Daqo’s IPO Plans On STAR Market Move Forward

Daqo New Energy Expects To Raise $732 Million Through IPO To Expand Annual Production Capacity By 35,000 MT; To Enter Semiconductor Market With 1,000 MT Semi-Grade Ultra-High-Purity Polysilicon Project
08:55 PM (Beijing Time) - 14. September 2020
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With the planned IPO listing at STAR Market, Daqo New Energy will be able to get access to low cost capital, said Roth Capital Partners, to expand its capacity and earnings power. It will also push up its subsidiary’s total implied market value to $4.9 billion. (Photo Credit: Daqo New Energy)

Key Takeaways

  • Daqo New Energy expects to raise $732 million through IPO of its principal operating subsidiary at the STAR Market of China
  • It will invest some $514 million on expanding its ultra-high-purity polysilicon capacity by an additional 35,000 MT for monocrystalline PV wafer applications
  • It also plans to build 1,000 MT of manufacturing capacity of semi-grade ultra-high-purity polysilicon with $62 million from the planned IPO
  • $156 million will be used as additional working capital, R&D and fund business development projects

Polysilicon producer Daqo New Energy says its principal operating subsidiary Xinjiang Daqo New Energy Co., Ltd. has submitted application documents of its proposed initial public offering (IPO) to the Shanghai Stock Exchange (SSE). The Chinese company announced its decision to get its subsidiary listed on SSE’s Sci-Tech Innovation Board (STAR Market) in June 2020 (see Daqo Eyeing Chinese Capital Markets For Listing).

Proceeds from the IPO are planned to be deployed to expand its current production capacity with 2 new projects. Around $514 million are reserved for investment on phase 4B of its ultra-high-purity polysilicon project which will add 35,000 metric tons (MT) capacity for monocrystalline solar PV wafer applications. This, it says, will enable it to better address the fast growing demand for mono-grade polysilicon.

Another $62 million are to be spent as capital expenditure on a semi-grade ultra-high-purity polysilicon project with 1,000 MT annual capacity for semiconductor wafer applications. Management explained that it sees this expansion as diversifying its product portfolio and fill the gap of domestic supply of semi-grade polysilicon.

$156 million are to be used up as additional working capital to optimize debt structure, enhance R&D and fund business development projects, the company explained.

It plans to issue a minimum of 286,764,706 shares accounting for close to 15% of its total share capital after the offering. As of now, Daqo owns close to 95.60% of Xinjiang Daqo but after the IPO launch, its stakes in the subsidiary will come down to 81.26%.

Analysts at investment bank Roth Capital Partners see the company’s plans to diversify into semi-grade polysilicon as a positive. “A completed China listing, in our view, is likely to provide the company with an infusion of low cost capital that can be used to add capacity and increase earnings power,” said Philip Shen, analyst at Roth Capital. “If the entire $732 million is raised by selling 15% of the Xinjiang subsidiary, the implied total market value of the subsidiary would be ~$4.9 billion, which is ~3x the total market value for DQ today of ~$1.6 billion.”

Shen expects the 35,000 MT capacity addition, post a successful IPO, to begin ramping in Q1/2022 and be fully ramped up by Q2/2022.

In August 2020, Daqo CEO Longgen Zhang said polysilicon demand is expected to outstrip supply globally over 15 months to 18 months due to limited additional supply of the material (see Daqo Sold More Polysilicon Than Guided In Q2/2020).

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

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Anu Bhambhani