After years of cooperation, the case of Daqo Energy (688303) being sued by suppliers has ushered in new progress.

On March 17, Daqo Energy announced the new progress of the litigation case involved in the company, and the current second-instance ruling of the case is to revoke the original judgment and remand for retrial. The company was the appellee in this lawsuit, and the amount involved was 1.848 billion yuan, all of which were expected contingent economic losses.

Source: company announcement

It is understood that the case is a litigation dispute between Daqo Energy and suppliers on issues such as contract performance and subject product quality, and Daqo Energy is the defendant. Xinjiang Xian'an New Materials Co., Ltd. and Xinjiang Dengbo New Energy Co., Ltd. (hereinafter referred to as "Xian'an New Materials" and "Dengbo New Energy"), Daqo Energy's long-term partners and suppliers of Daqo Energy, believed that Daqo Energy would no longer renew its cooperation with him, and took it to court "in a fit of anger".

According to previous announcements, the first-instance judgment of this case confirms that the rights and obligations of the Business Cooperation Agreement signed between the plaintiff Xinjiang Xian'an New Materials Co., Ltd. and the defendant Daqo Energy will be terminated on December 31, 2023; The defendant Daqo Energy compensated the plaintiff Xinjiang Xian'an New Materials Co., Ltd. for the loss of plant rent and personnel remuneration totaling 3.058 million yuan, and the defendant Daqo Energy compensated the plaintiff Xinjiang Xian'an New Materials Co., Ltd. for the lawyer's fees of 100,000 yuan, and the above-mentioned amounts totaled 3.1581 million yuan, and rejected the plaintiff's other claims.

It can be seen that the judgment result of a total compensation of 3.15 million yuan is far from the "astronomical amount" of 1.8 billion yuan in the plaintiff's claim. After that, the plaintiff refused to give up and resolutely appealed. In view of the fact that the case involved in the lawsuit has not yet been reopened, the final judgment is still uncertain, so the impact on Daqo Energy's net profit cannot be predicted.

In terms of performance, Daqo Energy announced the 2024 annual performance report, and after preliminary accounting, the company achieved operating income of 741,100 yuan in the reporting period, a year-on-year decrease of 54.62%; The net profit attributable to shareholders of the listed company was 2.718 billion yuan, a year-on-year decrease of 147.17%.

Specifically, in 2023, affected by overcapacity, the market price of polysilicon will drop significantly, and although Daqo Energy is full of production and sales, the net profit attributable to the parent company will drop by nearly 70%, and the operating income will drop by nearly 50%. Entering 2024, the situation is becoming more and more severe, with the national polysilicon output exceeding 1.82 million tons, a year-on-year increase of 23.6%; However, by the end of 2024, China's polysilicon production capacity will be 2.87 million tons/year, a year-on-year increase of 41.76%, and the capacity utilization rate will only be 63.41%.

In this serious mismatch between supply and demand, polysilicon prices are "falling endlessly". Daqo Energy's polysilicon price broke through the company's cash cost line in the second quarter of 2024, and the company had to ship at a loss. As of the fourth quarter of 2024, the company's unit sales price was 33.18 yuan/kg, a decrease of 42.21% from the same period in 2023; The company's unit cash cost is 35.19 yuan/kg, a decrease of 13.50% from 2023.

In order to cope with the price decline and loss situation, Daqo Energy had to make a provision for a large asset impairment loss. In the first three quarters of 2024, the company made a total impairment provision of 1.367 billion yuan, a year-on-year increase of 63871.86%; Wind data shows that the weighted average of the polysilicon and wafer industry is 641 million yuan of impairment, which is much higher than the industry average. These impairment provisions also further increased the company's financial burden, making the company's performance worse.

With the sluggish performance, in the past two years, Daqo Energy's senior executives and core technical personnel have also frequently resigned. On the day of the announcement of the progress of the litigation, the company issued an announcement on the resignation of core technical personnel Ma Xiaoliang. According to the announcement, the labor contract signed by Ma Xiaoliang and the company will expire on March 2, 2025, and the labor contract will not be renewed with the company due to personal reasons after the expiration of the contract, and the resignation procedures have been completed recently.

Previously, on January 18, 2025, core technical personnel Wang Xiyu resigned; On November 1, 2024, Cao Wei, deputy general manager of the company, also submitted an application for resignation, and after his resignation, Mr. Cao Wei will no longer hold any position in the company. Going back further, Hu Ping, the company's core technical personnel and deputy general manager, Guan Shihong, the employee representative supervisor, and Xia Jun, the chairman of the company's board of supervisors, also resigned. In less than a year, as many as 5 senior executives and core technical personnel have left one after another, and the position of general manager has been changed frequently.

The performance is deep in the red, and the company's stock price is also sluggish. Wind data shows that after the company's listing, it once fell from a historical high of 91.03 yuan/share to around 18.99 yuan/share, and its market value evaporated more than 100 billion yuan. As of the close of trading on March 17, Daqo Energy's share price was 21.40 yuan per share, with a total market value of 45.91 billion yuan.

Source: Reading and Entrepreneurship