On August 23, Daqo Energy (688303.SH) issued the Announcement on the Plan to Repurchase the Company's Shares by Centralized Auction Trading, intending to use its own funds to repurchase the Company's shares by centralized auction trading, and all the repurchased shares will be used for employee stock ownership plans or equity incentives. The repurchase price shall not exceed RMB 50 yuan/share (inclusive), and the total amount of repurchase funds shall not be less than RMB 0.2 billion yuan (inclusive) and shall not exceed RMB 0.4 billion yuan (inclusive).

"The active repurchase of listed companies sends positive signals, which helps to enhance market confidence, increase the attractiveness of stocks, increase the rights and interests of shareholders, and reduce the impact of market fluctuations on the company's share price." Tian Lihui, Dean of the Institute of Financial Development of Nankai University, commented on his views on share buybacks.

As of October 16, Daquan Energy has repurchased 1,616,588 shares of the company, accounting for 0.0754 of the company's total share capital. The highest price of the repurchase transaction is 40.58 yuan/share, the lowest price is 36.01 yuan/share, and the total amount of funds paid It is RMB 63.5867 million (excluding transaction costs).

Daquan Energy, which has been focusing on polysilicon for many years, has used real money to convey to the market its confidence in downstream market demand and its own high-margin N-type silicon business with obvious advantages.

01

Downward cycle, highlighting the cost advantage of the leader

Since 2023, the trend of falling silicon prices from high levels has attracted market attention.

"the cliff-like decline in the price of silicon is unsustainable. we hope that the price of silicon will fall steadily, which is beneficial to the healthy development of the whole industry," said Xu Xiang, the actual controller and vice chairman of daqo energy, in response to netizens' questions at the 2022 annual performance and cash dividend presentation meeting.

It is understood that in mid -2018, due to the impact of photovoltaic "531 policy" and other factors, polysilicon prices declined significantly and remained depressed until the second quarter of 2020. Downstream demand in the PV industry began to pick up in the second half of 2020, but the expansion of polysilicon production is subject to factors such as technical difficulties, high investment and long construction cycle (generally in 1.5 to 2 years), and the progress is relatively lagging behind.

and this mismatch between supply and demand has led to a sustained rise in silicon prices, with polysilicon prices basically running at a high level in 2022. After the price high, with the release of new capacity, silicon prices fell rapidly.

"the cost per ton of the head manufacturer is about 4-60000, which can bear the price reduction of silicon materials. The cost of second-and third-tier enterprises is relatively higher." Ping An Securities analysts believe that the quality, technology, cost and production efficiency of silicon materials determine the profit level of enterprises.

As one of the above-mentioned head manufacturers, one of the core advantages of Daquan Energy is cost control, which is almost an open secret in the industry.

Daquan Energy's semi-annual report for 2023 shows that the company's unit cost in the first half of the year was 51.36 yuan/kg, down 18.66 percent from 63.14 yuan/kg in the same period last year, and the unit cash cost was 45.05 yuan/kg, down 22.07 percent from 57.81 yuan/kg in the same period last year.

Polysilicon production costs, mainly by industrial silicon powder and other direct materials, direct labor, power and depreciation and other manufacturing costs. Daqo Energy through the continuous improvement of polysilicon production technology, to maximize the intensity of energy use, reduce the energy consumption per unit of product and raw material consumption. At present, the unit consumption of energy and silicon powder and other materials in the production process of its products is far better than the industry average level of China Photovoltaic Industry Association.

CITIC Securities analysts believe that Daquan Energy is expected to maintain a reasonable and stable level of profitability by virtue of its product quality and cost advantages.

02

N-type password leads, performance is expected to regain growth

We note that Daquan Energy achieved 76800 tons of polysilicon sales in the first half of this year, an increase of 0.59 percent over the same period last year, without a significant reduction.

according to ping an securities research report, the release of silicon production capacity drives down the price of the industrial chain and the release of demand: affected by the rise in silicon prices, the price of photovoltaic modules has been at a high level in the past two years, affecting the construction progress of ground power stations to a certain extent. with the release of silicon supply and the decline in prices, the price of photovoltaic modules is expected to fall to a certain extent in 2023, thus stimulating some demand originally suppressed by higher module prices.

the above analysis has been verified in the recent "photovoltaic event report": on September 19, longji green energy (601012.SH) announced that it plans to invest in the construction of a 12GW high-efficiency single crystal battery project in Tongchuan. On September 23, jingao technology (002459.SZ) dongtai base held a 10GW photovoltaic cell 10GW photovoltaic module project commissioning ceremony. On September 26, yangzhou bangjie new energy technology co., ltd., a subsidiary of bangjie co., ltd. (002634.SZ), held the commissioning ceremony of the 10GWTOPCon high-efficiency battery project...

In other words, the main reason for the recent rapid decline in silicon prices is not the weakening of real demand at the end. Soochow Securities analysts even put forward the view that "silicon prices bottomed out and earnings differentiation downstream benefited.

Downstream of the polysilicon is the silicon wafer. According to the China Photovoltaic Association statistics, in 2022, the national silicon output of about 357GW, an increase of 57.5. As head companies accelerate their expansion, national silicon wafer production is expected to exceed 535 GW in 2023.

In order to ensure the supply of high-quality polysilicon, downstream silicon wafer companies usually sign long-term polysilicon supply agreements with upstream polysilicon leading companies to lock in the supply of polysilicon for a period of time in the future. TCL Central (002129.SZ) is one of the important customers that has signed a long-term supply agreement with Daqo Energy.

TCL Central stated in its 2023 semi-annual report that the company's performance increase was mainly due to the pricing power of N-type large-size silicon wafers. TCL Central said that as a leading enterprise in the field of photovoltaic silicon wafers, so far only TCL Central has publicly released N-type silicon wafer quotations in the industry, and the company is currently the world's highest market share of N-type silicon wafer suppliers.

statistics from china photovoltaic association show that in 2022, the total market share of p-type monocrystalline silicon wafers and n-type monocrystalline silicon wafers will be about 97.5, of which the market share of p-type monocrystalline silicon wafers will be 87.5 and the market share of n-type monocrystalline silicon wafers will rise to 10%. it is expected that the market share of n-type monocrystalline silicon wafers will rise to 30% in 2023 and will exceed 50% in 2025.

Source: Gongyan Industry Consulting

A senior person in the photovoltaic industry pointed out that the most significant feature of the photovoltaic industry in 2023 is the transition period of the transformation of old and new technologies within the industry. N-type battery, component conversion efficiency is higher, lower attenuation, N-type battery power generation in the whole life cycle is also higher than P-type, has become the industry consensus, N-type technology route to replace the trend of P-type has been set.

With the advent of the era of N-type battery and component technology, the demand for upstream N-type silicon wafers and N-type silicon materials has risen accordingly.

"N-type high-quality silicon material may become the core of future competition", Ping An Securities analysts pointed out that the core of N-type material production is quality and control, which requires high purity and stable quality of the product, and control the impurity fluctuation of the product Within a very small range, the downstream produces high-quality N-type silicon wafers and batteries accordingly.

With such a high standard and high threshold, N-type silicon is ridiculed as a "king-class" product by the industry, but domestic production capacity is relatively limited. According to industry media statistics, Daquan Energy is one of the "Four Heavenly Kings" with N-type silicon production capacity, and it also underlies the price of N-type silicon to a large extent.

the n-type silicon market is about to explode, and daqo energy completed the research and development of the project "research and application of preparation technology for n-type monocrystalline silicon wafer materials" as early as 2018. at present, it has realized the batch sales of n-type high-purity silicon materials, reflecting the strategic capability of daqo energy.

The early bird catches the worm. As analyzed by Green Energy Media, in view of the structural overcapacity of silicon materials, it seems inevitable that there will be a structural reshuffle in the industry in the future, that is, there is a serious overcapacity of P-type materials and N-type materials may be in short supply. In this context, Daquan Energy has achieved a first-mover advantage due to its early entry into the N-type material market, and can firmly stand in the first echelon of the industry.

the above-mentioned senior people in the photovoltaic industry believe that at the time of N-type and P-type technology transformation, Daquan Energy, as the leader in the transformation of China's photovoltaic industry, holds the N-type key with high gross profit margin, which is expected to open the door to profit bonus and return to the track of performance growth.