Daqo New Energy Corp. (DQ) Q1 2017 Earnings Report, Transcript and Summary

Good day, and welcome to the Daqo New Energy 2017 First Quarter Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kevin He, Investor Relations for the company. Please go ahead.

Hello, everyone. I’m Kevin He, the Investor Relations of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the first quarter of 2017, which can be found on our website at www.dqsolar.com. To facilitate today’s conference call, we have also prepared a PPT presentation for your reference. Today, attending the conference call, we have Dr. Gongda Yao, our Chief Executive Officer; and Mr. Ming Yang, our Chief Financial Officer. The call today will feature an update from Dr. Yao on market and operations, and then Mr. Yang will discuss the company’s financial performance for the first quarter of 2017. After that we will open the floor to Q&A from the audience. Before we begin the formal remarks, I would like to remind you that certain statements on today’s call, including expected future operational and financial performance and industry growth, are forward-looking statements that are made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statements. Further information regarding these and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission. These statements only reflect our current and preliminary view as of today and maybe subject to change. Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today’s call is as of today and we undertake no duty to update such information except as required under applicable law. Also during the call, we will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into U.S. dollars solely for the convenience of the audience. Without further ado, I now turn the call over to our CEO, Dr. Yao. Please.

Hello, everyone, and thank you for joining our call today. We are pleased with the strong financial and operating results we achieved for the first quarter of 2017. I would like to thank our entire Xinjiang polysilicon team for their great efforts to make the first quarter of 2017 our best quarter ever in terms of cost structure, production volume and polysilicon quality. During the quarter, we fully ramped up our Xinjiang polysilicon facility to 18,000 metric ton annual capacity and achieved full production. Our capacity ramp-up progressed ahead of schedule. We produced 4,927 metric ton of polysilicon in the first quarter, increasing of 100 % as compared to the fourth quarter of 2016. While achieving a substantial increase in sequential polysilicon production volume, we also saw strong demand for our high-quality products from our customers. As polysilicon external sales volume reached 4,223 metric ton in Q1 2017, an increase of 91.2% from Q4 2016, achieving highest sales volume in the company’s history. This is in light of recent reports from some of our competitors who have seen their Q1 2017 revenue declined from Q4 2016, despite a sequential increase in polysilicon ASP. We’re clearly gaining meaningful market share during the quarter. Polysilicon market demand started strong in the beginning of the year, but it weakened towards the end of March, primarily due to the inventory management at downstream PV manufacturers. This resulted in a temporary polysilicon inventory buildup across the industry, with price adjustments reflecting the weakness. Market conditions stabilized towards the end of April, with strong demand recovery, and the industry poly inventory situated or adjusted to the healthy level polysilicon pricing also improved meaningfully in the late April, with robust customer demand and orders for our high-quality polysilicon product. Based on industry forecast, the global PV installations is expected to be approximately 75 to 80 gigawatts for 2017 compared to approximately 75 to 78 gigawatts for the 2016. Overall, the annual PV volume demand for this year is anticipated to be rather evenly spread between the first and the second-half of the year. While PV end market demand environment is very dynamic and may lead to polysilicon ASP volatility, we believe overall volume demand for the year is solid and healthy. Our cost leadership should help the company to weather through the market volatility. During the quarter, we also achieved the lowest ever cost structure, with total production cost of $8.41 per kilo, and the cash cost of $6.68 per kilo. With our lower production cost, gross margin was 42.8% for the first quarter of 2017, the company generated $22.9 million in net income and $41.7 million in EBITDA with EBITDA margin of 49.8%. In addition, thanks to the various quality improvement projects we initiated starting from the second-half of last year, the first quarter of 2017 was the best quarter in our history in terms of product quality. As part of our ongoing quality improvement program, we recently implemented new automated back end package system in the clean-room environment. Programs like these has helped to increasing production volume of polysilicon for mono wafer manufacturers. Going forward, we will continue to focus our efforts on cost reduction. We have identified a several cost reduction opportunities with potential reduction in unit energy usage and the raw material usage, which should allow us to continue to reduce our cost. At the same time, we continue to pursue in various programd and initiatives on the polysilicon quality improvement, which will help the company to meet the ongoing demand – growing demand for ultra-high-purity polysilicon, such as demand from the monocrystalline wafer manufacturers. We are currently undergoing qualification as additional monocrystalline wafer customers for high-purity polysilicon, with additional high efficiency mono wafer capacity coming online in the second-half of this year. We believe we are well positioned to supply the growing demand from this market. The combination of our cost reduction and quality improvement initiatives should increase our corporate flexibility and reinforce our competitive position as coverage of flexibility and they reinforce our competitive position as one of the leading polysilicon supply in China, which will allow us to take advantage of additional opportunities in 2017 and beyond. Now, let me provide an outlook for the second quarter of 2017. With a fully ramped up capacity, we expect to produce 4,800 metric ton to 5,000 metric ton polysilicon and the sale of approximately 4,200 metric ton to 4,500 metric ton to external customers during the second quarter of 2017. So above external sales guidance, exclude a shipment of polysilicon to be used internally by our Chongqing solar wafer facility, which utilize polysilicon for its wafer manufacturing operation. Wafer sales volume is expected to be approximately 23.5 million to 24 million pieces in the second quarter of 2017. Now, I will turn the turn our CFO, Mr. Ming Yang for the financial updates.

Thank you, Dr. Yao, and good day everyone, thank you for attending our call today. Now I will provide a financial update for the first quarter of 2017. Revenues were $83.8 million, an increase 82% from $46.1 million in the fourth quarter of 2016, and an increase of 45% from $57.7 million in the first quarter of 2016. Revenues from polysilicon sales to external customers were $70.4 million, an increase of 115% from $32.8 million in the fourth quarter of 2016, and 76% from $39.9 million in the first quarter of 2016. External polysilicon sales volume was 4,223 metric ton, an increase of 91% from 2,209 metric ton in the fourth quarter of 2016, and an increase of 45% from 2,905 metric ton in the first quarter of 2016. The average selling price of polysilicon was $16.66 per kilogram in Q1 2017, an increase of a 11.4% from $14.96 per kilogram in the fourth quarter of 2016. The increase in polysilicon revenue as compared to the fourth quarter of 2016 was primarily due to higher polysilicon sales volume and higher ASPs. Revenues from wafer sales were $13.4 million, compared to $13.4 million in the fourth quarter of 2016 and $17.8 million in the first quarter of 2016. Wafer sales volume was 22.4 million pieces, compared to 21.3 million pieces in the fourth quarter of 2016 and 22.1 million pieces in the first quarter of 2016. Gross profit was approximately $35.9 million, an increase of 153% from $14.2 million in the fourth quarter of 2016, and an increase of 115% from $16.7 million in the first quarter of 2016. Non-GAAP gross profit, which excludes costs related to the non-operational polysilicon assets in Chongqing was approximately $36.9 million, an increase of 133.5% from $15.8 million in the fourth quarter of 2016 and 95% from $18.8 million in the first quarter of 2016. Gross margin was 42.8%, increased from 30.7% in the fourth quarter of 2016 and 29% in the first quarter of 2016. The increase in gross margin as compared to the fourth quarter of 2016 was primarily due to higher quarterly polysilicon ASPs and lower polysilicon production cost. In the first quarter of 2017, total costs related to the non-operational Chongqing polysilicon assets, including depreciation were $1 million, decreased from $1.6 million in the fourth quarter of 2016 and $2 million in the first quarter of 2016. As we have already relocated the majority of the idle equipments from our Chongqing site to Xinjiang site and successfully reutilized them in our capacity expansion projects, the total costs related to the non-operational Chongqing polysilicon assets have been significantly reduced. In the near future, we expect such costs will remain at a level that is similar to that in Q1 2017. Excluding costs related to the non-operational Chongqing polysilicon assets, the non-GAAP gross margin was approximately 44%, increased from 34.1% in the fourth quarter of 2016 and 32.6% in the first quarter of 2016. Selling, general and administrative expenses were $4.1 million, compared to $3.5 million in the fourth quarter of 2016 and $4.1 million in the first quarter of 2016. Research and development expenses were approximately $0.4 million, compared to $2.8 million in the fourth quarter of 2016 and $0.1 million in the first quarter of 2016. The research and development expenses fluctuate from period to period according to the R&D activities occur in such period. Other operating income was $0.8 million, compared to $1.9 million in the fourth quarter of 2016 and $0.7 million in the first quarter of 2016. Other operating income was mainly composed of unrestricted cash incentives that the company received from local government authorities, the amount of which varies from period to period. Operating income was $32.2 million, an increase of 235% from $9.6 million in the fourth quarter of 2016 and 142% from $13.3 million in the first quarter of 2016. Operating margin was 38.4%, increased from 20.7% in the fourth quarter of 2016 and 23.1% in the first quarter of 2016. Interest expense was $4.3 million, compared to $4.1 million in the fourth quarter of 2016 and $3.9 million in the first quarter of 2016. EBITDA was $41.7 million, an increase of 137% from $17.6 million in the fourth quarter of 2016 and an increase of 90% from $21.9 million in the first quarter of 2016. EBITDA margin was 49.8%, increased from 38.3% in the fourth quarter of 2016 and 38% in the first quarter of 2016. Net income attributable to Daqo New Energy shareholders was $22.9 million in the first quarter of 2017, increased from $4.1 million in the fourth quarter of 2016 and $8.3 million in the first quarter of 2016. Earnings per basic ADS were $2.18, increased from $0.39 in the fourth quarter of 2016 and $0.80 in the first quarter of 2016. As of March 31, 2017, the company had $61.2 million in cash and cash equivalents and restricted cash, compared to $31.9 million as of December 31, 2016 and $35.7 million as of March 31, 2016. As of March 31, 2017, the accounts receivable balance was $13.1 million, compared to $4.8 million as of December 31, 2016. And as of March 31, 2017, the notes receivable balance was $11.7 million, compared to $13 million as of December 31, 2016. As of March 31, 2017, total borrowings were $236 million, of which $129.2 million were long-term borrowings, compared to total borrowings of $217.9 million, including $111.9 million of long-term borrowings, as of December 31, 2016. And for the three months ended March 31, 2017, net cash provided by operating activities was $28.6 million, increased from $22.5 million in the same period of 2016. For the three months ended March 31, 2017, net cash used in investing activities was $16.6 million, compared to $17.5 million in the same period of 2016. Capital expenditures were related to purchase of PP&E were $16 million for the quarter, which was primarily related to the capital expenditure of Xinjiang polysilicon projects. For the full-year of 2017, the company expects to spend approximately $45 million to $50 million in capital expenditures. For the three months ended March 31, 2017, net cash provided by financing activities was $16.5 million, compared to net cash used in financing activities of $3.3 million in the same period of 2016. The increase was primarily due to the drawdown of long-term project bank loans related to the company’s recent polysilicon capacity expansion. And that concludes the official part of our presentation. Now, let’s have the Q&A session.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Philip Shen of ROTH Capital Partners. Please go ahead.

Hi, everyone, thanks for the questions. In your release you indicated you expect demand to be evenly spread between the first and second-half. Can you share a bit more detail as to why you see that to be the case? And how do you expect the step down in the feed-in tariff in China on June 30th to impact demand?

So that’s really based on conversations with our downstream customers, most of them are engaged in international business for models. And also from some of the recent industry reports on supply and demand for PV and downstream. And it looks like overall the first-half, I think, most forecasts are looking at maybe 30 to 35 gigawatts from installation, or maybe more than that, I’m sorry, 35 gigawatts in that range and the second-half probably higher than that. And I think that’s what most of the analyst reports we looked at indicated and also our downstream customers are also looking at that as well. I think that the rush for Chinese demand is less than it was, for example, for 2016. But they’re also seeing increase in projects like the projects for distributor generation and other like bidded project within China, that’s geared for the second-half installation.

Great. So in terms of China demand, can you share, I think, we saw seven gigawatts in Q1, how much do you see in Q2, Q3 and Q4?

I think at this point, it’s hard for us to tell what that actual number looks like. But I think Q2 should be higher than Q1, that’s what it looks like.

Yes. So, Philip, so the semi – middle year, there’s some issues with tariff cut is already built in the market. And we saw, as Q2 will be relatively weak, actually, we saw the weakness and show up in the second-half of March. So clearly saw indication of recovery from that weakness already. So, obviously, we don’t know yet, because probably, we will clearly see that by end of May this month, we’ll see what’s happening in June. But it seems like so far we see the demand is much stronger than first quarter right now at this moment compared with the average of quarter and especially compared with the end of last quarter, which is March is very strong. So we believe most likely, it will be evenly distributed. So for Q1, actually, you mentioned the seven gigawatt. So it’s roughly, sales will be like a 30 to 35 gigawatts annually. So it’s roughly right. So normally Q1 is the slow and hopefully would catch up in the few quarters after that. But as you say, all of their forecasts – our point of view just suites of feeling – around our customer feeling. So it’s not the director’s feeling. We don’t have any installations for our business. So that’s just through the business to our customer, we see that. So there’s no guarantee that our view is right. But we think – we look like there’s more evenly distributed for four quarters.

Great. So how do you see that more even distribution of the demand impacting ASPs for polysilicon?

Yes, ASP, so yes, recovering recurring from weak – from the low points in the second half of March to right now is already around $2 higher, so roughly, so average is speaking. So is it still below – right now, ASP is still below the high peak in the Q1. So but we still see that recovery in first half. Secondly, we will sign more contracts with mono wafer manufacturers for whole year in a few – multiple years. So it seems like, people don’t worry about the short-term of up and down, and they aim in the long-term stability of business. So we – as a poly maker, we really need to look into largest scale of the thing. So the market we are positioning, as I said in previous, at the beginning is, we’re aiming more and more in a mono wafer supply, because which is very, very tight to supply and will be huge demand in China in future. So we are positioning that. We also enhanced our quality. So our market room is much larger compared with traditional multicrystalline wafer demand in the market. So, of course, at this moment, we serve the best markets, but since mono wafer business will grow in the second-half of this year. So from our point of view, we do not see much difference from first-half and the second-half. And actually, mono wafer may be better in the second-half. There’s a certain opportunity there, we are trying to address.

Great. Can you remind us, in Q1 what percentage of your polysilicon was suitable for mono? And then by Q4, how does that mix change?

Well, so Q1 is still like around 20% to 30%. But we’re trying to ship more actually during the end of the quarter actually, because going down a lot. So it’s causing a lot of people stop the buying. They’re using lot of inventories to consuming inventory to try to purchasing after stabilized poly price. And so we see lot of ordering actually inventory wise by the end – when we exited the quarter, actually that people – some who ordered didn’t want to take the poly. So most likely, they will take poly in the Q2 instead of Q1. So look at Q1 is relatively low than we – our expectation, because we really shipped only first two months. Third month, we didn’t ship any much for the mono wafer manufacturers, but we were starting like April and May April, we starting pick up. So those demand we see in Q2 is really high. So again, we like to ship more than 30%. I think, we can manufacture that. Again, the mono wafer product is slightly different technically due to some adjustment to the growing your poly. So we normally is only do that according to orders and shipment schedule. So if you don’t have much shipment order in hand, so we will make a polysilicon more tuned to fit into the multiwafer crystal kind of polysilicon. So – but for the basic parameters, spec is same. So for boron and phosphorus, impurity level is very low right now. We achieved more than 50% in the March for the – we called, E3 kind of grade. And through the end of the year, we were gradually increasing that percentage to 80%. So we were ready for the transition, for example, in future if the mono wafer supply and demand is getting going. And while we were increasing – improve our quality to meet that demand.

Okay. So could we say that by the end of the year, you will be capable of shipping as much as 80% of your volume to the mono customers? Is that fair?

Yes, there’s a possibility, but it is tough, because right now we are doing a lot of testing with our customers. So there’s two criteria to meet the mono wafer; first is, we call the impurity is the higher; the then second one is morphology of the polysilicon. So currently we only are shipping very dense material for those mono wafers. But we are trying to testing different morphology with our customer. If that can be done or proving is also suitable, then our volume for mono wafer. Our production percentage for mono wafer were increasing dramatically to more than 50%, like you said, through 60%, 70%. That that depends on the testing result.

Great. Okay. Thank you, Gongda and thank you Ming Yang, I’ll pass it on.

You’re welcome.

Okay, thanks, Philip.

The next question comes from Paul Strigler of Esplanade. Please go ahead.

Hey, guys. I was pleasantly surprised by your cash costs, but I’m a little bit confused. Do you guys started production at your new 3A facility primarily in February or so. I would have expected a little bit of expense drag and with all the mono upgrade projects going on at the facility, I would have expected actually, I guess, smaller quarter-over-quarter cost improvement, can you sort of explain why you didn’t see much drag, and I guess, what was the drag? So what would have cash costed and had you not been ramping the facility during the period?

Okay. So if you just look at the major driving down, I think, it’s, because of average of our depreciation costs that are going down, because we added a project – the capital investment for depreciation is very limited. So that’s why we’re going down as manufacturing costs. I think your point out is why cash cost is not going down as much compared with further cost..

No.

Yes.

No, no, the opposite – actually, the opposite, I thought cash cost would have been maybe down sequentially but not down so much. You were ramping a new facilities that didn’t – according to the press release, I think, you didn’t start ramping that facility until early February. I would have expected some sort of a drag on extensions for the quarter. Actually, I would expect the cash cost to be a little bit higher. So I was wondering what was the expense drag from the new facility 3A in the quarter, so that I guess I can net out to what the cash cost would have been had that facility been operating at fully capacity?

Well, there are two points. Actually, overall, the added capital investment is less. So we do expecting this for the depreciation were going down little bit, or at least, maintains same, although, it’s a new facility. For new facility, we added a new reactor. It’s a more efficient, because we will see some saving for the – for output increasing and also the saving the electricity consumption. So we see actually that – you mentioned in the February ramp-up, actually, we’re starting to ramp in the beginning of January. And we’re almost a little bit less behind in the January, but the February already catch up 100% ramp up. So we – first quarter we see is already ramp up to a full capacity we designed for is 18,000 metric tons a year.

So what was the on a per kilogram basis or just overall, how much do you think your Phase 3A facility cost you incrementally Q1 just from the ramp from being underutilized over the first?

We gave the guidance already. We gave the guidance last time we said, we’ll be like $8.50 average. So this means, including maintenance will be scheduled for Q3 right now. So doing the maintenance, we will shutdown the – around two weeks, three weeks. So the average cost will be going up a little bit. And then again back to fourth quarter, we’re below I think we’re trying to achieve fourth quarter will be lower than the first quarter definitely. So we are expecting to see the costs that would be going lower in the second quarter, then first quarter then Q3 maybe is slightly higher and then Q4 will be low again. So as of this year and when we exit the 2017, we shall see lower cost than Q1 we reported $8.41. We have some identified area. We’re trying to do that and most likely, we’re realizing the Q4 or Q1 next year, so for sure.

Okay. And then one just one last question for me. When do you think you will be shipping your last polysilicon that will be converted into a wafers and modules in the first-half of the year? How long – what’s the lead time? So if you ship polysilicon today when does that actually turn into wafers then into a module, I guess…

The time duration from they receive the polysilicon to make a modules is that what your last question?

No. When will your shipments and pricing reflect sort of the second-half of Q3 just shipping today, I expect that polysilicon is being converted into modules that will be installed in the first-half of the year. But when will you start shipping polysilicons that reflects demand in the second-half of the year?

That will be immediately in the second-half will be like normally is three weeks before.

Two to three weeks before the end of the quarter.

Yes.

Yes, like mid-June like will be the cutoff?

Perfect. Great job this quarter, guys. Congratulations.

Great. Thank you.

[Operator Instructions] The next question comes from Gordon Johnson of Axiom Capital. Please go ahead.

Thanks for taking the question. I guess, just looking to Q3, it seems like the expectation, I think broadly is that, there’s going to be a big fall off in demand. Can you guys give us some sense of how you expect pricing trends to unfold in Q3, as well as, I guess, you may have touched on this a bit. But what you expect your cost to do?

Okay. Originally, we think, again, the forecast of a price is difficult job, and I would tell you what do we think. We think at the beginning, price will be Q1 is strong, Q2 is strong, and Q3 we’re weak and Q4 we’re recovering, that’s the original kind of V curve or whatever curve you saw. But right now, actually, what happens in the end of Q1, prices suddenly dropped a lot. So it dropped a like several dollars, $3 to $4. And then right now they are coming back $2. So it’s hard to say. So if we combine with the original vision for next two quarters, so we will see already like a kind of little bit W shape kind of thing. So it’s – if you believe me, so if the Q1 is strong and then when we exit the Q1 is weak going down and then Q2 is certainly going up and then everybody said the second-half is weak, because as the tariff cut, so would be going down a little bit and in Q4 we’re recovering. So it’s – definitely we know it’s not a straight line. So it’s not mono trend of going up, or mono trend going down, or flat, that’s not case. Well, fluctuation is always reflecting the demand and the supply. So when poly price is going down below $12.30, or $0.50 and manufacturers of polysilicon were restrained and they reduced production, because some manufacturers were losing money, causing the supply tight and driving the price up. And up to some point and then oversupply may be too much high cost for the downstream producers, and they will buy less and then pull the price back. So that’s the – always the mechanism of the market that we are playing and that give you some kind of instead of in a straight line into kind of W shape or M shape whatever the shape is, so it’s a saturation. But as we see, this time, is –the saturation is much less than in the history. So it’s like a $2 to $3 up and down. So it’s manageable for the industry. So we do not see much problem for whole year as we entered the year. So So we still believe roughly it’s evenly distributed for the first-half and the second-half, that’s why we say that.

Okay, that’s helpful. And then when we look at it, there’s quite a bit of capacity coming online – new polysilicon capacity coming online. And I think as we’ve seen recently, there’s been some pressure on prices too, that’s lifted recently. Are you concerned at all that all this incremental capacity coming online looking into…

No, yes. No, nothing come out in the first-half. We probably are the only guy really bring to the real thing – real polysilicon. Whatever you’ve heard is a lot – we heard a lot on the paper or news media or whatever voice. But there’s no solid silicon. So they said, they will start producing silicon in the first-half, we don’t see those guys. Most likely, they will maybe, if lucky, will be second-half or maybe later. I know what you’re saying, and they announced a lot of things. They announced like 200,000 metric ton or even higher some guys. They will do, but we don’t see those silicon come up here.

Okay. So you’re not concerned at all that that silicon maybe come online now?

Yes. Well, they – maybe they can produce some silicon, but it’s not high-purity silicon. So we are totally in different market and they maybe can sell to some other people to using for some other purpose. But we know our Chinese market and manufacturer very well. And it’s not as straightforward. We wish them good luck. But if you’ve just heard a lot of things, if you have any, please confirm that if they have already silicon to sell. So –as we know, there’s no such sales in the market right now today.

Okay. So if I’m hearing you right, you’re saying that a lot of the new capacity coming online from the various players, some of which are established, you’re saying, you’re not seeing in the market right now?

They’re not funded. They haven’t started construction.

We’re talking about the larger, the significant amount like more than 20,000 metric ton or those kind of things. Add to that like a few thousand metric ton, we obviously cannot see the market. I’m talking about the new suppliers, okay. And there’s no and we know that several projects is to be delayed, like [indiscernible] project with IEC has been delayed for – to next year. This year, it will not happen, okay. And other things we heard is delay for production, but it’s not officially announced, so I cannot quote those things. But you can find out. So if anybody from downstream customers, if they get shipment from those new supplies, you will find out.

All right. Then lastly, just looking at the broader Chinese market and looking at the project market, what are you guys seeing with respect to curtailments and actual payment of the feed-in tariffs? Have you seen any improvement there and specifically, in any provinces, have you seen any improvement, or you think it’s still somewhat the same with respect to 30% to 40% curtailments and actual lack of feed payments? Thanks for the question.

No, actually, we do not see significant change from the situation. Actually, last year, we saw some payment of our historical due payment, but this situation is still lasting. I think they are trying to find the way for trading new trendy market for those things. But it’s still in the early stage. Implementation for the new method most likely will be next year.

Thank you.

Okay. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Kevin He for any closing remarks.

Thank you, everyone, again for attending the conference call today. Should you have any further questions, please don’t hesitate to contact us. Thank you and bye-bye.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.