Daqo New Energy Corp. (DQ) Q3 2020 Earnings Report, Transcript and Summary

Hello, and welcome to the Daqo Energy Third Quarter 2020 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 Daqo Energy. 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 third quarter of 2020, 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 Mr. Longgen Zhang, our Chief Executive Officer; and Mr. Ming Yang, our Chief Financial Officer. The call today will feature an update from Mr. Zhang on market and operations, and then Mr. Yang will discuss the company’s financial performance for the third quarter of 2020. 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 may be 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, Mr. Zhang. Please Longgen.

Thank you, Kevin. Hello, everyone. Thank you for joining our conference call today. During the third quarter of 2020, we successfully completed the annual maintenance and several technology improvement project at our polysilicon manufacturing facilities. We have resumed full production in August with excellent operational results. For the third quarter, we produced 18,406 metric tons of polysilicon, among which approximately 97.7% was mono-grade. We continued our relentless drive to lower production cost and reached to a record-lower cost in Renminbi terms. During the third quarter, we completed our digital transformation project, with a fully digitized manufacturing system that allow us to continuously improve our process control and analyze our manufacturing data so as to achieve better results in system stability, manufacturing efficiencies, production cost and product quality in the future. As our facilities are now running with increased efficiency, we expect to achieve a higher production volume of approximately 19,500 to 20,500 metric tons in the fourth quarter, with a potential cost reduction by approximately 3% as compared to the third quarter. During the quarter, polysilicon ASPs increased rapidly due to the quick recovery in solar PV demand from both domestic and foreign markets. Our ASP was $9.13 per kg, a significant improvement from approximately $7.04 per kg in the second quarter. With robust market demand for mono-grade polysilicon, we expect our ASP to improve meaningfully in the fourth quarter as compared to the third quarter. In recent weeks, because of strong solar module and installation demand, we began to see solar glass capacity shortage becoming a bottleneck for the solar industry and limiting module production. We expect the shortage of solar glass 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. Solar is now becoming one of the most competitive sources of energy, even compared to traditional power generation methods. Globally, we are seeing strong momentum around the world in adopting and implementing renewable energy policies that would strongly benefit the solar end market. Last month, Mr. Xi Jinping, the President of China, announced China’s initiative to scale up the national contributions to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060. We believe favorable policies benefiting solar will be implemented during the upcoming 14th five-year-plan, driving a substantial increase in solar installations in China. In addition, a growing number of countries and regions, including the most important economies in the world have announced goals and the plans to reduce carbon emission and widely adopt renewable energies. In particular, we are starting to see the trend of utility-scale solar generation combined with power storage providing base-load energy and replacing and displacing coal power plants. We believe this is the beginning of a long-term – solar displacing traditional fossil-fuel based generation driven by both economics and renewable energy mandates. We are strongly committed to contributing our efforts as a raw material provider for mainstream solar PV modules and are fully confident we will benefit from this fast-growing market. Now I would discuss outlook and guidance for our company. The company expects to produce approximately 19,500 to 20,500 metric tons of polysilicon and selling approximately 20,500 metric tons to 21,500 metric tons of polysilicon to external clients during the fourth quarter of 2020. For the full year of 2020, the company expects to produce approximately 75,800 metric tons to 76,800 metric tons of polysilicon, inclusive of the impact of the company’s annual facility maintenance. Now I will turn the call over to our CFO, Mr. Yang, who will discuss the company’s financial performance for the third quarter of 2020.

Thank you, Longgen, and hello, everyone. Thank you for joining our call today. Now I will discuss our company’s financial performance for the third quarter of 2020. Revenues were $125.5 million, compared to $133.5 million in the second quarter of 2020 and $83.9 million in the third quarter of 2019. The sequential decrease in revenue was primarily due to lower polysilicon sales volume despite higher average selling prices. Gross profit was $45.3 million, compared to $22.7 million in the second quarter of 2020 and $18.1 million in the third quarter of 2019. Gross margin was 36%, compared to 17% in the second quarter of 2020 and 21.5% in the third quarter of 2019. The increase in gross margin was primarily due to improvement in production costs and higher ASP. Selling, general and administrative expenses were $9.2 million, compared to $10.1 million in the second quarter of 2020 and $8.2 million in the third quarter of 2019. SG&A expenses during the quarter included $4 million in non-cash share-based compensation costs related to the company’s share incentive plan. Research and development expenses were $1.7 million, compared to $2 million in the second quarter of 2020 and $1.2 million in the third quarter of 2019. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter. As a result of the foregoing, income from operations was $33.3 million, compared to $10.8 million in the second quarter of 2020 and $8.8 million in the third quarter of 2019. Operating margin was 26.6%, compared to 8.1% in the second quarter of 2020 and 10.5% in the third quarter of 2019. Interest expense was $5.4 million, compared to $6.7 million in the second quarter of 2020 and $2.6 million in the third quarter of 2019. EBITDA for the quarter was $51.6 million, compared to $26.8 million in the second quarter of 2020 and $19.7 million in the third quarter of 2019. EBITDA margin was 41.1%, compared to 20.0% in the second quarter of 2020 and 23.5% in the third quarter of 2019. Net income attributable to Daqo New Energy shareholders was $20.8 million in the third quarter of 2020, compared to $2.4 million in the second quarter of 2020 and $5 million in the third quarter of 2019. Earnings per basic ADS was $0.29 in the third quarter of 2020, compared to $0.03 in the second quarter of 2020, and $0.07 in the third quarter of 2019. Now for the company’s financial condition. As of September 30, 2020, the company had $109.8 million in cash and cash equivalents and restricted cash, compared to $115.8 million as of June 30, 2020. As of September 30, 2020, notes receivable balance was $1.9 million, compared to $8.2 million as of June 30, 2020. As of September 30, 2020, total borrowings were $271 million, of which $140 million were long-term borrowings, compared to total borrowings of $264.8 million, including $116.9 million as long-term borrowings, as of June 30, 2020. For the nine months ended September 30, 2020, net cash provided by operating activities was $71.1 million, compared to $101.6 million in the same period of 2019. And for the nine months ended September 30, 2020, net cash used in investing activities was $80.3 million, compared to $202.3 million in the same period of 2019. The net cash used in investing activities in 2020 and 2019 was primarily related to the capital expenditures on our Phase 3B and Phase 4A polysilicon projects. And for the nine months ended September 30, 2020, net cash provided by financing activities was $1.1 million, compared to $76.6 million in the same period of 2019. And that concludes our prepared remarks. We will now open the call to questions from the audience. Operator, please begin.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Gary Zhou of Credit Suisse. Please go ahead.

Thanks, management. Congratulations on the strong results. So, this is Gary from CS. So basically, I had three questions. So firstly, on your cost reduction guidance for the fourth quarter is down around 3% q-on-q. May I ask that, is it production cost or cash cost? And these are based on RMB terms or U.S. dollar terms. And secondly, I noticed that in the third quarter this year, so basically, there was, this was my calculation around 4,700 inventory tie up, if I simply calculate the difference between your production cost and the sales volume. And if we look at the fourth quarter guidance, your sales volume is around the only 1,000 ton higher than your production volume. So may I ask, if it is company strategy, you think it is reasonable to have some imagery given the potentially very strong polysilicon demand in next year? And then lastly, a quick question on the – do you expect there to sign more trend about long-term polysilicon contracts in the future plus in recently, we saw kind of some news from your peers, typically people starting to secure their polysilicon supply for the next year. So thank you.

Hello, Gary. Thank you for your question. So this is Ming, I’m the CFO. So regarding your question about the 3% cost reduction in quarter-over-quarter, so that would be all U.S. dollar cost reduction. And I think if you look at for this particularly, or particular quarter for Q4 relative to Q3. So there are actually two headwinds. So one is the U.S. dollar exchange rate, so that moves significantly during the quarter and also there’s some increase in to a certain, the multi-grade silicon costs. But even with these two increases, I think because of our increased manufacturing efficiency and especially reduction in our energy usage. So we still expect about 3% a reduction in cost on U.S. dollar terms. Okay. And then for the third quarter in terms of inventory, I think, your numbers are fairly close to our actual numbers, now on every quarter, we use about 500 to 600 metric tons of our own polysilicon for manufacturing of silicon seed rods, which then we reuse in our production of polysilicon. So that’s how we also keep our costs low. So I think that need to be factored in. So I think if we include that impact, I think for Q4 overall, we expect drawdown approximately a 1,500 to maybe north of 2,000 tons of inventory. I think that’s what we’re seeing now. I think the overall demand for mono grade poly is strong from our customers. I think there is some impact of from the glass shortage, which is impacting the overall industry utilization and the modules, volume shipments. So I think, if there’s no glass shortage, then I think there’s going to be even better demand for polysilicon. But I think overall transaction volume is very healthy for the industry currently. And I think for a long-term contract, Longgen will take this question.

Gary, I think, for your second question about inventory. I think basically we think right now, I think even downstream we’ve – capacity expansion so quickly and we see the sign continue to demand that in Q4. We’re given guidance is a little conservative because we believe we can – by that end of Q3, our inventory actually, yes, cozy you figure, maybe a lot about, more than 5,565 tons – metric tons. So basically, what I want to say is, we will sale I think more than our production and it’s possible move some capacity to next year. And for high ASP then also for star market value is evaluation. Secondly, for long term contracts, so far we have long-term contracts with three clients, and one is LONGi, one is Shangji and one is Jinko and all sorry we collect the deposits from 3.5% to 6%. So I think it will continue to sign one or two long-term contracts and it cover three years, I think supply. We know that a lot of clients right now want to sign a long-term contract with us, especially because from now on to end of next year, no more additional adding capacity is on. But the demand is continuing to increase. So basically, we have two conditions is, one is if you want to sign a long-term contract – at least three years and the quantity maybe starting lower in next year then higher, maybe 2023 or 2022, definitely, is we have to collect a lease right now, I think a 4% deposits from long-term contracts. Otherwise, we will not to sign those contracts because we want to lock the quantity. So we have to quantity. So we have to collect deposits. So yes, I’m answering your question, Gary?

Yes. Thank you very much, management. So maybe if I may, just very quickly follow-up on the first question. So if I calculated the exchange rate, I think that in fourth quarter, the R&D may appreciate versus U.S. dollar by roughly around 3% to 4%. So is it fair to say that in RMB terms, we are expecting around almost 7% Q-on-Q cost reduction in first quarter? And so – and what is our kind of expectation for our further cost reduction into next year? Thank you.

I think, Gary, if you look at our Q3, basically right now, because renminbi continued to appreciation. So our – I think cash cost is $4.88 compared to Q2, I think, is $4.87, $0.01, adding. So for dollar, yes, it’s go up. But for the renminbi actually, our cash cost is RMB33.75 per kg compared Q2 is RMB34.53 per kg. The production cost, cost of goods sold I think RMB40.3 per kg compared Q2 RMB41.04 per kg. So basically, yes, what I want to say is 3% continue to go down, maybe combined with our renminbi, I think costs continue to go down, then with maybe possible foreign exchange, I think renminbi appreciation. Ming, do you have any…

Yes, Gary, you’re right. So I think for Q4, if you look at our expectation is that – in terms of – in RMB terms, we expect roughly a 7% reduction in costs. That’s correct.

Okay, thank you very much. That’s all my questions. Thank you for taking those.

The next question comes from Alan Han of JPMorgan. Please go ahead.

This is Alan from JPMorgan. I have like two minor questions on the ASP side of things. Because like on the third quarter of this year, your average like ASP selling price was around like U.S. $9.13 per kilogram, but that’s slightly lower than what we have been seeing on the spot market. So I’d like to understand why? And small follow-up question on this one is, what’s the price outlook for price to be realized for Daqo in the fourth quarter? And I guess like also along the prices, like what is the pricing outlook for 2021? And that’s my questions.

Okay. I think basically, maybe Ming can continue adding up. If you look at our Q3 ASP actually is $9.13 per kg of which, I think, because the mono-grade, I think we’re selling is 13,278 tons. So it’s account 97%. It’s $9.23 then rest of them is, I think 3% is the – around 360 metric tons, I think is the selling price is around like $0.60. So basically, if you compare – the reason is because this is ASP, okay? If you look at the renminbi cost, the selling price is $71.42. The reason why, because in Q3, if you look at July and August, your selling price is not immediately come back, match the industry guidance. The real is because most July and August, you already signed the contract before. You deliver on those months. So actually, Q3 you enjoy the high price maybe only in September, and the partial is August. So that’s why in Q4, OFC will dramatically increase higher than Q3. Meantime, the cost will then continue down 3%. So the gross margin in Q4, you can imagine, I think, at least around 10% improved.

Alan, thanks for your question. So because of our order contracting, so to the time from when we signed the orders and to, when the product is shipped and then delivered to the customer recognize as revenue. So there could be two to three weeks lag. So for example, most of our revenue that was recognized. For the month of July, actually, these contracts or pricing were determined around the end of June when pricing was still fairly low. Yes. So really, the price normalization really happened for the month of August and for the month of September. But when you average out the prices, then it is a little bit lower than what the industry market – spot market pricing is. So there is that lag. I think by Q4, this will have normalized.

I got you. And the last follow-up is on the pricing outlook in 2021?

Okay. Basically, right now, just like you mentioned, we only – in mono-grade silicon right now, we just – I think the highest price is a small partial of what you call reimport the price, the highest, okay? Basically, right now, I think it’s around – the industry guidance right now is around RMB85 to RMB86, and we believe because of the shortage of glass, the module right now, production is limited. So we believe, okay, by the end of this month, this quarter, maybe the selling price mono-grade is around like RMB84 to RMB86, the range, even RMB82 to RMB86 – all is RMB. So, for the next year, we believe, okay, in Q1, maybe even China is maybe – Chinese New Year, but we think the – out of China, the market is coming back. So we still believe, I think Q1 the selling price around RMB82 to RMB85 and even higher. But in the second quarter, because the – I think the glass increased, I think, maybe 40% the capacity. So it’s no way to limit the market for the demand for the module. And we believe the price – silicon – because silicon supply is limited – is there – stable. I think the demand is continuing to increase as the wafer capacity continue to increase as the wafer capacity continue to increase. And we believe in the second quarter, third quarter, the silicon price was above RMB90, even about RMB100. So basically for 2021, we believe the ASP were between RMB90 to RMB100 per kg, renminbi.

Got it. I guess like on the technology front, I guess, just get one more last follow-up questions on the technology front. Like some of your competitors talking about like FBR technology. Just want to get your sense on the threat of FBR technology?

I think FBR, I think only one of the companies in China right now, I think, still stick on that, it’s the MEMC technology. Basically, I think FBR, due to the quality still contains the high percentage of high sodium and carbon. So determine the products still lower quality is classified as the multi-silicon. So the selling price is also lower. And we don’t believe – I think maybe it’s supplementary to high-quality polysilicon made with modified Siemens process. I don’t think they were maybe supplemental 5% in the future. But right now, because the cash cost is still high, around the RMB47, RMB50 and – but selling price lower. Secondly is we believe, I think one of the company right now is, I think, take advantage of the local subsidized continue to expansion their capacity. But it’s no way from cost-effective FBR will replace, I think, Siemens Masters the polysilicon.

Got it. And I guess I will pass from here and thank you very much for your answer.

Thank you.

Great, thank you, Alan.

The next question comes from Philip Shen of ROTH Capital Partners. Please go ahead.

Hi, guys. Thank you for taking my questions. The first one is on the outlook for 2021 volume? I know you’re not providing official guidance, but the run rate you’re looking at or we’re looking at for Q4 is about 20,000 metric tons per quarter, factoring out maybe two weeks of maintenance. Do you think you can get to 80,000 as a baseline for next year? Or do you think there’s possibly some upside to that?

Basically, it’s not the timing for us to give guidance for, I think, 2021, we will have given guidance in next, I think, earnings call. And – but you, I think your projection is correct because basically, we were not adding more capacity to underline, but will continue to improve. And I think the ties the manufacturing system, we reach that figure you mentioned. So, yes.

Okay. Thank you, Longgen. As it relates to capacity expansion, I can imagine the China listing is important for that. And just want to check in on how you’re thinking about capacity expansion with pricing, as you mentioned, possibly in that RMB90 to RMB100 per kilogram what do you think the timing could be on a decision and for capacity expansion? And remind us what that next amount of capacity could be?

Thank you, Philip. I think it’s good question. I think, first of all, I think we are actually making efforts try to speed up - accelerate our processing of listing in STAR Market. I think so far, I think we can – we cannot – given the timing table, but we believe we can listing in STAR Market before the end of Q1 2020, that I think IPO proceeds will give us the opportunity to continue to expansion 4B in Shihezi. So the 4B, I think, 40,000 metric tons, we believe because we’re already starting our design and the main key equipment, I think, contracts and the bidding system. So we are planning, I think, maybe starting trial production before the end of next year. And definitely, we were, I think, starting, I think, full capacity running the 4B in Q1 2022. So I think in 2022, that we’re adding more, I think, the capacity given as the output to meet the market. Considering right now, I think downstream, especially the wafer capacity expansion, as you see that. By the end of this year, China may be around 160 gigawatts single-wafer capacity. By the end of next year is around more than 300, I think, gigawatt capacity. That mean needed single silicon around 100 metric tons but so far, didn’t have too much real player. Our competitor to declare, I think, capacity expansion. On the silicon side, the only is Tongwei so two plants, I think, 80,000 tons. Then we are, I think, in the STAR Market proceeding, we also declared we will use the proceeds to invest in 4B expansion, that’s 40,000 tons. Then plus Asian Silicon also declare is around maybe 30,000 tons. So basically, next year is no more silicon capacity is adding. So for the year 2022, only around 150,000 tons capacity adding up, but the demand side is very hard. So that’s why we’re thinking if the market continue to drive compound, maybe 30 to 40 growth by the end of the product model installation we believe even year 2022, silicon price can continue – still it can keep a little higher price level.

Great, thank you for that detailed answer. I wanted to just ask about a comment you made on metallurgical grade silicon. I think Ming may have made that comment. That it’s a little bit higher now. Can you talk about why it’s higher? How much higher it is versus maybe a quarter ago? And then what is the trajectory ahead? And do you expect some relief? Or do you think that there should be – there might be tightness in that raw material as well for some time ahead? Thanks.

Yes.

Okay, Phil. So a couple of factors are impacting the metallurgical grade silicon pricing. So one is supply and demand. I think because now we’re pretty much in overall economic recovery, particularly for China. And so demand for example for silicones is improving. And for other products that use metallurgical grade silicon is also improving as well. So overall, demand is rising. And then in terms of supply because winter is usually the season where the production is a little bit seasonal. So we are seeing some increase in the price. Right now, it’s roughly 5% to 7% higher than the previous quarter. Q-over-Q increase, but I think we can absorb that into our cost, and we’re still forecasting a cost reduction for next quarter because of improved manufacturing efficiencies.

Right. Thanks, Ming. So do you expect this to be relieved starting in Q2, the pressure there from metallurgical grade silicon? Or do you think it’s – like Q1 is still winter for most of it. So if it’s seasonal, I’m guessing it’s due to lower water levels as a result of needing hydro for the production? Yes, go ahead, sorry.

Yes. That’s absolutely right, yes. So we think probably Q1 will maintain the current level of costs in Q4 and then price would come down in Q2.

Okay, okay, good. Okay, I think that’s it for me. I’ll pass it on. Thanks.

Great, thank you.

Thank you, Phil.

The next question comes from Tony Fei with BOCI Research. Please go ahead.

Hi management, this is Tony Fei from BOCI. I have three questions. First question, regarding your long-term contract. So we know that your long-term plans are typically only lock in the volume, not the price and in the last of September, we do notice that you can agree on the pricing with one of your wafer customer. So are there any financial consequence of these kind of delayed agreement? And do you think it will happen again in the future? This is the first question. And second is on the product mix. So this year, we noticed some of the sale manufacturers, they announced new plans to ramp up the HJT capacity in 2021. So when that comes true, there will be new demand for the N-type polysilicon. So I’m just wondering if you can give an update on your certification process for the N-type polysilicon with the wafer manufacturers? And third is a housekeeping question. As you have paid down some of your debt in the third quarter. So will you continue to do that given your strong operating cash flow? Thank you.

Okay. First of all, for your first question about long-term contracts, most long-term contracts right now, today, in China is not – the price is not locked only the quantity. Even our competitors, even not collect, I think, deposits, lower deposits. But to us, I think you can see, we already signed three long-term contracts. We collected deposits from 3% – to 3.5% to 6%. The reason why we continue to stick on that because we think with certain – a little higher percentage of deposits can guarantee the quantity a contract can be stick on that can deliverable. So that’s, I think, our purpose even though I think one of our long-term contracts, you see in the history in this year and some months maybe delay and sign contracts they still, I think, come back, for example, one of our clients didn’t sign in September. So that’s why our inventory jumped up. And but there’s still, I think, come back book additional one month in fourth quarter. So basically, I think it’s a long-term relationship. And yes, from contract side, we have the right to – if in a book, take the contract, the quantity of silicon, we can forfeit the deposits. But all these clients is long-term. We’ll not do that. So basically, I think for us, I think if we collect enough deposits, we think we can still stick on the contracts. And the contracts, I think, basically, the price is determined by, I think, the industry guidance. And then the sign each month, even right now, two weeks, we signed maybe signed contracts with clients. Second question about the HJT. HJT, I think, is the – I think the cell production for N-type cell. Basically, right now, the import HJT equipment it’s almost 4 times cost than the PERC technology. So it’s not cost effective. So basically, right now, China today, everyone right now tried to domestic manufacturing N-type or you call HJT cell production. For example, I think one of our clients – I’m not mentioning this in U.S., they call HBT. So the HBT, they also still produce N-type cell. But I think the efficiency maybe only increased 0.5 point or 0.7% is not to compare with HJT increase almost 1.5% to 2%. So HBT right now, I think they cost like 1.5 times the cost of, I think, PERC. So that’s why right now is workable. But they not specifically by N-type silicon from us, they just – because we supply all P-type. They just select from our raw material to some N-type to manufacturing right now, 800 megawatts, I think, the HBT N-type cell. But for the future, yes, definitely, I think if HJT, the equipment can domestic manufacture the cost to continue to go down the cost-effective is sure, then N-type silicon will be – demand will be more. Today, actually, our silicon production, I think, of which almost 30% to 40% is N-type. But we cannot selling N-type in separator. Only one client, SunPower. I think definitely one of the Chinese company right now, I think every month, two ships – two cartons. I think, N-type. So today, N-type, the ASP compare the P-type, only RMB2 per kg difference. So in the future, hopefully, I think as the HJT equipments continue to, I think, installed and adding. So N-type silicon will continue to demand – increase then the price differentiate between N-type and P-type silicon were different. We can become large. For the third question about the debt, I think so far, I think if you look at our EBITDA, I think for the third quarter, even for the fourth quarter, which dramatically increased. So basically from November, our target is to continue to improve our leverage, reduce our leverage ratio. I think, to pay off some 4B, I think, expansion payments then also to reduce the banking loans. And basically, I think as I mentioned, the STAR Market value, I think, today in China, valuation is higher than the U.S. market basically, and we are making efforts to listing in STAR Market. We believe, I think we can raise enough money to expansion 4B, even more money to expansion for another new 40,000 tons, I think, facilities in somewhere we’re looking outside of Xinjiang. So Tony, does that answer your question?

Yes, thank you for the color. Appreciate it.

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.

Yes. Thank you, everyone, again, for participating in today’s conference call. 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.