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Daqo (DQ)

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17 minutes ago, Klothilde said:

You are getting me wrong, I like DQ a lot and I was hoping I could buy some.  But the price needs to drop, it's too expensive right now, out of sync with fundamentals imho.

I am with you. I was looking to buy in the low to sub $20 range for DQ. The 2020 earnings suggests $3-mid $5 range. That places an upside to $42 with a PE of 8. At $37 it is to costly due to industry volatility. If you are hoping for $6 a share with a $1.75 ASP to cost spread of last quarter for a full year then there is  upside to $48ish. I won't bet on that swing.

 

CSIQ - I bought in the $12 range but sold out in the $14 range. I do not see future metrics as strong as it is right now as the old contracts expire and they dispose of the JPN assets the next year. I can only see the tumbling of  margins compared to the mid 25% they have had the past 2Q's over the next year. I do not see them offsetting with volume shipments in 2020 or 2021. I have a feeling they will become second Tier to others that will supplant them in China as volume producers.

 

JKS - is strange. They have been low margin with near zero profits outside of accounting reversals and subsidy payments. Their issue of low margins can be corrected by bringing online more capacity instead of using so much outsourced modules. You have to believe the reason for the outsourced modules is due to poor cash flow to pay for expansions. Even with 15GW sales and 14% margins, they are unlikely to have much if any profits to justify their $21 price tag. They need 15-16% margins for 2020 based on ASP pricing trends to earn $1 to $2 without subsides forex or hedging. I was a buyer at $8 and sold in the $12-$13 range. At $21 I do not see it as justifiable.

 

Cheers happy investing

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39 minutes ago, Klothilde said:

You are getting me wrong, I like DQ a lot and I was hoping I could buy some.  But the price needs to drop, it's too expensive right now, out of sync with fundamentals imho.

OK, in your opinion.  Obviously the market disagrees with you right now.  But you post information meant to be critical of DQ on a nearly daily basis.  Half the time, your interpretation is wrong--the article you reference is actually positive in its entirety, but you pull out an isolated number and present it in a negative light.  Or ask us how we should "spin" it.

This behavior reminds me of the Yahoo message boards.  Do you think your "spinning" actually influences the stock price?  Surely you're more intelligent than that.  You want the stock price to go down.  I want it to go up.  Nothing either you or I do or say in this forum will influence what the stock actually does.

I value this forum precisely because it is NOT the Yahoo environment.  If I want to read "spin," I'll go there (and I sometimes do, when I want a laugh).  Here, I want to read quantitative analysis.  Moreover, I want to read CONSISTENT analysis.  Don't tell me you're looking 2 years out for one stock, but are concerned about the next 3 months for another.  Or if you do, just tell me once.  You don't have to tell me every day.

I don't mean to offend.  Your posts are at least polite, unlike the Yahoo crowd.  But they clearly support an agenda.  We all know that agenda by now.  And there's nothing wrong with having an agenda.  But when you post it every day, well, it just gets old, that's all.

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5 minutes ago, Arrowhd said:

DQ not having a good day.   JKS the same.  Was there some negative news out of China? 

Nope.  Negative news out of the US.  CSIQ had great earnings for the past quarter, but sh*t the bed with their forecast for next quarter.

All this from the report of one company, which doesn't even sell into the largest solar market.

If JKS follows suit tomorrow, things will REALLY get ugly....

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Poly falling further in China you guys.  This summary has multi-grade poly dropping to a historic low of 60 RMB/kg, that's about $7.9/kg ex VAT.  Decide for yourself whether this is good or bad for DQ you guys, I won't provide any spin this week.
http://m.solarzoom.com/index.php/article/123101

P.D. I used the VAT of 13% which applies from April 1 on.

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Every new low in poly (or any other component) price is "historic," and has been for the past 30 years.  That's what happens when the price of an item declines over time.

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The thing is Daqo has been predicting rising polysilicon prices for the last three quarters and every time they were wrong.

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Just like you've been predicting Daqo to lose money for the last three quarters and every time you were wrong.

They don't need prices to rise (although that would be a nice bonus).  They just need prices to stabilize somewhere, and to have costs below that.  So far, their cost-cutting has managed to stay ahead of the price declines.  I see no reason for that to cease.

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15 hours ago, solarpete said:

Just like you've been predicting Daqo to lose money for the last three quarters and every time you were wrong.

No need to abandon subject and launch a personal attack.  Besides, you are not fully accurate as I have also predicted positive results over the last months, e.g. in November when I predicted $0-$0.5 in Q3  EPS ex write-off and they reported $0.31:
https://solarpvinvestor.com/topic/2-daqo-dq/page/22/?tab=comments#comment-98709

 

15 hours ago, solarpete said:

So far, their cost-cutting has managed to stay ahead of the price declines.  I see no reason for that to cease.

Are you looking at DQ's numbers or at Wrigley's? Their gross margin has shrunk in half over the last three quarters (from 44.8% in Q1 to 22.4% in Q4) because prices have come down way faster than their costs.  They have compensated this decline in margin partially through an increase in volume, but not enough to keep EPS constant.

I don't see any reason to rule out a further drop in margin / EPS, this could very well happen if the poly oversupply worsens.

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Solarzoom article discussing the poly price collapse.  They call it an avalanche.  They claim the reason why multi-grade poly is crashing while mono-grade poly is still relatively stable is because the newly released capacities from Tongwei, GCL, etc. are still churning out a lot of sub-specification product while the processes get optimized.

They predict the price-gap between mono and multi-grade poly to narrow as these processes get optimized.

http://m.solarzoom.com/index.php/article/123113

Some here will get a tantrum because I posted this but I think free speech requires both the good and the bad.

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3 hours ago, Klothilde said:

No need to abandon subject and launch a personal attack.

Stating your track record is not a personal attack, merely reporting the facts.  You consistently choose to disbelieve information put out by these companies, and at the same time you consistently underestimate their performance.  Perhaps the latter is caused by the former.

We all have our blind spots.  Your words of caution are useful to remind me of mine, IF I find them based on sound reasoning.  But when, upon examining your reasoning, I find you simply make up the numbers you want to use for your assumptions, while ignoring the numbers reported by the companies in question, well, no offense, but here in the United States we currently have a problem with people doing exactly that.  Perhaps that's why I've become sensitized to the issue.

Differences of opinion aside, I do still wish you the best of luck with your trading.

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20 hours ago, solarpete said:

...So far, their cost-cutting has managed to stay ahead of the price declines...

So difficult for you to acknowledge that you were wrong with this?

Or maybe you are not able to read financial statements and truly think margins have stayed stable?  Is that the case? 

In any case it's weird that you accuse me of ignoring their numbers when I use their gross margin figures to make a point.  Please let me know what's going on with you cause you got me confused.

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????

You're disputing their cost-cutting has stayed ahead of their price declines?  Then how in the world do they still have any profits????  And they DO have profits.  $1.20 last quarter, to be precise.  At a time when the sky is supposed to be falling in on them, post-May 2018.

At the end of the day, what matters is DO THEY MAKE MONEY.  And their record over the past year, again during a time which was supposed to be extremely challenging, is that YES THEY DO.

What is so hard to accept about this????

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One quick addendum:  when I say cost-cutting has stayed ahead of price declines, I mean at least enough to prevent losses.  Margins can decline, leading to reduced profits, but as long as margins stay positive, you're still looking at reduced profits, versus losses.  And that's what I expect for the next several months, eventually followed by an increase in demand (either later this year or beyond), when the increase in volume will drive an increase in profits even with the reduced margins.

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6 hours ago, Klothilde said:

Solarzoom article discussing the poly price collapse.  They call it an avalanche.  They claim the reason why multi-grade poly is crashing while mono-grade poly is still relatively stable is because the newly released capacities from Tongwei, GCL, etc. are still churning out a lot of sub-specification product while the processes get optimized.

They predict the price-gap between mono and multi-grade poly to narrow as these processes get optimized.

http://m.solarzoom.com/index.php/article/123113

Some here will get a tantrum because I posted this but I think free speech requires both the good and the bad.

Hmmm,  Q4 DQ had 61% production being mono. In Q1 they are forecasting 78% of their production will be mono. To me that sounds like the Multi ASP drop will not impact them significantly for now.

As you can see from their transcript below they indicate that Mono would not drop much due to the production costs of most online. In fact they were suggesting due to  ratios of mono vs multi poly and much better pricing on Mono and more production Q1 should be improved margins.

 

As for the price tightening, when everyone  refines and moves from junk poly  to mono quality, then the Si price for  Poly wafer production will rebound as the glut will be less. That price rebound for poly would create a narrowing in the price gap. That suggests that that  while Mono may decline some, it will not  necessarily decline much since the Mono wafers  is ramping much faster this year in wafer productions vs last year.

 

Now to add to that DQ, is suggesting they will reduce cash  costs to $6.0/KG. That is close to  20% from the Q4 producton costs, This means that they can easily maintain profitability with  handle the price dropping 20%  from Q4 levels to $~8/KG . When you recognize they will have 2x the capacity and $6/Kg cost, the  spread and margins can be narrower and they can make more money than now come 2020.  

 

 

https://seekingalpha.com/article/4248446-daqo-new-energy-corp-dq-ceo-longgen-zhang-q4-2018-results-earnings-call-transcript?part=single

 

"For example, I can say an example, in Q4, our monosilicon supply is around 61%. So, if you look our gross margin, our monosilicon price ASP is around like $10 and the multi is around $6.30 or whatever. Our ASP is around like renminbi is around like – US dollar maybe around like $9.50. So, we see in Q1, we will get more improved our gross margin, the reason because first of all, the monosilicon percentage will increase to around 77%, 78%,"

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2 hours ago, SCSolar said:

Hmmm,  Q4 DQ had 61% production being mono. In Q1 they are forecasting 78% of their production will be mono. To me that sounds like the Multi ASP drop will not impact them significantly for now.

As you can see from their transcript below they indicate that Mono would not drop much due to the production costs of most online. In fact they were suggesting due to  ratios of mono vs multi poly and much better pricing on Mono and more production Q1 should be improved margins.

Yes based on mono/multi mix and the spot indices I have their Q1 ASP increasing slightly to $9,75.  This coupled with a cost of $7.50 gives them an expanded spread of $2.25/kg, equivalent to a margin boost of approx. 5%.

2 hours ago, SCSolar said:

As for the price tightening, when everyone  refines and moves from junk poly  to mono quality, then the Si price for  Poly wafer production will rebound as the glut will be less. That price rebound for poly would create a narrowing in the price gap. That suggests that that  while Mono may decline some, it will not  necessarily decline much since the Mono wafers  is ramping much faster this year in wafer productions vs last year.

I think the price gap between mono and multi grade polysilicon must narrow quickly again to the historic average of ~10RMB/kg simply because this corresponds to the added value of mono over multi.  I think we will simply see multi dragging down mono.  Cheap multi-grade polysilicon will make the rest of the multi-grade chain drop in price and force the mono side to go down in price as well in order to stay competitive.  I think that the poly glut will intensify during april and may as the new plants are ramped so I don't see multi-grade poly rebounding any time soon.

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GCL expanding ultra-low cost capacity by 60000T in Sichuan:
https://www.digitimes.com/news/a20190419PD211.html
http://guangfu.bjx.com.cn/news/20190418/975620.shtml

This will speed up the realignment of the global poly industry you guys, i.e. driving non-Chinese competitors out of business and cementing poly prices way below $10/kg.  Keep in mind when it comes to calculating spreads and EPS for DQ you guys.

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20-F out you guys:
http://secfilings.nasdaq.com/filingFrameset.asp?FilingID=13364060&RcvdDate=4/17/2019&CoName=DAQO NEW ENERGY CORP.&FormType=20-F&View=html

Let's see what we can dig up here.  For starters here's some info on CAPEX for 3B and 4A.  This reinforces my view that they'll have to pile on some serious debt for their expansion:
"We completed the construction of our Phase 3B expansion project in October 2018. The total capital expenditure for our Phase 3B expansion was approximately $129.8 million, of which $95.3 million had been spent as of December 31, 2018.We commenced our Phase 4A expansion project in 2018. The total capital expenditure for our Phase 4A expansion is expected to be approximately $415.3 million, of which $56.1 million had been spent as of December 31, 2018."

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OCI Q1 results out, operating margin of the poly division = -27%, cash burn continuing for the third quarter in a row and intensifying:

https://www.oci.co.kr/eng/sub/investment/ir_view.asp?idx=645&pageNo=1

It's funny how CEOs always have to fight to the bitter end.  They would save their investors so much money by shutting operations and liquidating assets but their egos prevent them from doing so in 99% of the cases.

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No estimate from me (I don't have the time to do the detailed research you and other posters here do--which is why I like this forum), but $0.56 sounds pretty good to me.  I'd be pleased with that.

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5 hours ago, Klothilde said:

Daqo New Energy to Announce Unaudited First Quarter 2019 Results on May 21, 2019
https://www.prnewswire.com/news-releases/daqo-new-energy-to-announce-unaudited-first-quarter-2019-results-on-may-21-2019-300845902.html

Any estimates you guys?  I have them with Rev of $84.8M and EPS of $0.56 on estimize currently.

I will go $0.34 before 1 time adjustments and forex. That runs a $1.75 spread between cost and ASP.

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No commentary you guys? I'm in a cabin in the woods but it looks like they made most of earnings from forex gains, right?

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13 hours ago, Klothilde said:

No commentary you guys? I'm in a cabin in the woods but it looks like they made most of earnings from forex gains, right?

Yeah you were overy bullish at $0.56. :)

 

Q2 will be worse.

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