Daqo Releases 2020 Revenue & Net Profit Guidance

• Xinjiang New Energy says it expects its revenues in 2020 to grow to a total of RMB 4.5 billion to RMB 4.7 billion
• Its net profits are likely to fall within the range of RMB 0.95 billion to RMB 1.05 billion for the entire year
• Daqo has offered a revised guidance for its polysilicon sales in 2020 to 74,700 MT to 74,900 MT
• Roth Capital Partners sees the company as strongly positioned in near term but the anticipated US action to check alleged human rights violation in Xinjiang could hamper its prospects

Chinese polysilicon supplier Daqo New Energy expects full year 2020 revenues to fall into the range of RMB 4.5 billion to RMB 4.7 billion ($696 million to $727 million) while its net profit expectation is within RMB 0.95 billion to RMB 1.05 billion ($147 million to $162 million).

Daqo's subsidiary Xinjiang Daqo New Energy has provided this guidance to the Shanghai Stock Exchange to meet requirement of its initial public offering (IPO) on the Shanghai Stock Exchange's Sci-Tech Innovation Board.

Daqo New Energy Corp is the majority owner of Xinjiang Daqo New Energy. With a 95.6% stake in the subsidiary, it brings in the majority of the group's revenues and net income.

Under its planned IPO, Daqo expects to raise $732 million to expand its annual production capacity by 35,000 MT. Back in September 2020 it announced plans to enter the semiconductor market with a 1,000 MT semi-grade ultra-high-purity polysilicon project (see Daqo's IPO Plans On STAR Market Move Forward).

Daqo also increased its 2020 guidance for polysilicon production volume in Q4/2020, which is in the range of 20,500 MT to 21,000 MT while full year 2020 guidance is for 76,700 MT to 77,200 MT. As for sales volume for Q4/2020, it expects now to have sold 23,000 MT to 23,200 MT and for full year 2020 the guidance is for 74,700 MT to 74,900 MT.

During its Q3/2020 results announcement, Daqo's Q4/2020 production guidance was 19,500 MT to 20,500 MT, and for 2020 it expected to produce 75,800 MT to 76,800 MT (see Daqo's Q3/2020 Net Income Grew To $20.8 Million).

According to analysts at Roth Capital Partners, Daqo continues to enjoy good fundamentals in the form of constrained supply of polysilicon in the market currently, strong demand and healthier prices along with the planned China listing. But they fear the company's prospects could suffer in the face of anticipated US government action related to the alleged human rights violations reported in Xinjiang, China.

Background

A report from the independent consulting firm Horizon Advisory suggested there were indicators of forced labor of Uighur population in Xinjiang region of China which is where some of the words largest polysilicon manufacturing plants are located which also supply to the US solar industry. Some of the companies that have found mention in the report include Daqo New Energy, GCL-Poly, Xinte Energy, JinkoSolar, among others.

"The U.S. Commerce, Treasury, Homeland Security, and State departments have also issued a warning to companies that have suppliers or customers in Xinjiang, China regarding the legal and reputational risks they may face by doing business with entities linked to the alleged human-rights violations. DQ operates in the city of Shihezi, located in northern Xinjiang. This represents, in our view, a risk to DQ's business as it may discourage other companies from doing business with DQ even if DQ has no connection to the alleged activities as a result of geographical association," said Philip Shen of Roth.