Daqo New Energy Corp. (DQ) Q4 2021 Earnings Report, Transcript and Summary

Good day, and welcome to the Daqo New Energy Fourth Quarter and Fiscal Year 2021 Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kevin He, Investor Relations. 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 fourth quarter and fiscal year of 2021, which can be found on our website at www.dqsolar.com. To facilitate today's conference call, we also have 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 quarter and the year. 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 views 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 conference 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.

Thank you, Kevin. Hello, everyone. Thank you for joining our conference call today. We had an excellent year with great operational and financial performance. We produced 86,587 metric tons of polysilicon in 2021, exceeding our guidance of 83,000 to 85,000 metric tons and 12% higher than 77,288 metric tons produced in 2020. In 2021, approximately 99% of our production with smaller grade polysilicon, reached the highest pricing in the market and was the product most sought out by wafer customers. The year 2021 saw strong global policies supporting carbon neautrality and the decarbonization of the energy sector that led to strong demand for solar energy products and resulted in high polysilicon prices. We delivered a strong financial performance for the full year with a gross margin of 65% and net income attributable to our shareholders of USD 756 million, representing a 485.3% increase compared to 2020. Daqo New Energy also achieved 2 additional major milestones in 2021. We successfully listed our subsidiary, Xinjiang Daqo on the Shanghai Stock Exchange in China in July 2021, which will significantly amplify our future growth with access to a robust capital market in China. We also successfully completed the construction of our Phase 4B project and started the pilot production in December 2021 with better-than-anticipated results. As such, we believe that we will continue to be one of the world's best operators in the polysilicon industry and a market leader in many aspects, including production throughput, production, quality, profit margin, cost structure, capital structure and balance sheet. In the fourth quarter of 2021, we produced 23,616 metric tons of polysilicon, including 1,111 metric tons from our newly built Phase 4B facility, and we sold 11,642 metric tons. End of the year, seasonality impact, combined with downstream inventory adjustments, led to a temporary reduction in demand when our customers in the wafer sector reduced their own raw material and product inventory levels and temporarily lowered the utilization rate. After extensive analysis of long-term supply and demand dynamics, we believe that the lower utilization level in the wafer sector was due to seasonality impact and temporary in nature. Therefore, we expect conditions to resume to normal once the solar value chain achieves a new balance when the market demand bounces back. In January 2022, the solar market did see a strong pickup in end market orders and wafer sector utilization and demand quickly resumed to normal levels. As a result, polysilicon ASPs started to recover meaningfully. Our inventory also quickly returned to a normal level by the end of January. In the fourth quarter, our production cost was $14.11 per kg. The increase in production cost as compared to the third quarter, was primarily due to the increase in the cost of raw material of silicon powder. The average procurement cost of silicon powder increased from $2.50 per kilogram in the third quarter to $8.68 per kg in the fourth quarter. Start-up costs related to our new Phase 4b facility also had a temporary impact on our costs in the fourth quarter. Despite the strong increase in raw material costs during the fourth quarter, most of these costs increase was paired to our downstream customers. As ASPs for the fourth quarter increased to $33.91 per kg compared to $27.55 per kg in the third quarter, moreover, the price of silicon powder started to decline quickly in January 2022. And the current market price of silicon powder is approximately $3.50 to $3.60 per kg. We expect our production cost to decrease meaningfully in the first quarter of 2022, as a result of lower silicon powder prices and better operational efficiency in our Phase 4B facility. In terms of our new Phase 4B facility, we completed the project ahead of schedule despite significant difficulties and challenges resulting from the resurgence of COVID-19. We commenced the construction of Phase 4B in 2021 and harvested in the first batch of polysilicon from the brand new CVD furnaces in early December 2021. Within the same year, this has been a new milestone in our company's history in terms of building new capacity and have also set a new benchmark for the industry. We've produced approximately 1,411 metric tons and 2,825 metric tons of polysilicon from our Phase 4B facility in December 2021 and January 2022, respectively. We expect to reach more optimized output in February and March 2022 and to produce approximately 9,500 metric tons from our Phase 4B facility in the first quarter of 2022. Polysilicon production from this new facility has already been delivered to our mono wafer customers and met their quality standards. Our Inner Mongolia polysilicon product projects consisting of a 100,000 metric ton polysilicon for the solar industry and 1,000 metric tons polysilicon for the semiconductor industry are expected to commence in March 2022 and to be completed by the end of the second quarter of next year. We have already obtained the energy consumption approval, and plan to partially use renewable energy to power these projects in the future. We also plan to expand the silicon powder production in Inner Mongolia in the future, which will allow us to further enhance our cost structure and improve our supply chain stability. Global solar PV installations were approximately 160 gigawatts in 2021, representing a 23% increase compared to approximately 130 gigawatts in 2020. The 2021 global PV market size was limited by availability of polysilicon. In addition, solar module pricing increased by more than 20% during 2021. The increases both in volume and price in 2021 demonstrated a very strong market demand, as solar broadly achieved grid parity in major power markets around the world and the development and the use of renewable energy has become a global consensus to meet the urgency of global climate challenges. We believe the strong momentum in the solar PV industry will continue to provide a huge market with a significant growth potential in the future. In the solar PV industry, polysilicon production has the highest entry barrier, requiring substantial capital, complex and difficult to manage process and equipment, stringent product quality requirements and long lead times. We are confident that our advantages and competitive positioning with first-class quality and competitive cost structure will enable us to continue increase our market share and enhance our global leadership in the polysilicon industry. For the outlook and guidance for the coming -- for this quarter, Q1 2020, the company expects to produce approximately 31,000 metric tons to 32,000 metric tons of polysilicon during the first quarter of 2022. The year expects to produce approximately 120,000 metric tons to 125,000 metric tons of polysilicon for the full year of this year, inclusive of the impact of the company's annual facility maintenance. Now I would like to turn to -- the call to our CFO, Mr. Ming, please.

Thank you, Longgen, and good day, everyone. Thank you for joining our earnings conference call today. Now I will discuss our financial performance for the fourth quarter and fiscal year of 2021. We will begin with a review of our fourth quarter 2021 results. Revenues were $395.5 million compared to $585.8 million in the third quarter of 2021 and $247.7 million in the fourth quarter of 2020. As Longgen discussed earlier, the decrease in revenue as compared to the third quarter of 2021 was primarily due to lower polysilicon sales volume as a result of year-end market seasonality impacts combined with downstream inventory adjustments. With strong downstream demand and customer orders since the beginning of this year, our inventory level has returned to normal by the end of January. Gross profit was $239.8 million compared to $435.2 million in the third quarter of 2021 and 109.5 million in the fourth quarter of 2020. Gross margin was 60.6% compared to 74.3% in the third quarter of 2021 and 44.2% in the fourth quarter of 2020. The decrease in gross profit as compared to the third quarter of 2021 was primarily due to lower sales volume. The decrease in gross margin compared to the third quarter of 2021 was partly due to the impact of higher cost of raw materials. As Longgen indicated earlier, silicon powder cost has declined in Q1 2020 as compared to Q4 2021, and we expect our polysilicon production costs to decline as a result. Selling, general and administrative expenses were 10.2 million compared to $11.4 million in the third quarter of 2021 and $11.2 million in the fourth quarter of 2020. SG&A expenses during the quarter included 2 million in noncash share-based compensation costs related to the company's sharing incentive plan. R&D expenses were $1.3 million compared to $1.9 million in the third quarter of 2021 and $1.5 million in the fourth quarter of 2020. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter. R&D projects for the quarter include technology development related to impurity removal and manufacturing efficiency gains. As a result of the foregoing, income from operations was $228 million, compared to $421.7 million in the third quarter of 2021 and $98 million in the fourth quarter of 2020. Operating margin was 57.7% compared to 72% in the third quarter of 2021 and 39.6% in the fourth quarter of 2020. Net interest expense was $2 million compared to $4.5 million in the third quarter of 2021 and $8.1 million in the fourth quarter of 2020. The decrease was primarily due to lower balance of bank loans. EBITDA was $251.1 million compared to $441.8 million in the third quarter of 2021 and $115.1 million in the fourth quarter of 2020. EBITDA margin was 63.5% compared to 75.4% in the third quarter of 2021 and 46.5% in the fourth quarter of 2020. Net income attributable to Daqo New Energy shareholders was $148.6 million compared to $292.3 million in the third quarter of 2021 and $72.8 million in the fourth quarter of 2020. Earnings per basic ADS was $2 compared to $3.95 in the third quarter of 2021 and of $1.01 in the fourth quarter of 2020. Now on to our full year 2021 results. Revenue for the year was $1.68 billion compared to $675.6 million in 2020. The increase was primarily due to higher polysilicon average selling prices and higher sales volumes. Gross profit was $1.1 billion, compared to $234 million in 2020. Gross margin was 65% compared to 34.6% in 2020. The increase was primarily due to higher polysilicon sales price. SG&A expenses were $39.9 million compared to $39.5 million in 2020. R&D expense was $6.5 million compared to $6.9 million in 2020. Income from operations for the year was 1.05 billion compared to $188 million in 2020. Operating margin was 62.6% compared to 27.8% in 2020. Net interest expense was $20.5 million compared to $25.7 million in 2020. The decrease was primarily due to lower bank loan balance. Income tax expense was $162.8 million compared to $28.2 million in 2020. Net income attributable to Daqo New Energy shareholders for the year was $756 million compared to $129 million in 2020. Earnings per basic ADS was $10.24 compared to $1.82 in 2020. Adjusted net income attributable to Daqo New Energy shareholders was $766.3 million compared to $147.1 million in 2020. Adjusted earnings per basic ADS was $10.37 compared to $2.07 in 2020. Now on the company's financial condition. As of December 31, 2021, the company had $724 million in cash and cash equivalents and compared to $661 million as of September 30, 2021and $118.4 million as of December 31, 2020. And as of December 31, 2021, the bank notes receivable balance was $366 million compared with $353 million as of September 30, 2021 and $0.2 million as of December 31, 2020. Our inventory balance at the end of the year was $327.7 million. This compares to inventory balance of $46.2 million at the end of the third quarter. The increased inventory balance was due to higher polysilicon finished goods inventory as a result of lower sales volume in Q4 as well as higher raw material prices related to silicon powder price increase and raw material and work in process inventory related to the start-up of our new Phase 4B facility. As of December 31, 2021, we have no bank borrowings and all of our bank borrowings have been repaid during the year of 2021. This compares to total bank borrowings of $193.7 million as of December 31, 2020. And now on to the company's cash flows. For the 12 months ended December 31, 2021, net cash provided by operating activities was $639.1 million compared to $209.7 million in the same period of 2020. The increase was primarily due to higher revenues and higher gross margins. The 12 months ended December 31, 2021 net cash used in investing activities was $782 million compared to $118.5 million in the same period of 2020. The net cash used in investing activities in 2021 and 2020 was primarily related to the capital expenditures on the company's Phase 4B and Phase 4A projects. Total capital expenditures for the year 2021 was approximately $508 million. For the 12 months ended December 31, 2021, net cash provided by financing activities was $736.2 million compared to net cash used in financing activities of $95.5 million in the same period of 2020. The net cash provided by financing activities in 2021 was primarily related to the net proceeds of $935 million contributed by Xinjiang Daqo's IPO in China. And that concludes our prepared remarks. Operator, we will now open the call for questions from the audience.

[Operator Instructions] Our first question today comes from Philip Shen with Roth Capital Partners.

Just a quick one on the guidance for Q1. Given your expectation that inventory has returned to normal at the end of January, I think you guide to 31,000 metric tons in Q1. Does that suggest sales of maybe more than 40,000 metric tons in Q1 '22?

Philip, I think, basically, today, I think our production volume is high. See, each quarter, first quarter guidance is 31,000 metric tons. If you look at our end of December, I think our inventory is around 13,500 metric tons. So end together, you see I think good for sale, I think almost 43,000 metric tons, 44. So basically, we should have like 5 days in our merchandise – in shipments. So yes, I think it should be around 40,000 tonnes.

As it relates to the Inner Mongolia facility, I was wondering if you could provide a little bit more details on the total CapEx expected, but also a breakdown between the CapEx for the polysilicon for solar and then silicon for semiconductors and then silicon metal capacity. Is it possible to break that down? And then also can you talk about, for the polysilicon production for solar, how does that cost structure -- how do you think that cost structure will compare with your existing Xinjiang cost structure?

Okay, I think, first of all, I think we already announced, I think, total investments, I think, CNY 32.5 billion. I think for Xinjiang, the whole year and next 3 to 5 year strategic investments. Basically, I think in our wafer in Mongolia to total single project for the solar silicon is 200,000 tones, for the semiconductor it's 21,000 tonnes . For the silicon metal, I think it's 300,000 tonnes and then I think silicon, right, is around 200,000 tonnes. But we definitely, I think, put a priority at this moment, because we are in offering, I think, follow-on offering in Asia, as you see that. I think the total is CNY 11 billion. That is used to, I think, clearly, I think first project, we will do it 100,000 tonnes polysilicon projects, plus 1,000 tonnes semiconductor polysilicon. I think for the 100,000 tonnes solar polysilicon projects, total investments around -- CapEx around the I think 8 billion. Then we raised, I think, 11 billion. 3 billion is for the working capital. For the 1,000 metric tons of semiconductor polysilicon project, we already raised the money for our IPO. That's, I think, CNY 500 million. So for that, I think we -- I think we have enough cash to cover those 2 projects. For the next step, what we'll do is, I think, in the processing, is 200,000 tonnes metric I think in silicon metal. I think that's the next -- I think, priority. Then for the further more, I think when we're going to do the next 100,000 tonnes polysilicon for the solar and also 220,000 metric tons for semiconductor is dependent on the market and also the capital condition. But anyway, I think today, if you look at our balance sheet, and we -- I think by the end of December, we are sitting there almost around CNY 9 billion sitting in the balance sheet without any banking loans, and also without any accounts receivables. So basically, I think this year, definitely is a good year. We see the price right now is very strong and for the Q1 and the cash flows is can -- I think, projectable. So if can -- our follow-on offering can be successful or without follow-on offering, the money proceeds, we still can I think implement it, I think, or execute the Mongolia that the 100 metric tons polysilicon for the solar projects. Do you have any comments?

Can you also talk about the cost structure expected for the Inner Mongolia, 100,000 metric ton polysilicon facility for solar, and how it compares to Xinjiang. What is your expected cost structure -- production cost structure.

The cost structure should be, I think, compared our -- I think, Xinjiang definitely will be by 3% to 4%, I think down. The reason is scalability. I Think, 100,000 tonnes by the 2 production lines. And because Xinjiang right now, our output, I think we've already given you this year, is around 120,000 tonnes to 125,000 tonnes, but they are composed, I think, of a 6 production line. So I think definitely, for the efficiency, I think for the conversion rate, I think from silicon powder to silicon, all will improve. Definitely. I think, for example, per kg polysilicon produced will consume electricity, I think it should reduce to total around 52 KWH, compared right now, in January, I think we're around 60 KWH. So all this, I think, definitely will be, I think, will significantly improve. But most important, I think the quality of -- the products will produce -- the quality for the Inner Mongolia project will be better than Xinjiang projects. For example, Mongolia projects, we can produce more than 80% to 90% N-type polysilicon. But for the -- I think Xinjiang project right now, if we didn't do any, I think, technology improvement, we can maybe can do is around 70% to 80%. So the quality is most that we focus for the future, especially I think the next evolution for the sale from P to N. So that demand and challenge we have to meet.

In terms of the outlook for pricing, there's a lot of announcements of capacity expansion and with that capacity expansion and extra supply, one would think that pricing would be coming down later this year. But I was wondering if you could talk through your latest outlook for how polysilicon pricing evolves as we get through the year, and how much production you expect from these new facilities?

I think the polysilicon price is determined by both, I think, supply and demand, the quality and the quantity. I think from the quantity, I think today, polysilicon, you need to compare the aiming market. For example, how much we're going to implement in-store PV, I think, the module. And for the -- also, you have to compare the wafer capacity right now, expansion in China is very so quickly. So the demand also is hot. But anyway, if you look at last year, China produced, I think, 42 -- 420,000 tonnes polysilicon, solar polysilicon plus the import around more than, I think, around like 120,000 tonnes. So together, it's around 540,000 tonnes. So if you look at compare you see that can support, I think, the end market around 160 to 165 gigawatts. But finally, I think because you have to look in all those wafers, the furnaces have to be running. So that's what exactly happened in December, a lot of wafer producers reduced the capacity, okay? They're almost selling their silicon in the furnaces, you see. So for example, the [indiscernible], reduced their wafer capacity utility rate even to 12%, 15%, 20%. So that's why I think we have inventory December delay because we don't want to selling cheaper. So basically, we sell, I think January. We sold a same contract, I think, around 16,000 tonnes. In the January -- February, we sold, I think, 13,300 tonnes. So I think the inventory is back to normal. So this year, I think if you look at how much -- recall how much supply is available, we say you see the usable supply. We think it maybe will increase around 250,000 tonnes, of which I think Daqo will provide, I think, around to 45,000 tonnes. And Tongwei will provide maybe 80,000 tonnes. Then Asian polysilicon, I think maybe it will provide, I think, 20,000 to 30,000 tonnes, then the rest of them come from improvement -- technology improvements from, I think, [Indiscernible] also the New Horizon. So we estimated this year total adding supply -- the supply side, the quantity may be around 250,000 tonnes plus last year. So total is 750,000 to 800,000 tonnes that will support the end market maybe around 220 to 230. So we don't see -- we do not see the price were dramatically down because we see right now the selling price -- I think our ASP is around $32 to $33 per kg right now. And we think second half of the year, we'll continue. We're above, I think, around like 28 to 30. So the tricky is maybe next year. The next year because a lot of new coming. But I don't think that the new coming will immediately come out good quality product supplier, especially, I think a lot of the rushing guys -- just like a certain example like New Horizon, taking 4 years to produce the polysilicon. But the quality, for example, the electronic grade quality, still what we call P-grade still below, I think, 75%. So basically, all is quality. Then considering right now, the sale technology from P to M, that demand high quality of polysilicon. So that means even today, some supply, the quality maybe is not demanded they're not a useful supplier. So basically, I think it all depends next year. Whether the P to M is dramatically will transfer. Second is those newcomers will produce the high-quality products. So we are ready. But I think at Daqo what we focus is, first of all, we will, I think, continue to import the money to the silicon metal because silicon metal, if we can produce, can stable our supply, reduce our cost and guarantee our quality, that's one. Second is we will focus to make efforts in working on the semiconductor segments, polysilicon. We think some revenue will come from semiconductor silicon, at least to replace import in the year '24. So that's our -- I think in the next 2 to 3-year strategy. We are upstream integrated than horizontally expanding our products from solar polysilicon to semiconductor to silicon.

The next question comes from Gary Zhou with Credit Suisse.

Firstly, congratulations on the strong results. So I have 2 questions. So firstly, I would like to ask -- to understand, our A share have a dividend policy to pay no less than 30% of the profits. So just wondering commitment to provide us kind of a time line when the U.S. ADR may receive such dividends in cash, and what is our plan to how to use that cash. And the second quick question on the so – can you provide us any cost estimate for first quarter this year? Thank you.

Hello, Gary, this is Ming Yang, I'm the CFO. So regarding your first question on the A share subsidiary dividend policy, okay, so our subsidiaries in Daqo has provided a commitment letter to its shareholders in China. And it's committed to pay cash dividend on the 3-year period from 2021 to 2023 of no less than 30% of the average annual net profit in this 3-year period. So you can say that it's committed to pay at the minimum of 10% of the year's net profit. Okay? And so -- and as the shareholder of Xinjiang Daqo, so we are considering to propose a plan with higher than -- in that percentage of dividend for this year. However, we also need to consider the CapEx requirements and the related uncertainty of Daqo's product offering in China. So we would need to balance between long-term and short-term shareholders' interest. However, I would say that the dividend plan of Xinjiang Daqo in 2021 will need to be approved by the Board of Directors and the shareholders' meeting of Xinjiang Daqo. And so the actual amount will be announced by then, and we expect that to be around mid-March of this year. And then on your second question of cost estimates, so let me give you a little bit more color. So I think as you see, our cost of goods sold for Q4 was USD 14.11. This translates to roughly RMB 90 per kilogram in cost, and this is really due to the significant higher cost of silicon powder. And so I would say, since January of this year, silicon powder cost has declined to roughly $3.50 per kilogram or roughly RMB 25 or so -- per kilogram in RMB. So I would say, overall, for Q1 without higher cost inventory impact, so costs would be somewhere in the range of RMB 50 to RMB 55 per kilogram or I would say, roughly $8 to $8.50 per kilogram. But because we do have the higher cost inventory at the end of the year, so I would say cost will be somewhere within that range. So between 8 to 14, so somewhere in the middle, maybe $10 to $11, something like that for Q1 and then reverting to the lower end of roughly $8 to $8.50 in Q2.

Just a very quick follow-up on the first question, so am I right that -- so basically for the U.S. ADR, the earliest time that we may pay dividends is for the FY '22 results. And secondly, before that, it is possible that at the U.S. ADR level, we may consider to use the dividend you see from Asia to some share buybacks at the U.S. level.

I think basically, it's all Asia. It's Asian regulations. I think we were determining the dividends I think by the annual meeting, I think a board meeting, maybe this June. Usually, the dividends will declare, I think, release maybe in June, July. So basically, then also considering that Daqo is a major holder, so we need to exchange the Renminbi profit to foreign exchange. So it takes some time. Basically, what we need to do is either we continue to just release the dividend to the U.S. shareholders or we just buy back. So far, we're not making these things so far, okay? We will let you know.

The next question comes from Alan Lau with Jefferies.

Congratulations to management on the good results. And most of the questions was answered, I have a couple of minor questions. First of all, I would like to know in terms of lost profit in the first quarter, given that the cost is coming down and while the policy income price stays strong. Do you would expect the unit cost of it to stay similar or even better compared to Q4 last year?

He's talking about costs, right? You're talking about costs, right? The unit cost, right?

Unit gross profit.

Profit -- let me answer this question for you, okay. So obviously, if you look at where ASP is right now, as Longgen indicated, I think somewhere in the $32 to $33 range, while we believe that the cost based on current trends is probably around $10 to $11. So we're looking at more than $20 per kilogram in terms of contribution per kg, right. So I think this is probably one of the best or better periods for the company. And definitely, we think it's better than our Q4 level.

And considering the sales volume is high as well. I would like to check on the Asia issuance progress, because given the amount is relatively huge, we are talking about RMB 11 billion. I would like to know, is there any interest received so far? Like, any cornerstone investor or any like major funds showing interest on this front?

I think as a follow-on offering right now, I think just I think, accepted by Shanghai Stock Exchange, still in the preselling of, I think auditing, we call it checking the materials. I think the follow-on offering procedures will be simple than the IPO. Basically, just inside Shanghai Stock Exchange, inside and check all the data and question, I think it is time or 2 times than they have a conclusion, then we just go to the China FCC for the registration. So the timing, I think, maybe we'll finish, I think, by the middle of July. And talking about potential investments, I think we already did some road show. I think so far, I think we sent our road show to 400, I think, quality institutional investors right now. So far, almost, I think, around 200 institutions very interesting and including some big name and also some severing funds. Yes, we are working on some. I think we’ll let know. I think some corner investments, investors may be taking, I think, a bigger chunk, maybe around $2 billion, $3 billion. So the rest of them, I think other investors have. Because the total, I think, of qualified investors should be limited by lower than 35, I think, investors. So we're working on that. We will let you now.

The next question comes from Colin Yang with Daiwa Securities.

This is Colin from Daiwa. My first question is regarding the demand supply dynamics. As you may know, the polysilicon demand supply has been remained largely balanced after 2100 and Daqo silicon powder also in the -- commenced operation in the last quarter, last year. And we do not see any new capacities coming out during the first 3 quarters this year. So my question is which quarter do you think we would see the most imbalanced demand and supply of polysilicon? And my second question is regarding the N-type and the P-type polysilicon, what is the cost difference in terms of N-type and the P-type polysilicon and is there any difference between the conversion ratios for the polysilicon conversion to 1 gigawatt of mono wafer?

I think it's a good question. I think for the first question, I think when is the -- I think the price, I think the new supply come in? I don't have a crystal ball, okay, I'm not a fortune teller. But at least we can say because the polysilicon produce, it takes a long time from design to equipment procurements. For the -- you see I think for a long time -- for the particular time, even let's say, like Tongwei today, I think they're still climbing, I think ramping their production I think – in production , you know that. It takes time, at least, I think, 18 months. So I don't believe I think the newcomer will supply the good quality products starting, I think, the production running by, I think, first year next year. I'm even thinking second half of next year, maybe some coming. So basically, I don't think the -- any big change in this year -- but definitely next year, you will see some players will come in. But definitely, I would say, in the future, I think Tongwei and Daqo will take the market share more than 50% than the rest of them taking another 50%. Even though, let's say, the new coming, the market may be, I think the price will go to another circle, then the quality is a big issue. So I think I like your second question. From P to N, that means it demand high-quality products, okay? So even today, for example, if we use our Xinjiang facility right now, all production produce the P level silicon, we can produce around, I think, 130,000 tonnes, let's say that, okay? But if we're going to produce 70% N-type, the quantity definitely will go down. Maybe we'll go down to 120,000 tonnes. The output maybe will reduce by 10% or 5%. Then the cost also will go up because the furnaces may be taking -- deposit may be taking a long time -- a little long time. So you maybe will consume more electricity. Also, I think for the conversion rate, I don't think it will change too much. But for the -- for other processing, you need more, I think, technology know-how to do that. So to answer your question, from P to N, I think the quality not only from purity, but also from the other, I think, technology data to see, you have to improve. So basically, I think today in China, is not too much player can produce N-type. And we are, right now all, I think, recognize and I think a business application -- a qualification. I think by the major, I think, wafer produce, I think downstream wafer producer.

So do you have any quantitive data like what is roughly cost difference from P to N?

Okay. So actually, there is slightly higher cost for N-type poly compared to P-type. You're talking about production costs, right, of the different types? Okay, so I would say this will be similar to -- for example, when multi-type poly initially was the dominant market and when people started to enter into mono type of poly, so because initially, when we grew monotype of poly, we had to grow slower, losing more electricity. And also with a different process. So it had maybe 10% to 15% higher cost. But I would say as time go on, we continue to optimize our production to the extent that now all of our production is really a P-type mono, right? So production costs would go down over time. We’d say similarly for N-type. So initially, N-type would also require us to grow the silicon slower with the optimized process and using more energy and maybe more other raw materials as well and also for impurity removal. But we would -- so maybe 5% to 10% higher cost, but I would say over time, when we start to ramp up the production mix then the cost would go down further. The key is -- I think the key is, I think within the industry, very few players can do N-type currently. And I think that would continue going forward, especially for the new entrants.

I have another question. Do you have any color and share with us about any privitization client for the U.S. ADR?

Can you repeat your question? I'm sorry. We didn't hear that very well.

Sure. I mean do we have any plan to take the U.S. ADR privately?

No, at least right now, we not manage any forecast on any privatization. We are working on, I think, the Asia company, the company, I think the operations side we not considering anyone now so far.

The next question comes from Chao Ji with Goldman Sachs.

Can I ask about what's your view on how the metal silicon powder prices evolving throughout the year? As you mentioned before, you see very strong results this year and also there are incremental new capacity of the polysilicon. So how are -- and recently, there has been some meaningful reductions of silicon powder prices, but how do you see the price evolving or trending in the future quarters?

I think last year, the silicon powder price go up because I think the first half of the year in the Southern China, I think the -- because the government, I think, emphasis on the policy high consumption, high convinient, production elimination, so I think it caused the silicon metal price go up, especially in September or October to the peak. But later, I think the government, I think, recognize the problem, I think, especially solar industry is the key industry for China. So I think they opened the door and reopened, I think, the small and the medium, I think silicon metal plant starting the production. So we see December, the silicon metal price dramatically down from CNY 90,000 per ton dropped to, I think, 40, 50. In February right now, the metal prices I think you see the -- I think underline, you see that is around like CNY 23,000 per ton. I think definitely, I think because the mineral prices go up, the coal price go up, I think the cost to produce silicon metal also go up from, I think, of history, maybe around 8,000, 7,000 per ton to right now around 13,000 to 14,000 per ton. So we think the price will be in the future around, I think -- the metal maybe around like 20,000 tons. The silicon powder may be around 20,000 to 23,000 tons. But yes, if we're going to do that in Inner Mongolia, I think we will first do the 200,000 metric tons to match our production. I think therefore, we'll reduce our cost, I think back -- our cash cost to maybe still to [30] if we can produce our own silicon metal, you see. And definitely, I think it's a competitive edge for us to compete with other players

This concludes our question-and-answer session. I would now like to turn the call back over to management for any closing remarks.

Thank you, everyone, for participating in today's conference call. Should you have any further questions, please don't hesitate to contact the company. Thank you. Bye-bye.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.