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ASP decline worse than expected. Just glimpsed at the PR cuz I'm at the nursery. Could someone post some highlights of the con call? Doesn't look rosy to say the least.

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29 minutes ago, Klothilde said:

ASP decline worse than expected. Just glimpsed at the PR cuz I'm at the nursery. Could someone post some highlights of the con call? Doesn't look rosy to say the least.

It looks pretty good to me.

DQ had almost a $2 spread per KG.

They are expecting 6800-7000MT for shipments and production of 7000-7100MT.

That puts the new capacity on line at around 40% utilization in the first full quarter of production as the ramp to 100% for Q219.

Production was down in Q3 by nearly 15% which is inline with most poly doing upgrades and maintenance.

As a result of lower production, the depreciation had increased 15%/KG or  $0.20/KG.

Ramped production should lower the cost in Q4 by  $0.20 or more as the run full capacity.

The new capacity ramp should likely lower it another $0.20-$0.40/KG.

Overall production should be lowered by a minimum of $0.40 to mid $8.50 or lower in Q4. 

The production cost declines should keep the $2 spread for Q4 and depending on ASP delcines may increase that spread.

The increased volume would suggest $12-$16M in gross for Q4 and likely profitable at $0.15 to $0.50 depending on adjustments and 1 timers

 

https://finance.yahoo.com/news/daqo-energy-announces-unaudited-third-110000067.html

 

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I'm with you on cost decline in Q4, however the indices are also pointing to an ASP decline of roughly 1usd/kg qoq. That would result in a narrower spread of 1.5 or less. I hate being Debbie Downer but I cannot ignore facts. Also me thinks the poly from the new plant won't be 100% on spec from the beginning and may sell for less than the premium stuff.

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My Q4 speculations as of today:

Volume sold: 6850T
ASP: $9.9/kg
cost: $8.3/kg
Gross: $11.0M
OPEX&NI: $10.9M
EPS: $0.0 before adjustments

Q1 speculation: going red.

Beware people cuz 2019 EPS consensus is still $4.34 and it's only a question of time til it gets adjusted downward significantly imho.

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Just read the transcript.  They claim poly prices will recover over the next few quarters:

"...So basically what I think is for Q4 to Q1 next year, the price should be around $11 to $12. Unless the new policy maybe stimulates the production in China, then the price definitely will be back to 13.  For the whole year of next year, I think the price should be second half of next year, should be around $12 to $13..."

This is at odds with some expert views out there (Bernreuter etc.) who see prices softening even further once the low-cost capacities of Tongwei and GCL come online.

My dirty mind has me thinking they have to talk profits and keep the valuation high because they are considering another secondary to fund the 4A expansion (2.9BN RMB or $420M).

They originally planned to finance about 55% of the expansion with cash & operating cash and the other 45% with debt (see Q1 transcript).  Now after 531 with the reduced cash flow the split may have shifted to approx. 20%/80%.  They may be thinking of doing a secondary in order to limit extra leverage.  $340M in debt would result in ~$4M of additional quarterly interest expense which would be a significant drag on profits.

Is this a credible explanation or am I just talking crap?  Do you guys have an idea how they will finance $420M in Capex?

But raising $340M with $280M in market cap would dilute the hell out of shareholders, won't it?

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OCI's polysilicon EBITDA collapsing into the red zone in Q3:
http://www.oci.co.kr/eng/sub/investment/ir_view.asp?idx=629&pageNo=1

In other words, all three remaining non-CN poly gorillas (Wacker, REC, OCI) produced at cash cost or below in Q3 (at around $10/kg).  Means to me that at current poly prices all of these guys are effectively wiped out...

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