, none of the companies will be operating at full utilization rate until demand climbs up again. I think that's what's going to happen at least in the short-term to the midterm.

Okay, got it, thank you and do we or you guys expect any additional actions from the government or from the industry that maybe we're not all aware of that could also serve as positive catalyst, in addition to the lower utilization rate, what else can you and the industry and the government do? Thanks.

I think the overall conversation on the consolidation in terms of the SPV, I bet that all the investors have seen a lot of news around that and I'll say the anti-involution initiatives are still ongoing conversations. All the companies are taking the initiative to participate and are actively engaging in these conversations so that we would see a healthier and more sustainable industry going forward and I think that's the key focus right now, at least in the near term. And I would say aside from the anti-evolution in terms of the consolidation, the other one that might be worthy to mention is the, draft on the new mandatory national standard, right? I think that would work as another positive catalyst like, while the consolidation conversation is still ongoing.

The government is also pushing out the national standard on energy consumption, and that would serve as a hard cutoff point for some of the industries, for some of the companies and industry.

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

Alan Yang, Jefferies.

Thanks a lot for taking my question. First question, I would like to follow-up on the sales question on self-discipline in the industry. I would like to know if what when do you expect the whole consolidation agreement among the remaining players will be signed and what exactly, in terms of mechanisms to make sure the players to obey the quota or the volumes that are agreed upon by the part, is there any performance bond or some kind of mechanisms like that.

Thank you, Alan. So of course, like I just mentioned, the conversation is still ongoing, so we're waiting for more details before we can unveil it to the investors, but I would say we're pushing toward meeting that or having a consensus in terms of the consolidation, and it's difficult for us to say exactly when that's going to.

Turn out or when we can see an agreement signed, but of course from our perspective, the sooner the better, right? So that of course we've seen a price recovery in the third quarter already, but suppose we can get a consolidation done soon we might see further uptake in the prices, yeah, but of course because there are many parties involved in working out the consolidation, including the government entities and the companies in the industry. So it's taking some time, but of course we are working very diligently and working very hard toward having a consensus.

Thank you. So, my second question is, to follow-up on the company's specific matters. So, I have noticed that actually the ASP achieved by the company is quite high relative to peers would like to know what's your expectation on the prices, especially if the consolidation initiative is implemented. And then secondly, and also looked at from the cost perspective, both the production cost and the test cost went down. So how do you see the trend in 4Q?

Okay, I, I'll just the, cost, transfers and Anita will talk about that especially. What our expectations after the consolidation initiative. So, we did see a significant reduction in cost for this quarter and it's actually, a bit better than what we had originally anticipated.

So, cost went down about 12%, quarter over quarter overall cost, and then, especially, cash cost declined by more than 11% a quarter of a quarter and a significant portion of that is actually the reduction in energy usage closely around efficiency.

So we did a lot of efforts in terms of Including our process and for further optimization and we would say that a lot of those efforts actually begin to materialize, especially in the third quarter and as well as the usage of silicon and powder in terms of per unit. Reduction and also this quarter we benefited additionally from a decline in in slick metal pricing.

And also because of the increase in production, so this quarter, production is more than 10% higher than the previous quarter. So there's also a per unit reduction in terms of relatively fixed cost, for example, labor and benefits. So the combination of these, helped us to reduce our costs and we actually expect, currently expect the Q4 cost to continue to decline compared to Q3, I think in the low single-digit range. So we should continue to see a low single-digit percentage range. So we should continue to see benefits from our cost reduction.

And in terms of the ASPs, so first of all, for the fourth quarter, as we're still undergoing the conversation to make the consolidation happen, we think the price change will remain relatively stable at the current level because prices have already picked up in the third quarter near the end of the quarter, it's already in a range of RMB49 to RMB55 per kilogram, so we think that's going to sustain that the fourth quarter.

However, after the consolidation is completed, of course, the consolidation will be done in phases. So, it's more likely going to be capacity exiting in different phases, and we do we should expect prices to tick up after the consolidation happens to rise around RMB60 per kilogram first and perhaps taking up further as we see more nameplate capacities exiting the industry. So perhaps in the range of RMB60 to RMB80 as we foresee it.

Thank you. That's just very clear. I think my, last question is on the buyback because, the company has announced the buyback program a couple of months back. I would like to know the progress of buyback since then and also combining the consideration of potential CapEx of acquisition spending. We'd like to know what is the pace of buyback and emphasized by the company.

Thank you, Alan. So, in terms of the share repurchase, after we announced the program, share prices actually increased, to the highest to $31, which was about 35% higher than what was near the end of August and because we wanted to, purchase more shares, right?

So we were waiting and monitoring the market closely and another thing is that we were waiting to see what would be the initial investment for the consolidation, right? So suppose the Initial investment is around RMB30 billion versus like RMB10 billion will means a huge difference to what we have to put in the consolidation. Hence, we're still waiting to see how that's going to unfold before we can confidently start the share repurchase again.

Okay, so, assume the consolidation as will materialize in 4Q, then probably there will be more clarity on the amount that 3Q has to spend in that, platform, and then probably the company will start by that probably in 4Q of the next year, right? Is it a fair expectation?

So, what's the question?

So, yeah.

It's on the timing, so if it's the consolidation effort. Going to be in 4Q or 1Q, then 3Q will start buyback in right after that, so which is a couple of months now.

In terms of the timing of the share repurchase?

Yeah.

I think that after we have a more clear picture of what the consolidation looks like, we can start the share repurchase.

Thank you. That's very clear. I'll pass on. Thanks a lot.

Yeah thank you, thank you Alan.

Mengyun Wang, Goldman Sachs.

Yes, thanks for taking my question, Anita and Yang. So, my first question is regarding to the production cost. So, mean you just mentioned the lower cash cost is mainly due to our, capacity upgrade. So, therefore less, energy usage now. So, I was wondering, what's our, unit electricity consumption per kilogram of the poly right now.

Okay, so, so it's actually different for our two, facilities, but generally it's in the range of 52 to 55 per hour or per kilogram.

Sure, that's clear. And my second question is regarding to the production. So, we raise our production plan by 30% plus in 4Q from level, so the direction is really, going against with our peers. So I was wondering how we fit our production left to current industrywide production quota narratives and also what drives our more positive demand outlook into 4Q. I think that's supposed to be a traditional weak demand season.

Thank you Mengyun. So, I would say that we were among the first to start lowering our utilization rate to around 30% initially, right? So I would say we have been very aggressive in doing that. However, as prices have recovered, in the third quarter.

And we do foresee a more optimistic outlook going forward with the consolidation and also the proposal on energy consumption, we do see the direction to curb the vicious competition in the industry, right? So we are more confident in the future outlook and we have ways.

Our own current plan as well as in terms of the cost if we increase our production volume now, we can further reduce our production costs. So I think that's the logic behind raising our production plan in the fourth quarter.

Mm, so, can we, use the over 50% utilization as, the guidance in of the production plan in 2026 and going forward?

Yeah, I think that would be a reasonable assumption for 2026.

Sure, that's very clear. That's all my question. I will pass the question to the next investors.

Thanks. Okay, thank you.

Gordon Johnson, GLJ Research.

Hey guys, thanks for taking the question. So just, I guess number one focusing on your current production cost $638. I'm looking at what PB Insights is reporting for poly silicon prices in Q4 so far, $653. That would suggest the margin of 2%. But when I look at the Guangzhou, I'm sorry, futures exchange, it has poly silicon prices right now, futures at like, around $840, so when we look at your Q4 gross margin, are we looking at a margin similar to what you reported, in the 2% range or something higher and then I have a follow-up. Thanks.

I think for the poly futures market, you have to subtract by a 13%. VAT, I think once you subtract, I think you get maybe a ballpark mid to high single-digit kind of gross margin, something like that. So let me just say just kind of a range of gross margins maybe low to mid single-digit kind of low margins, I think based on the current market environment.

Okay, that's helpful. And then are you guys mentioned that you sold a lot out of inventory is that done or will you continue that? And then my last question is, given the new five year plan that's coming through in China, what is your expectation for installation, solar installations writ large in China in 2026 versus 2025? Thanks again for the questions.

Okay, so I think in terms of sales, I think it is still a little bit early, right? So we're at the end of October. There's two more months to go by. I think based on our latest. A customer orders and order trend. Well, at least at this point we do anticipate that, the overall volume for the quarter, that it should be similar to our expected production volume. I think that's the baseline for our sales. But we do also look for opportunities to sell down additional inventory. So, that's what the current market condition looks like.

Okay, and then on total installs in China for next year versus this year.Thanks.

And for installation, we think it will be relatively stable or low single-digit compared to this year because this year the forecast is in a range of around, I would say 220 gigawatts to 250 gigawatts for additional installations in China. So, I think for next year would be more likely in the range and perhaps for growth to around I would say 270 to 280 gigawatts.

Thank you.

Great. Thanks, Gordan.

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

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

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