Daqo’s Q3/2020 Net Income Grew To $20.8 Million

Increased Demand For Mono-Grade Polysilicon & Higher ASP Enabled Daqo New Energy To Report $20.8 Million Net Income During Q3/2020; Management Says Solar Glass Shortage Becoming Bottleneck For Industry
10:42 PM (Beijing Time) - 25. November 2020

Improved ASP for polysilicon during Q3/2020 turned out to be a positive for Daqo New Energy. Going forward, it expects the ASP to improve meaningfully in Q4/2020. (Source: Daqo New Energy)

Key Takeaways

  • Daqo’s Q3/2020 revenues declined due to lower polysilicon sales, but higher ASPs helped it report higher net income
  • Out of 18,406 MT polysilicon produced during the quarter, 97.7% comprised mono-grade
  • Management said shortage of solar glass during the quarter has limited module production but it should resolve soon
  • Q4/2020 polysilicon production volume is expected between 19,500 MT to 20,500 MT

Higher demand for mono-grade polysilicon during Q3/2020 and increased ASP for the raw material for solar wafers enabled Daqo New Energy to improve both its net income ($20.8 million) and gross margin (36%) with gross profit ending up at $45.3 million on both annual and sequential basis.

Its revenues slid down to $125.5 million compared to $133.3 million it reported during Q2/2020 while it went up from $83.9 million in Q3/2019 (see Daqo Reports $5 Million Net Income In Q3/2019).

The Chinese polysilicon producer rolled out 18,406 MT of polysilicon during the reporting quarter 97.7% of which comprised mono-grade, relying on its fully digitalized manufacturing system and achieved average total production cost of $5.82 per kg going up from last quarter’s $5.79 per kg. However, it benefitted from ASPs going up to $9.13 per kg in Q3/2020 compared to $7.04 per kg in Q2/2020. The company expects ASP to improve meaningfully in Q4/2020.

Raw material shortage

Daqo management pointed at the shortage of solar glass in the market as becoming a bottleneck for the solar industry that’s limiting module production but expects it to ease over the coming months as additional solar glass capacity comes online. “The temporary constraint on the industry’s utilization rate will be removed which eventually will increase demand for polysilicon,” said Daqo CEO Longgen Zhang. Recently solar cell and module manufacturer Canadian Solar too pointed at input material shortage in its Q3/2020 results which may drive down its gross margins in Q4/2020 (see 20% Annual Revenue Growth For Canadian Solar In Q3/2020).

Currently, Daqo has 3 big contracts with JinkoSolar, LONGi and Shangji and expects to sign 1 or 2 more long-term contracts to cover the next 3 years with the condition for it to be at least a 3-year contract with order quantity starting low and reaching up higher.


During Q4/2020, Daqo expects to produce around 19,500 MT to 20,500 MT polysilicon and sell close to 20,500 MT to 21,500 MT to external customers. For the full year 2020, the management has offered a slightly higher guidance of producing 75,800 MT to 76,800 MT compared to the revised guidance of 75,000 MT to 76,000 MT it offered in October 2020 (see Daqo Lowers Polysilicon Sales Forecast For Q3/2020).

Management also shared that it expects to complete STAR Market listing in China by the end of Q1/2021. Proceeds from the listing will be used to invest in 4B production capacity expansion at Xinjiang with 40,000 tons annually where trial production can be expected to begin by the end of 2021 and full production capacity in Q1/2022 (see Daqo’s IPO Plans On STAR Market Move Forward).

Roth Capital Partners analysts believe the next expansion of 80,000 tons could be outside of Xinjiang and potentially even outside of China. “The fundamentals for the company appear to be robust nearly across the board with strong demand, an elevated pricing outlook, and an improved cost structure,” said Philip Shen of Roth.

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

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Anu Bhambhani