Daqo New Energy Corp (DQ) Q1 2025 Earnings Call Highlights: Navigating Challenges Amidst ...

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Wed, Apr 30, 2025, 1:08 AM 5 min read

Revenue: $123.9 million, down from $195.4 million in Q4 2024 and $415 million in Q1 2024.
Gross Loss: $81.5 million, compared to $65.3 million in Q4 2024 and a gross profit of $72 million in Q1 2024.
Gross Margin: Negative 66%, compared to negative 33% in Q4 2024 and 17.4% in Q1 2024.
SG&A Expenses: $35.1 million, including $18.6 million in non-cash share-based compensation costs.
R&D Expenses: $0.5 million, compared to $0.4 million in Q4 2024 and $1.5 million in Q1 2024.
Loss from Operations: $114 million, compared to a loss of $200 million in Q4 2024 and income of $30 million in Q1 2024.
Operating Margin: Negative 92%, compared to negative 154% in Q4 2024 and 7.3% in Q1 2024.
Net Loss: $71.8 million, compared to $180 million in Q4 2024 and net income of $15.5 million in Q1 2024.
Loss per Basic ADS: $1.07, compared to $2.71 in Q4 2024 and earnings of $0.24 in Q1 2024.
Non-GAAP Adjusted Net Loss: $53 million, compared to $170.6 million in Q4 2024 and adjusted net income of $36 million in Q1 2024.
EBITDA: Negative $48 million, compared to negative $236 million in Q4 2024 and $76.9 million in Q1 2024.
EBITDA Margin: Negative 39%, compared to 121% in Q4 2024 and 18.5% in Q1 2024.
Cash Balance: $792 million as of March 31, 2025.
Net Cash Used in Operating Activities: $38.9 million for the three months ended March 31, 2025.
Net Cash Used in Investing Activities: $211 million for the three months ended March 31, 2025.

Warning! GuruFocus has detected 2 Warning Signs with DQ.

Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Daqo New Energy Corp (NYSE:DQ) maintained a strong balance sheet with no financial debt, providing strategic resilience during market downturns.
The company had a substantial cash balance of USD792 million and quick assets totaling USD2.15 billion, ensuring ample liquidity.
Sales volume exceeded production, allowing Daqo New Energy Corp (NYSE:DQ) to reduce inventory to healthier levels.
The company is well-positioned to capitalize on long-term growth in the global solar PV market, with plans to enhance its higher-efficiency N-type technology.
Daqo New Energy Corp (NYSE:DQ) remains one of the world's lowest-cost producers with high-quality N-type products, strengthening its competitive edge.

Negative Points

Daqo New Energy Corp (NYSE:DQ) faced significant challenges due to overcapacity in the solar PV industry, leading to operating and net losses.
Polysilicon prices remained below cash cost levels, impacting profitability.
The company operated at a reduced utilization rate of approximately 33% of its nameplate capacity due to weak market conditions.
Gross margin was negative 66%, primarily due to lower average selling prices and higher production costs.
Net loss attributable to Daqo New Energy shareholders was $71.8 million, reflecting ongoing financial challenges.

Q & A Highlights

Q: Can you discuss when you expect the overcapacity in the polysilicon market to be resolved and which companies might exit the market? A: Anita Zhu, Deputy CEO, explained that the rebalancing of supply and demand will take longer than expected due to solid shareholder bases and financing options for many companies. The industry utilization rate is currently around 40% to 50%, and no companies have completely exited the market yet. However, as prices remain below cash costs, it will be challenging for some companies to sustain operations.

Q: How do you expect the industry utilization rate to trend throughout the year? A: Anita Zhu noted that the first quarter saw monthly domestic production of 90,000 to 100,000 metric tons, with a slow pace of inventory depletion. Prices are expected to remain stable due to policy support, but there are potential downside risks from policy changes and external tensions. The utilization rate is expected to remain below 50% for the rest of 2025.

Q: What is your expectation for demand in China after the policy cutoff date of May 31? A: Anita Zhu stated that Chinas demand for 2025 is expected to be strong, ranging from 250 to 300 gigawatts, equivalent to 1.4 to 1.6 million metric tons of polysilicon. Despite potential impacts from new policies, renewable energy is transitioning to a more market-driven model, supporting long-term demand.

Q: What is Daqo New Energy's strategy regarding the ADR delisting risk amid US-China tensions? A: Anita Zhu acknowledged investor concerns but considers the delisting risk to be low. The company previously considered a dual listing in Hong Kong but held off due to resolved issues with the PCAOB. While there are no immediate plans for a Hong Kong listing, the company is monitoring developments and remains committed to protecting shareholder interests.

Q: Can you provide an outlook on cash production costs for the upcoming quarters? A: Ming Yang, CFO, explained that cash costs increased by 5% to 6% due to maintenance and facility-related costs. The Inner Mongolia Phase 2 shutdown added approximately $0.20 per kilogram to costs. For the second quarter, cash costs are expected to be similar or slightly lower, depending on production levels.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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