Not long ago, Daquan Energy (688303.SH) announced its report for the third quarter of 2023. In the first three quarters, it achieved revenue of about 12.878 billion yuan and net profit attributable to shareholders of listed companies of about 5.115 billion yuan.

It is worth noting that in this financial report, the name of the Middle East sovereign wealth fund- Abu Dhabi Investment Authority (ADIA) is impressively listed in the company's "top 10 unlimited shareholder holdings" list .

Daquan Energy is one of the giants in the upstream raw material polysilicon field of China's photovoltaic industry. According to the data, the company was established in February 2011. Daquan New Energy Company, which is listed on the New York Stock Exchange in the United States, invested and constructed in Shihezi, Xinjiang, mainly engaged in the research and development, production and sales of high-purity polysilicon materials.

on July 22, 2021, daquan energy successfully landed on the board and raised a total of about 6.4 billion yuan through IPO for planning and construction of 1000 tons of high-purity semiconductor materials project and 35000 tons of solar photovoltaic polysilicon project.

In the year of listing, Daquan Energy's performance soared. According to the financial report, in 2021, the company achieved operating income of 10.832 billion billion yuan, up 132.23 percent year-on-year, and net profit attributable to its parent was 5.724 billion billion yuan, up 448.56 percent year-on-year.

Soon after its IPO, Daqo Energy quickly entered AIDA's pool of investment targets. According to the company's third-quarter 2021 financial results, ADIA ranks among the top 10 largest shareholders of Daqo Energy.

To date, ADIA holds 8.259656 million shares of Daqo Energy.

ADIA ranks first among the world's sovereign wealth funds, ranking third in the latest ranking and first in the Middle East.

data show that as of 2022, ADIA's assets under management will reach 993 billion us dollars, equivalent to more than 7 trillion yuan . Its financial strength is second only to the Norwegian government's global pension fund and China Investment Corporation from China, both of which have assets under management of more than $1 trillion.

In 2021, ADIA opened an office in Beijing and began to dig into the Chinese market. Its investment strategy in China adheres to a diversified strategy, covering a variety of channels such as real estate, investment funds, direct investment and secondary market equity investment.

The reason why ADIA chose Daqo Energy as its investment target is related to the latter's "Jianghu status" in the polysilicon field. In the past ten years, Daquan Energy has been ranked among the top10 global polysilicon production.

In 2021, Daqo Energy achieved polysilicon production of 86600 tons, exceeding the original forecast of 8.3-85000 tons, an increase of 12.03 over 2020. This year, China's polysilicon production was about 506000 tons, which means that Daquan Energy's market share reached 17%.

After the listing, Daqo Energy also significantly accelerated the pace of expansion. In December 2021, the company announced that it plans to invest 33.25 billion million yuan in Baotou to invest in the construction of 300000 tons/year high-purity industrial silicon project +200000 tons/year silicone project +200000 tons/year high-purity polysilicon project +21000 tons/year semiconductor polysilicon project.

in January of the following year, the company announced the issuance of A- share shares to specific targets, raising no more than 11 billion yuan to invest in a project with an annual output of 100000 tons of high-purity silicon-based materials and replenishing working capital to accelerate the landing of the project.

according to the company's report for the third quarter of 2023, from January to September this year, daquan energy produced 136800 tons of polysilicon and sold 140000 tons of polysilicon. among them, the output in the third quarter was 57700 tons, up 27.28 from the previous quarter.

At present, Daqo Energy has formed an annual production capacity of 205000 tons of high-purity polysilicon. Among them, Xinjiang has a production capacity of 105000 tons and Inner Mongolia Baotou Phase I 100000 tons. At the same time, the 100000-ton high-purity polysilicon project in Baotou, Inner Mongolia, is under orderly construction and is expected to reach production quickly in the next few months.

Since the second half of this year, with the continuous release of new domestic production capacity, the relationship between supply and demand in the market has plummeted, and polysilicon prices have fallen rapidly. According to the statistics of the Silicon Industry Branch, the average price of domestic single crystal dense materials is down to more than 60000 yuan/ton, and the rational return of polysilicon prices also makes the silicon enterprises in the industry face huge cost pressure.

This also means that the silicon market has entered a new stage of high-quality development, and the competition among enterprises has shifted from the past scale to cost reduction and efficiency and technological innovation .

In this regard, Daqo Energy is well versed in the way of survival when the industry goes down, and improves its competitiveness by continuously reducing production costs. Data show that in the first half of 2023, the company's cash cost per unit of polysilicon production was 45.05 yuan/kg, down 22.07 per cent from 57.81 yuan/kg in the same period last year.

In addition to continuously reducing costs, this silicon faucet continues to exert its power on "quality" . It is reported that up to now, more than 99% of Daquan Energy's products can meet the demand for downstream monocrystalline silicon wafers, and more than 99% of the products exceed the photovoltaic level 1 and reach the electronic level 3 standard. More than 90% of the products are above the electronic level 1 standard.

The company's continuous R & D investment is behind the decline in costs and product quality leading the industry. Daquan Energy's research and development expenses continued to expand to 0.784 billion yuan in the first three quarters, up 5.19 percent year-on-year. In the first half of 2023, the company applied for a total of 44 patents, including 9 invention patents and 3 approved.

It is particularly noteworthy that as photovoltaics enter the N-type era, the demand for upstream N-type silicon wafers and N-type silicon materials is also stimulated. Because N-type silicon means higher purity, the cleanliness of all aspects of silicon production (distillation, reduction, crushing, packaging, etc.) is higher.

As one of the major manufacturers of high-purity N-type silicon materials, Daqo Energy has deployed early, and its N-type silicon materials have achieved rapid release, with sales accounting for a multiple-level growth.

it is understood that in the first half of 2023, daquan energy produced 6248 tons of n-type single crystal and 69954 tons of p-type single crystal. the company's n-type silicon has been supplied in batches and has been recognized by many downstream customers.

in addition, the company's inner Mongolia production line can produce 100 n-type materials, while Xinjiang production line can produce 60%-70% n-type materials without technological transformation.

in the next few months, daquan energy will have another 100000 tons of polysilicon production capacity, and the company's n-type silicon production capacity will be further improved.

Although the voice of photovoltaic overcapacity is rampant, high-quality capacity is actually still scarce. This also means that Daquan Energy will further consolidate its own "moat".

It is understood that at present, the only domestic enterprises with N-type silicon production capacity are Tongwei, Xinte Energy, Daqo Energy, etc. Among the leading enterprises, Daquan Energy is leading the upstream supply chain with more than 263000 tons of N-type silicon production capacity that has been completed and will soon reach production.

in addition to the early layout of n-type silicon production capacity, daqo energy has 10 billion cash . According to the third quarter report of 2023, the net cash flow generated by the company's operating activities was 10.1 billion yuan, while as of the end of September, its monetary capital was 20.674 billion yuan.

What's more valuable is that Daquan Energy is the leader with the lowest debt ratio among silicon companies. Financial report data show that the company's debt ratio is only 13.45, while Tongwei's asset-liability ratio is 54.52, and Xinte Energy's asset-liability ratio is 58.35.

In order to show the confidence of employees in the company, Daqo Energy also launched a share buyback. On August 22, the board of directors agreed to spend 2-0.4 billion yuan to buy back. The company also said that the repurchased shares will be fully used for employee stock ownership plans or equity incentives at an appropriate time in the future.

As of October 31, Daquan Energy's repurchase amount was 73.5623 million yuan, the lowest price for repurchase transactions was 35.54 yuan per share, and the highest price was 40.58 yuan per share.

Today, the price of silicon is still falling, the photovoltaic industry has entered a downward cycle, and the era of "holding silicon as king" has long ended. However, the other side of the coin is that the global photovoltaic market is still promising.

The International Energy Agency (IEA) recently released "2023 World Energy Investment" pointed out that the investment in clean energy and traditional energy is widening the gap. It is estimated that global energy investment will increase to US $2.8 trillion billion in 2023, and clean energy will account for 60%. Among them, 380 billion US dollars will be invested in the photovoltaic industry, which means that more than 1 billion US dollars will be invested in photovoltaics every day, and the amount of investment will exceed oil investment for the first time. Just 10 years ago, PV investment was only 1/6 of oil investment.

Another report from the IEA also confirms the boom in the renewable energy industry. The report predicts that in 2022-2027, the global installed capacity of renewable energy will increase by 2400GW, of which photovoltaic will account for 60%, with an increase of nearly 1500GW.

This also means that the current plight of the photovoltaic industry is short-lived. Faced with the current situation of such an industry, enterprises can only dig deep into the "moat" in order to cross this cycle and wait for the next outbreak of the industry .

In this regard, Daqo Energy may already be ready.