Daqo New Energy Pockets $256 Million Revenues In Q1/2021

Chinese polysilicon producer Daqo New Energy produced 20,185 MT of polysilicon in Q1/2021, a little higher than its guided range of 19,500 MT to 20,500 MT. This gives the company confidence to aim higher for the year 2021 for which it has revised annual guidance to produce between 81,000 MT to 83,000 MT, taking it upward from the previous annual polysilicon production guidance of 80,000 MT to 81,000 MT (see Solid Q4/2020 Reported By China’s Daqo New Energy).

CEO Longgen Zhang said his company is already sold out its production volume for 2021 through long-term supply agreements with customers that ‘span all the major mono-wafer manufactures as well as major integrated solar manufacturers’. “More importantly, in connection with these long term supply contracts, we have received RMB 800 million ($124 million) of prepayments from customers this year to date, which will help us fund our future expansion plans and ensure our future market share,” added Zhang.

One of the world’s largest polysilicon manufacturer, Daqo believes the current tight supply of polysilicon in the market is likely to last until the middle of 2022 when some additional supply of polysilicon will flow into the market.

Daqo has guided for around 20,000 MT to 21,000 MT polysilicon production volume during Q2/2021, and said will sell 20,000 MT to 21,0000 MT to external customers.

Q1/2021

During the reporting quarter, Daqo said it sold around 99% of its polysilicon products to mono-wafer customers and already began shipping N-type polysilicon to 4 major customers. Total polysilicon sold by the company in the quarter was 21,471 MT for an average selling price (ASP) of $11.90 per kg, compared to $10.79 per kg in Q4/2020.

Average total production cost during the period was $6.29 per kg, growing from $5.92 per kg in the previous quarter, a rise of 4% in RMB terms which Zhang attributed ‘primarily to the rise in the cost of silicon raw material and the impact of lower production volumes’. Management expects production costs to stabilize in the coming quarters as it believes the cost of silicon raw material has stabilized for the time being.

Daqo’s total unaudited revenues in Q1/2020 added up to $256.1 million, up from $168.8 million in Q1/2020 (see Daqo Ticked All Right Boxes In Q1/2020). Gross profit for the quarter grew from $56.6 million last year, grew to $118.9 million in Q1/2021, and with higher ASPs its gross margin went up to 46.4%, up from 33.5% in Q1/2020. Non-GAAP EBITDA was reported as $128.1 million, compared to $63.1 million a year back.

On the manufacturing front Daqo said its phase 4B project expansion to add 35,000 MT capacity for high-purity polysilicon, has been under construction since mid-March 2021, and is expected to complete by the end of 2021, ramping up to full capacity by the end of Q1/2022.

This expansion is coming up at the company’s polysilicon facility with 70,000 MT annual capacity in China’s Shihezi city in Xinjiang’s Uyghur Autonomous Region where it recently took a group of domestic and international journalists, solar industry analysts and 7 institutional investors on a field trip to help them ‘better understand the technical processes’ and show them that the highly-automated production process here is ‘not conducive to employing unskilled labor’ (see JA Solar Secures 78,200 MT Polysilicon Supply From Daqo).

Commenting on Daqo’s results for the quarter, Philip Shen of Roth Capital Partners said, “The outlook for poly pricing appears to be quite strong through the end of 2022. While the China IPO continues to be delayed, management believes it could be done in July, which should serve as a positive catalyst. On the flip side, the Xinjiang forced labor issue remains a political risk.”