"Seek the elder of the wood, you must consolidate its foundation; those who want to flow far away must dredge its source", this is the beginning of the Tang Dynasty Wei Zheng's "Admonition to the Emperor Taizong's Ten Sessences", which means that the growth of trees needs to stabilize the root system, and the long flow of river water needs to dredge the source. In a sense, this is also the true meaning of the development of photovoltaic industry.

Looking back at history, the photovoltaic industry has changed and fluctuated. When it goes up, all kinds of capital rush in. When it goes down, it is difficult to avoid the bankruptcy of a large number of enterprises. This cycle is even more "ferocious", how to break through, has become a must-answer photovoltaic enterprises.

in this turbulent development, there are also some enterprises that maintain strong competitiveness, innovation power, revenue strength, etc., so they can rely on these "solid foundation" to break out of the "circle" of traditional cycle development, become the leading photovoltaic force through the cycle, and realize the "new life" of improving quality and efficiency. Daquan Energy (688303.SH) is the representative of the upstream of the photovoltaic industry chain.

Quality, cost and capacity are the three core driving forces of Daqo Energy. China Post Securities Research Report pointed out that the quality of Daquan energy products continued to improve, the cost was optimized quarter by quarter, the production capacity was released as scheduled, and the leading position was consolidated. Its revenue in 2023 was 16.329 billion yuan, and its net profit attributable to its parent was 5.763 billion yuan. Its gross profit margin and net profit margin were 40% and 35% respectively, and its performance was more resilient.

innovative iteration, steady expansion of production, leading such a "volume"

Photovoltaic practitioners are moving in two directions. Some of them are full of hope and ambition, ushering in the best era, such as the industry leaders with steady and high-quality development like Daqo Energy. After all, under the background of overcapacity, the media reported that the price of silicon materials has dropped by more than 80% from the higher point, and the prices of silicon wafers, batteries and components have also fallen.

However, the price of "volume" is not as good as that of products and innovation. In this regard, Daquan Energy continues to improve product quality, while adhering to the way of technological innovation, seizing the opportunity of product upgrading, and walking out of the "road to breaking the game".

with strict quality management system, advanced testing equipment and efficient quality control process, more than 99% of Daquan energy's products exceeded photovoltaic level 1 and reached electronic level 3 standard in 2023. More than 90% of the products are above electronic level 1 standard. It fully demonstrates the company's leading position in product quality control. The strict requirements for product quality have also been recognized by the market. Daqo Energy has successfully opened up a number of overseas emerging photovoltaic markets, and its products are exported to Turkey, India, Japan, South Korea and other countries.

In terms of innovation, along with the wide application of a new generation of downstream N-type silicon wafer-based battery technology, the upstream N-type silicon material has seen explosive growth. As one of the major manufacturers of high-purity N-type silicon, Daqo Energy is keenly aware of market changes and early layout, which enables the company to realize the rapid release of N-type silicon products in this round of product iteration. Its Inner Mongolia production line has the ability to produce 100 N-type silicon materials, while Xinjiang production line currently accounts for 60%-70% of N-type materials. After technological transformation in the future, N-type material capacity level will be further improved.

in the 2023 annual report, daquan energy introduced that the company achieved 53200 tons of n-type silicon sales in 2023, of which n-type silicon sales accounted for 59.11 in December.

In addition, at present, China's semiconductor silicon materials are still mainly dependent on imports, in this regard, Daquan Energy has a large enterprise to play, with years of technology accumulation in the field of high-purity polysilicon, horizontal expansion of semiconductor-grade polysilicon projects, is expected to break the dominant position of foreign enterprises, to promote the localization of semiconductor polysilicon process.

The vigorous development of the company is inseparable from the solid support of funds. In this regard, Daquan Energy, which has always adhered to a prudent business strategy, has an "enviable" cash flow situation. According to the disclosure, as of the end of last year, the company's monetary funds The total amount reached 19.629 billion and did not assume any interest-bearing liabilities. The asset-liability ratio is as low as 13.44 per cent, which is at a low level in the industry.

Reducing costs and increasing efficiency, leading companies have significant cost advantages

For the future development of the industry, industry analysis is also optimistic. According to the analysis of the first securities research report, worldwide, the policies of various countries are constantly guiding the development of energy independence and energy diversification, which will greatly promote the growth of photovoltaic installed capacity. Photovoltaic is in line with the future development direction. The research report predicts that the global market will maintain a growth rate of 19% in 2024/2025. InfoLink (the world's leading renewable energy and technology research and consulting firm) also has data predicting that the overall global demand scale will still show deterministic growth in 2024, with full-year component demand expected to reach 492GW, with a forecast growth rate of about 6%-15%.

Of course, for now, the industry problem still exists-the growth of the market size, can alleviate overcapacity? International Solar Photovoltaic Network has previously published an article pointed out that in the fierce price war, cost reduction and efficiency is the main line of the development of the photovoltaic industry.

it is understood that in 2023 alone, daquan energy has successfully implemented the digital "smart" manufacturing strategy and a number of cost reduction and efficiency enhancement measures, including graded energy recovery, graded wastewater recovery, intelligent control of reduction system and high boiling cracking recovery of hexachlorodisilane (SiCl). the implementation effect of these measures is quite remarkable. In 2023, the company's average annual polysilicon unit cash cost fell from 53.06 yuan/kg in 2022 to 42.70 yuan/kg, a decrease of 19.53.

the cost advantage has enabled daquan energy to occupy a favorable position in the market competition. this can also be seen from the financial data. the analysis of guoxin securities research report said that daquan energy continued to reduce costs and increase efficiency last year. it was mentioned that the cost rate of daquan energy continued to decline during 2023. under the background of the sharp price reduction of industry products, the gross profit margin still reached 40%.

It is reported that Daquan Energy has successfully passed the winter of the industry and ushered in new development opportunities by virtue of its sound business strategy, continuous technological innovation and cost control capabilities.

Pioneer Practitioner of ESG Concept

Behind the development prospects of photovoltaics is the pursuit of sustainable development worldwide. Therefore, environment, social responsibility, and corporate governance are gradually regarded as one of the important standards for investment. China Energy News pointed out that in recent years, the practice of ESG has become an important engine for China's energy enterprises to enrich their own connotation and enhance the value of the company.

Daquan Energy has long been responsible for this. Its chairman Xu Guangfu pointed out, "The company has always pursued the national new energy strategic plan, with quality first and benefit first as its business philosophy, relying on continuous R & D investment and technological innovation, and adhering to people-oriented, The corporate culture of compliance and integrity will do its best to promote the innovative development of green and clean energy on a global scale, and strive to achieve global sustainable development goals."

silicon production process is closely related to the topic of environmental protection. it is understood that in 2023, daqo energy implemented a series of energy-saving and consumption-reducing measures, such as replacing low-energy-efficient motors, and uniformly using high-energy-efficient motors and variable-frequency motors in new projects to reduce power consumption from the source. The introduction of a new water quenching device has significantly improved the quality of crushed silicon and reduced dust generation; its production base in Inner Mongolia Daquan is to achieve industrial wastewater "zero" emissions.

The pursuit of green environmental protection in production is only a small part of the construction of Daquan Energy ESG. It is understood that Daqo Energy has built a three-tier ESG governance structure with the board of directors, ESG leading group and ESG working group as the core, continuously promoting the board of directors and senior management to participate in the ESG risk assessment and management process, promoting cross-departmental cooperation and full participation, and continuously improving its own ESG governance level.

Daquan Energy's achievements in ESG construction have naturally attracted attention and recognition. At the end of 2023, the enterprise won two ESG awards in succession: first, vice chairman Xu Xiang won the 2023 "ESG Pioneer Award" for his outstanding performance in leading the enterprise's ESG governance practice and continuously deepening the enterprise's sustainable development; second, Daquan Energy Company won the "ESG Era Pioneer Listed Company Award".

According to media reports, "As a representative enterprise in the photovoltaic industry chain, Daquan Energy has won many awards in ESG management and construction, which can be described as an example for the entire industry. In the future, Daquan Energy will inevitably drive the entire industry to pay attention to ESG development, practice ESG concepts and promote ESG practices."

(This article does not constitute any investment advice, and investors operate accordingly at their own risk.)