管理層發言
Welcome to the Daqo New Energy Second Quarter 2026 Results Conference Call. (Operator instructions were provided to participants.) Please note this event is being recorded. I would now like to turn the conference over to Jessie Zhao, Investor Relations Director. Please go ahead.
Hello, everyone. I'm Jessie Zhao, the Investor Relations Director of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the second quarter of 2026, which can be found on our website at www.dqsolar.com. Today, attending the conference call, we have our Chairman and CEO, Mr. Xiang Xu; our Deputy CEO, Ms. Anita Zhu; our CFO, Mr. Ming Yang; and myself. Today's call will begin with an update from Mr. Xu on market conditions and company operations, followed by a translation from Ms. Zhu of Mr. Xu's remarks, and then Mr. Yang will discuss the company's financial performance for the quarter. 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 statement. Further information regarding this 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. Now I will turn the call to our Chairman and CEO, Mr. Xiang Xu. Mr. Xu, please go ahead.
Spoke in Chinese. (Translation provided by the company's translators appears in subsequent remarks.)
Hello, everyone. This is Anita, and I'll now translate our Chairman, Mr. Xu's remarks. In the second quarter of 2026, market sentiment across the solar PV industry remained cautious amid weak domestic demand and elevated inventory levels, which drove prices lower across the solar value chain. Despite these headwinds, we resumed sales in June, delivering a sequential increase in revenue and a narrowing of our quarterly operating and net losses. Throughout this period, we continued to maintain a robust and healthy balance sheet with zero debt. As of June 30, 2026, we held a cash balance of $555.3 million, short-term investments of $250 million, bank notes receivable of $71.7 million, held-to-maturity investments of $51 million and fixed-term bank deposit balance of $994.8 million. Together, these readily convertible assets totaled USD 1.9 billion, providing us with ample liquidity, confidence and strategic flexibility to navigate the current market downturn. On the operational front, we continued to take proactive measures to navigate challenging market conditions with our nameplate capacity utilization rate operating at approximately 57% during the period. Total production volume at our two polysilicon facilities was 43,675 metric tons for the quarter, exceeding our guidance range of 35,000 metric tons to 40,000 metric tons with polysilicon market prices remaining below production costs since the first quarter of 2026. We initially refrained from engaging in below-cost sales in line with top Chinese self-regulation guidelines and adopted a disciplined wait-and-see approach pending further implementation of the national anti-involution policy; however, after an extended period without clear policy updates, we adjusted our sales and pricing strategies toward a more market-oriented approach in June. As a result, our sales volume increased from 4,482 metric tons last quarter to 15,190 metric tons with average selling price falling to USD 4.04 per kilogram. Our polysilicon transaction and shipment volumes have continued to pick up in the third quarter, reflecting increased confidence in the quality and an ongoing preference for our products from customers. On the cost side, total production costs remained flat sequentially at USD 5.95 per kilogram with cash cost edging down by 0.4% to USD 4.57 per kilogram and manufacturing costs in RMB terms declining slightly. In light of the current market dynamics, we expect total polysilicon production volume in the third quarter of 2026 to be approximately 40,000 metric tons to 45,000 metric tons. For the full year 2026, we expect production volume to be in the range of 160,000 metric tons to 180,000 metric tons. Polysilicon market prices came under further downward pressure during the second quarter with N-type polysilicon prices falling from RMB 35 to RMB 37 per kilogram at the end of the first quarter to RMB 31 to RMB 34 per kilogram at the end of the second quarter. Amid subdued demand, depressed pricing and accumulated industry-wide inventories, polysilicon producers operated at a low utilization rate with aggregate output of 538,000 metric tons in the first half of 2026, representing a 9.8% year-on-year decrease. As we make our way through the third quarter, the continued rollout of anti-involution measures is gaining momentum. In July, a series of mandatory national standards were issued for energy consumption and product efficiency across the solar PV value chain, including the final official version of a new standard setting energy consumption limits per unit of polysilicon output, which will take effect on January 1, 2027. Polysilicon manufacturers whose unit energy consumption exceeds 6.3 kgce/kg must complete corrective improvements by that date or face the risk of plant shutdown. Notably, this threshold of 6.3 kgce/kg is stricter than the 6.4 kgce/kg proposed in the draft, signaling regulators' commitment to accelerating the phase-out of inefficient capacity. On July 27, the China Photovoltaic Industry Association issued the general principles for Cost Accounting Models in the Photovoltaic Industry, an initiative to regulate market competition and advance standardized industry governance that lays the foundation for price regulation enforcement. On July 31, the State Administration for Market Regulation issued price compliance guidelines for the solar PV sector, promoting a structural shift from price competition to value-driven differentiation. The SAMR emphasized that solar PV companies must conduct price-compliance self-reviews and curb irrational low-price competition, and that the CPIA should strengthen industry self-regulation, promote the General Principles, and guide companies away from illegal pricing practices such as below-cost dumping. The SAMR also indicated that it will take enforcement action against non-compliant entities. Together with seven other polysilicon manufacturers, we jointly signed an initiative to eliminate below-cost sales and fully comply with energy consumption standards on August 6. As a result of these collective measures, polysilicon prices are beginning to show signs of recovery, with spot prices stabilizing and forward prices rebounding by more than 10% from their recent low. We are also diversifying beyond our core polysilicon business to hedge against solar PV cyclicality, targeting the fast-growing AI data center and power infrastructure market. On June 3, 2026, we announced the signing of an investment agreement to establish a manufacturing base focused on the R&D, manufacturing and sale of next-generation energy solutions and related equipment for AI data centers. This includes energy storage systems, solid-state transformers, and solid-state circuit breakers. These technologies support the industry's transition to high-voltage direct current architecture, such as the 800V DC standard advanced by NVIDIA and other leading AI infrastructure providers. The platform is anchored by Daqo Group, our affiliated entity under common beneficial ownership with Daqo New Energy Corp., which brings over 40 years of power equipment manufacturing expertise, established technology, and deep talent and customer relationships to accelerate our entry into this segment. We view AI data center power infrastructure as a structural growth opportunity that complements our core business and broadens our earnings base. Consistent with our strong track record having navigated several polysilicon cycles, we intend to pursue this expansion in a disciplined manner that preserves our balance sheet strength. Despite a challenging environment, the solar PV industry continues to exhibit compelling long-term growth prospects. Growing vulnerabilities in global energy markets have sparked widespread concerns about national energy security, in which the solar PV and renewable energy sectors can play a crucial role. As one of the world's lowest-cost producers of the highest-quality N-type polysilicon, backed by a robust balance sheet and zero debt, we remain optimistic about the sector and are well positioned to capitalize on the anticipated market recovery and long-term growth opportunities. We will continue to strengthen our competitive edge through advancements in high-efficiency N-type technology and cost optimization via digital transformation and AI adoption. As the world accelerates its transition to clean energy, we are confident in our ability to play a leading role in shaping that future. And now I'll turn the call to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter. Ming, please go ahead.
Thank you, Anita, and hello, everyone. This is Ming Yang, CFO of Daqo New Energy. We appreciate you joining our earnings conference call today. I will now go over the company's second quarter 2026 financial performance. Revenues were $62.7 million compared to $26.7 million in the first quarter of 2026 and $75 million in the second quarter of 2025. The increase in revenue compared to the first quarter of 2026 was primarily driven by higher sales volume as the company resumed normal sales activities starting in June following a prolonged period with no new policy development. Gross loss was $82.7 million compared to $139 million in the first quarter of 2026 and $81.4 million in the second quarter of 2025. Gross margin was negative 132% compared to negative 520% in the first quarter of 2026 and negative 108% in the second quarter of 2025. The sequential improvement in gross margin was primarily due to a decrease in provisions for inventory impairment, which was $55.7 million in the second quarter of 2026 compared to $98.9 million in the first quarter of 2026. SG&A expenses were $15.8 million compared to $12.2 million in the first quarter of 2026 and $32 million in the second quarter of 2025. The sequential increase was primarily due to higher sales volume in the second quarter of 2026. The year-over-year decrease was also due to the company's recognizing $18.6 million in noncash share-based compensation costs related to its share incentive plan in the second quarter of 2025. R&D expenses were $1.6 million compared to $0.8 million in the first quarter of 2026 and $0.8 million in the second quarter of 2025. The increase is primarily due to R&D of next-generation energy solutions for AI data center power infrastructure. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter. Loss from operations was $98 million compared to $150.8 million in the first quarter of 2026 and $115 million in the second quarter of 2025. Operating margin was negative 156% compared to negative 560% in the first quarter of 2026 and negative 152% in the second quarter of 2025. Net loss attributable to Daqo New Energy Corp. shareholders was $81 million compared to $88 million in the first quarter of 2026 and $76.5 million in the second quarter of 2025. Loss per basic ADS was $1.20 compared to $1.31 in the first quarter of 2026 and $1.14 in the second quarter of 2025. Adjusted net loss attributable to Daqo New Energy shareholders, excluding noncash share-based compensation costs, was $81 million compared to $88.4 million in the first quarter of 2026 and $57.9 million in the same quarter of 2025. Adjusted loss per basic ADS was $1.20 compared to $1.31 in the first quarter of 2026 and $0.86 in the same quarter of 2025. EBITDA was negative $29 million compared to negative $83 million in the first quarter of 2026 and negative $48 million in the same quarter of 2025. EBITDA margin was negative 46.8% compared to negative 311% in the first quarter of 2026 and negative 64% in the same quarter of 2025. Now on the company's financial condition. As of June 30, 2026, the company had $555 million in cash and cash equivalents compared to $559.4 million as of March 31, 2026, and $598.6 million as of June 30, 2025. And as of June 30, 2026, short-term investment was $250 million compared to $288 million as of March 31, 2026, and $418 million as of June 30, 2025. As of June 30, 2026, note receivable balance was $71.7 million compared to $20.8 million as of March 31, 2026, and $49 million as of June 30, 2025. Note receivable balance, which represents bank notes with maturity within six months. As of June 30, 2026, held-to-maturity investments was $51 million compared to $50.3 million as of March 31, 2026, and zero as of June 30, 2025. And as of June 30, 2026, the balance of fixed-term deposits within one year was $928.9 million compared to $1 billion as of March 31, 2026, and $960.7 million as of June 30, 2025. Now on the company's cash flows. For the six months ended June 30, 2026, net cash used in operating activities was $276 million compared to $105 million in the same period of 2025. And for the six months ended June 30, 2026, net cash used in investing activities was $159.6 million compared to $342.7 million in the same period of 2025. Net cash used in investing activities in 2026 was primarily related to the purchase of short-term investments and fixed-term deposits. For the six months ended June 30, 2026, net cash used in financing activities was $7.8 million compared to $32,000 in the same period of 2025. Net cash used in financing activities in 2026 was primarily related to $7.8 million in stock repurchases made by the company's subsidiary, Xinjiang Daqo, from its minority shareholders. And that concludes our prepared remarks. We will now open the call to Q&A from the audience. Operator, please begin.
分析師問答
Our first question comes from Philip Shen with ROTH Capital Partners.
This is Oscar Chim on for Phil. Can you hear me okay? I have two questions. First question is on government support on polysilicon pricing. Even with the recent 10% rebound in forward prices, polysilicon ASP remained below industry production cost since late Q1. How would you characterize the central government stance on supply rationalization? Are you anticipating any incremental regulatory support that could help establish a sustainable price floor in the near term? And then I have a follow-up.
I will translate your question for our CEO, Mr. Xu. On August 6, led by the China Photovoltaic Industry Association, there is a strong initiative for self-discipline. Based on the CPIA cost model, the industry average production cost is estimated to be around RMB 50,000 per ton, so about RMB 50 per kilogram. But due to the current market environment where demand activity is relatively low, and there's still approximately 500,000 to 600,000 tons of inventory in the industry, we think this price recovery might take a little bit longer than anticipated. However, there is strong consensus within the industry for self-discipline and also urging from the government and related departments that it is no longer viable to sell below cost. What we're seeing in the market is that quotations for polysilicon pricing from different manufacturers have already exceeded about RMB 40 per kilogram. So we're optimistic about the current policy development, and we're waiting to see how the policies may be enforced going forward.
Spoke in Chinese. (Translation provided by the company's translators appears in subsequent remarks.)
So right now, within the value chain between buyers and sellers of polysilicon, some buyers are still observing the market and policy development and taking a wait-and-see approach. In terms of the polysilicon manufacturers, there is an expectation for a reasonable price where they would not be selling at a loss or below cost. There is still some waiting and seeing between manufacturers and downstream players. We do believe that the past industry practice of selling below cost, especially in the first six months of this year, is likely to end and that the government is very adamant about preventing dumping and sales below cost. Under the legal framework for pricing and anti-involution policies, our expectation is that this is likely to progress positively over the next several months. Over the past few years, polysilicon manufacturers and the industry in general have seen significant losses, which is not sustainable and could lead to industry distress. For example, in December of last year when the anti-involution policy was more effective, Daqo New Energy had no cash loss in Q4 of 2025 and achieved positive operating cash flow during that period. We consider that a more sustainable framework going forward.
Just my second question is on the self-discipline agreement signed in August. Previous rounds of self-regulation struggled to maintain compliance once prices fluctuated. Just wondering what makes this framework structurally distinct from past attempts? And then regarding the energy consumption requirements, what is your estimate of total industry capacity that could be phased out?
We're still answering and translating. Hold on a moment.
All right. We have Philip Shen back on the podium. My apologies.
Spoke in Chinese. (Translation provided by the company's translators appears in subsequent remarks.)
We believe that the current round of anti-involution policies and enforcement under the price law is likely to be more sustainable. In the previous round, a proposed industry consolidation platform raised concerns at the State Administration for Market Regulation about anti-monopoly behavior by leading manufacturers. This time, the efforts are led by SAMR, bringing stronger discipline and enforcement. Importantly, there is no coordination among manufacturers on pricing or allocation of sales volume; instead, the approach emphasizes each manufacturer's cost efficiencies. This time, the mechanism is based on individual manufacturers' production costs and manufacturing efficiencies, encouraging companies to sell based on their own ability to produce at lower cost. We think this approach is more sustainable and is supported by the government. As a low-cost producer with better energy efficiency, Daqo New Energy stands to benefit. Through both our lower-cost position and the regulatory push on energy usage, this will promote a market-oriented exit of inefficient capacity and more reasonable selling prices under the current legal framework.
Our next question comes from Alan Lau with Jefferies.
So my first question is a follow-up on the overall initiative to avoid selling below cost. My understanding is that current industry inventory is quite high and end demand is weak. When would you expect polysilicon prices — for example, you mentioned prices 'above RMB 40 per kilogram' — but given inventory at wafer players and weak demand, when would you expect the first batch of transactions at higher prices to happen? In the past two weeks, all the data has halted. When do we expect real transactions to come through?
Let me translate for Mr. Xu.
Spoke in Chinese. (Translation provided by the company's translators appears in subsequent remarks.)
We are seeing some transactions in the market at roughly RMB 40,000 per ton, or about RMB 40 per kilogram, although transaction volumes are low right now. Even though overall demand is relatively weak, there are some wafer producers with low to no inventory who are procuring for production. Some manufacturers are testing the market by selling small volumes at these prices. While the full cost model suggests around RMB 50 per kilogram, some producers are testing the market at approximately RMB 40 per kilogram. It's been about two weeks since the manufacturers' announcements and government guidance, and we do think that going forward we are likely to see more transactions at this new price range.
Understood. So strictly based on production cost, polysilicon price should be higher than that. But given this round of anti-involution initiative lacks an execution plan afterwards, if prices go up to RMB 40 or maybe RMB 45 or RMB 50 per kilogram, what do you think would happen? Effectively, that would reach the cost level of more players. Who would be able to sell their products? What do you think is the end game of this round of initiatives? Will some capacity be shut down because of the higher energy consumption requirement? How do you see this unfolding?
Let me translate for Mr. Xu. He thinks that the recent energy quota policy with differentiated energy usage requirements will force the exit of a significant amount of capacity that has higher energy consumption. We are likely to see that happen soon. Industry self-discipline also includes commitments from manufacturers for voluntary production reductions and not selling below production cost. We think these will occur starting in the second half of this year. Additionally, many producers lack current capability to restart shutdown capacity quickly because the industry is running at fairly low utilization, with labor shortages and lack of trained personnel. As a result, capacity that has been shut down is unlikely to be restarted easily. Although nearly three million tons of capacity were built, effective industry output is already less than two million tons and is likely to decline further.
My last question is about the AI data center initiative as a second growth driver for the company. I wonder if you can share the backlog or progress on this business?
Let me translate for Mr. Xu.
Spoke in Chinese. (Translation provided by the company's translators appears in subsequent remarks.)
We see AI data center related power infrastructure and equipment as a viable and significant growth driver and the second sector the company is entering. Daqo Group has over 40 years of experience in power equipment, supplying high- and low-voltage products such as transformers and circuit breakers. We see strong demand particularly in AI data center related power equipment. We believe this is a real opportunity and Daqo Group brings manufacturing, R&D and technology advantages. We are targeting next-generation power infrastructure under the 800-volt DC architecture led by customers such as NVIDIA. Initially, we are focusing on solid-state transformers and solid-state circuit breakers and expect the industry to start ramping in 2027. We expect significant growth from 2028 to 2030 with power demand from new AI data centers adopting 800V DC. With Daqo Group's experience combined with Daqo New Energy's balance sheet and capital position, we expect to capture this growth. We have built an R&D team in Shanghai, expect an initial product ready by year-end with prototypes and achieving sales starting in 2027, and plan to capture significant growth in 2028 to 2030. Our goal is to become a Tier 1 supplier in this AI data center power equipment sector.
Our next question comes from Mengwen Wang with Goldman Sachs.
I have two questions. One is related to the polysilicon business and another to the AI data center business. First, in terms of the polysilicon business, you mentioned the upstream and downstream players are in a wait-and-see stance. Given downstream inventory is relatively high, what outcome do you expect after the wait-and-see period? In the first half, you upheld pricing and recorded lower shipments. Do you have any shipment guidance toward the end of the year? What's your priority going forward — uphold pricing at a higher level like RMB 50,000 per ton or balance price and shipments? I want to hear more about the polysilicon business operation strategy.
Thank you, Mengwen. Let me translate your question for Mr. Xu. Please hold on while he responds.
Spoke in Chinese. (Translation provided by the company's translators appears in subsequent remarks.)
In the second half, given Daqo New Energy's superior product quality and low cost position, selling and shipping our product is not the issue; the key issue is price. In the first half, we adhered to self-discipline and did not sell as much as our normal market share because competitors engaged in below-cost sales. We believe our historical market share is around 15% and we continue to expect that level going forward. Our target is to sell at an appropriate and reasonable price while fully complying with government guidance and the price law. Over the next six to 18 months, we expect forced or market-based exits of manufacturers with high production costs or weak balance sheets. Companies with poor cash positions will continue to struggle, while Daqo New Energy, with our strong balance sheet, cash position, high product quality and low cost, is likely to perform well. We expect a much improved market environment in 2027 and intend to continue lowering our inventory to relatively low levels.
Can I conclude that you will uphold pricing in the near term, wait for marginal players to exit, and then see faster inventory depletion and a recovery of shipments likely in the next six to 18 months?
In terms of pricing, we cannot sell below cost, so we are going to adhere to that. At the same time, we will look for opportunities to sell at reasonable prices and wait for additional capacity exits in the market.
That's super clear. My second question is about AI data center business. You announced a RMB 6 billion total investment with RMB 2 billion in the first phase, and you mentioned sales next year. Can you share more about the plan: CapEx timeline, source of capital for the RMB 6 billion or RMB 2 billion, expected payback for the first phase, normalized profitability, and other operating metrics? Will you rely on synergies with Daqo Group or allocate additional resources?
Let me translate for Mr. Xu. First, although the total anticipated project investment is RMB 6 billion, we are committing only the first phase now, which is about RMB 2 billion, covering solid-state transformers, solid-state circuit breakers and e-House total solutions for AI power infrastructure as well as some related energy storage. The remaining RMB 4 billion is not committed as of today and will be planned for the future. Our strategy focuses on AI data center power infrastructure equipment, with three primary products: a plug-and-play package solution for AI power infrastructure (including related power equipment), solid-state transformers, and solid-state circuit breakers with related software and control. There are significant synergies with Daqo Group due to their experience and customer relationships, which we expect will help secure orders. We are in the R&D and initial manufacturing preparation phase. We expect an initial product prototype by year-end, with products being introduced to the market in 2027 and significant growth from 2028 to 2030. We aim to become an industry leader and a Tier 1 supplier in this sector.
For the RMB 2 billion committed investment, will you spend that in 2026?
Over the next two years. This year the committed spending is only about USD 30 million to USD 40 million; the remainder will be spent over the next two years.
That's all from me, thank you.
Our CEO will provide an additional comment. Spoke in Chinese. (Translation follows.) Our CEO will provide an update on our semiconductor polysilicon business. The company has invested a total, including land and related equipment, of about RMB 1.2 billion into this business. We have been conducting trial production and customer qualification. The qualification cycle has been much longer than anticipated, but we are continuing with trials. He is optimistic about significant market demand: demand for semiconductor polysilicon is roughly 75,000 tons per year, while current industry production is about 57,000 tons per year. We anticipate significant growth in that market sector and will reinvigorate our activities there.
This concludes our question-and-answer session. I would like to turn the conference back over to Jessie Zhao for any closing remarks.
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 have an awesome day. Goodbye.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.