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Daqo (DQ)

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1 hour ago, Klothilde said:

I'm in the gym but check out the DQ transcripts. They think 12USD is the bottom of the industry cycle and that from there on prices increase.

PV insights has poly holding steady at $13.30 high end ASP for the past month. Mid range price is holding stable and the low end price dropped a bit. This would suggest that companies with cash costs of $12/KG is shutdown or break even. Companies with cash costs around $9-$10 are positive cash flow.

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1 hour ago, Klothilde said:

I'm in the gym but check out the DQ transcripts. They think 12USD is the bottom of the industry cycle and that from there on prices increase.

OK.  Does this article disagree?  (As I said, I can't access it from here.)  If so, what are the arguments from the two sides?  Which one do you think is more believable, and why?

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18 hours ago, solarpete said:

OK.  Does this article disagree?  (As I said, I can't access it from here.)  If so, what are the arguments from the two sides?  Which one do you think is more believable, and why?

I could write a book on this but don't have the time.  You should try and read the article from another computer if you are so interested.

In a nutshell:  DQ has a more favorable view of the poly supply & demand balance over the next quarters than this article and many others.  DQ thinks the global PV market will recover quickly from the China cliff and resume its strong growth trajectory already in 2019 with subsidy-free installations as a main driver.  They think that low-cost poly supply will be very limited against this strong demand, thereby prompting a significant price increase relative to current prices.  They think that new capacities being built by competitors will in some case be smaller than announced and also come online so slowly that they won't affect the supply & demand balance much.

This article doesn't go into much detail on demand but states that the supply over the next months will be significant and may pressure prices unless a parallel increase in demand occurs:

"...According to the expansion plans of various enterprises, the release of new capacity of Xinjiang GCL, Tongwei, Xinjiang Daquan, Dongfang Hope, and Asia Silicon is concentrated in October-November, which will put some pressure on domestic polysilicon supply. Therefore, it is expected that the fourth quarter If there is no domestic front-runner or the EU to abandon the "double-reverse" taxation and other favorable domestic and foreign terminal demand, the polysilicon market will not rebound sharply, and may even enter a new round of decline..."

I side with the article and think that supply will expand much faster than demand over the next quarters and put additional pressure on poly prices.  I think DQs market growth projections based on subsidy-free installations are essentially fairy-tales and won't materialize.  We already have countless regions in the world that have been in grid parity for years and where PV installations haven't taken off (e.g. Italy).  It's not as simple as bringing the levelized cost of PV below the grid tariff.  Financing and Dispatchability need to be put in place as well.

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On 8/7/2018 at 8:25 PM, SCSolar said:

OK read the con call. It is reasonably sound. They are selling today at around $12.24 for Mono. They expect the poly to rise by year end to  $12.75 for mono. 

 

This places gross based on $9/kg production cost at $3.24-$3.75/Kg.

 

For Q3 - Use an average of $3- $3.50 gross. 6000MT is $18M to  $21M gross. Less $9M for Opex and interest you have $9-$12. Afer tax you have $0.61 to $0.82 in EPS before 1 timers such as shuttering the wafer or writing off the equipment which is hinted at.

 

 

OK DQ confirms the discontinuation of the wafering business and a $21M write down. That makes it look like a loss coming in Q3 of up to $1 a share.

 

https://finance.yahoo.com/news/daqo-energy-discontinue-wafer-manufacturing-090000533.html

 

CHONGQING, China, Sept. 7, 2018 /PRNewswire/ -- Daqo New Energy Corp. (DQ) ("Daqo New Energy", the "Company" or "we"), a leading manufacturer of high-purity polysilicon for the global solar PV industry, today announced that it plans to discontinue its solar wafer manufacturing operations in September 2018 so that the Company can focus on its core polysilicon manufacturing business. 

The Company expects to incur approximately US$21.6 million in fixed-asset impairment and restructuring charges during the third quarter of 2018, including approximately US$1.6 million in employee severance payments and approximately US$20.0 million in impairment of long-lived assets.

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4 hours ago, Klothilde said:

And down it goes.  Apparently this wasn't fully baked in...

I see it as only a positive for DQ long term. They will be a pure play poly supplier with better margins. They never were very profitable for wafers  and never ramped capacity. It is shown by the fact that the wafering is only writing off appx $20M of what is 500MW of capaccity they have had for several years. 

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