Xinhua Finance, Shanghai, January 6 (Reporter Gao Shaohua) Xinjiang Daquan New Energy Co., Ltd. recently held the 2023 Investor Exchange Conference in Shanghai to answer relevant hot issues of investor concern. Daquan Energy said that the current round of cyclical lows in the polysilicon industry is expected to end by the end of 2024 or early 2025. The future competition in the industry will be a "quality + cost" competition. Daquan Energy will also continue to adhere to the overall strategic plan of "upward integration and horizontal expansion.

Output Approaching 200000 Tons in 2023

Xinjiang Daquan New Energy Co., Ltd. was established in February 2011. Daquan New Energy Company (stock code: DQ) listed on the New York Stock Exchange in Shihezi, Xinjiang, mainly engaged in the research and development, production and sales of high-purity polysilicon materials. The Company was listed on the Shanghai Stock Exchange's CRE Board on July 22, 2021, and is also the first share of the CRE Board in Xinjiang under the registration system (stock code: 688303).

Daqo Energy currently has two production sites. According to Wang Xiyu, general manager of Daquan Energy, the annual production capacity of the Xinjiang production base has increased from 5000 tons in the initial stage to 105000 tons, and it is now in a normal production state. The company plans to continue to invest 15 billion yuan in Shihezi to build 100000 tons of high-purity polysilicon, 300000 tons of industrial silicon and 2.2 million round silicon core projects, of which: the first phase of the project plans to invest 7.5 billion yuan to build 50000 tons of polysilicon and supporting 150000 tons of industrial silicon and 1.2 million round silicon core projects.

Inner Mongolia production base is located in Baotou City, with an annual production capacity of 200000 tons of high-purity polysilicon, 1000 tons of semiconductor-grade polysilicon, 150000 tons of industrial silicon and 1.8 million round silicon cores. Inner Mongolia Phase I Project with an annual output of 100000 tons of high-purity polysilicon is now in normal production. The second phase of the project with an annual output of 100000 tons of high-purity polysilicon is under construction and is expected to be completed and put into operation in the second quarter of 2024. The 150000-ton industrial silicon project will officially start construction after the Spring Festival in 2024. The 1.8 million-branch round silicon core project has entered the underground construction stage. The 1000-ton semiconductor polysilicon project has entered the stage, will break through the domestic silicon enterprise product quality instability of the constraints.

Wang Xiyu said that in the first three quarters of 2023, Daquan Energy's polysilicon production was 137000 tons, accounting for 13.6 of domestic polysilicon production, with sales of 140000 tons, up 36.7 percent and 27.9 percent respectively from the same period in 2022, and inventories were at a low level. The company expects to produce about 60000 tons in the fourth quarter of 2023, with an annual output of nearly 200000 tons, achieving full production and full sales.

According to another report, the unit cost of polysilicon produced by Daquan Energy in the first three quarters of 2023 was reduced to 49.7 yuan/kg, a year-on-year decrease of 15.1, and the decline rate of 2 yuan to 3 yuan per kilogram per quarter showed a continuous downward trend. In 2024, the company's unit costs will continue to decline. With the intensification of competition in traditional P-type silicon production capacity and lower price expectations, Daqo Energy's forward-looking layout of N-type silicon and rapid release, has become one of the main manufacturers of high-purity N-type silicon in China.

Downstream demand remains strong

2023 domestic polysilicon industry due to oversupply, polysilicon prices fell sharply, the industry generally suffered a cold winter. Xu Guangfu, chairman of Daquan Energy, said that since the second quarter of 2023, the sales price of polysilicon in the photovoltaic industry chain has fallen rapidly, mainly due to the increased competition caused by the rapid expansion of photovoltaic upstream enterprises on the supply side. On the demand side, silicon wafers, batteries and components still maintain a sustained growth momentum. For this reason, the Photovoltaic Industry Association once again raised the expectation of terminal photovoltaic installation, raising the global expectation of new photovoltaic installation to 345GW to 390GW, and the domestic expectation of new photovoltaic installation to 160GW to 180GW. The overall growth momentum of the photovoltaic industry remains strong.

In Xu Guangfu's view, China will unswervingly follow the path of green development and build a diversified clean energy system. This goal will also continue to promote Daqo Energy to deeply cultivate the clean energy industry and continue to adhere to the overall strategic plan of "upward integration and horizontal expansion. The so-called upward integration, that is, to polysilicon upstream to expand industrial silicon, round silicon core business, so that the cost and quality of raw materials independent control.

In response to the current round of cyclical troughs in the industry that investors are concerned about, Xu Xiang, vice chairman of Daquan Energy, said that the current round of industry troughs is different from the previous two years. The trough in the previous two years was that there was no demand. Now the downstream demand is still strong, just because the capital entry in the past two years has led to fierce competition in the industry and oversupply. This round of trough is not expected to be too long, and it may end by the end of 2024 or 2025. By then, the polysilicon market will balance supply and demand, market prices will return to normal levels, and Daquan Energy's product prices will also return to normal.

"after this round of cycle adjustment, the future industry competition must be quality plus cost competition, the market will stage the survival of the fittest, only high-quality, low-cost enterprises can better survive." Xu Xiang said that at present, Daquan Energy has advantages in terms of cost, especially the proportion of N-type silicon has reached 60%, which will soon increase to 100.

Develop industrial silicon to ensure supply chain security

In addition to polysilicon products, Daqo Energy is currently laying out industrial silicon products. Xu Xiang said that in order to ensure the security of the company's supply chain, industrial silicon must be done. The establishment of a complete industrial chain is very important for Daqo Energy, so the company must have stable industrial silicon as the basis, as well as silicon ore resources. With these important resources, the company can avoid the impact of rising costs in the future.

"building a complete industrial chain is the direction we are striving." Xu Xiang said that especially in the current downward stage of silicon prices, the company can take advantage of this opportunity to obtain better resources. With these resources, future operations will rest easy.

In the stock market, Daqo Energy previously announced a $0.4 billion share buyback program. According to Xu Xiang, the company is currently actively buying back. Up to now, it has bought back 0.24 billion yuan, and it will definitely buy back next. In addition to the company's buyback, Xu Xiang and several executives also plan to carry out personal buybacks.

Regarding overseas markets, Daquan Energy also pays close attention to overseas regional markets, and is also conducting relevant exchanges and research with investment institutions and government departments in several countries. In the future, it also hopes to provide localized polysilicon products overseas according to customer needs.

finally, Xu Xiang stressed that the polysilicon industry is currently at the bottom of the cycle. Daquan Energy's strategy is to maintain sufficient cash flow while implementing share buybacks. Daquan Energy currently holds about 20 billion yuan in cash. At the bottom of the cycle, the company has enough cash flow to withstand the cold winter.