Daqo New Energy Corp. (NYSE:DQ) Q3 2023 Earnings Call Transcript

Daqo New Energy Corp. (NYSE:DQ) Q3 2023 Earnings Call Transcript October 30, 2023

Daqo New Energy Corp. misses on earnings expectations. Reported EPS is $-0.09 EPS, expectations were $1.7.

Operator: Good morning, and welcome to Daqo Energy Third Quarter 2023 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note that this event is being recorded. I’d like to turn the call over to Ms. [Anita Zhu] (ph), Investor Relations Director. Please go ahead.

Unidentified Company Representative: Hello, everyone. I’m Anita Zhu, the Investor Relations of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the third quarter of 2023, 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; CFO, Mr. Ming Yang; and myself. The call today will begin with an update from Mr. Xu on market conditions and company operations. And then, Mr. Yang will discuss the company’s financial performance for the quarter and the year. After that, we’ll 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 these and other risk is included in the reports or documents we have filed with were 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 amount in the 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. So, now we would like to welcome our CEO, Mr. Xiang Xu, for the opening remarks.

Xiang Xu: [Foreign Language] [Interpreted] Thank you, everyone, for joining the conference call today. Anita will serve as my translator during the call. And if you have any questions addressed to the company or to me, please address the questions at the end of the call. So, now on behalf of Mr. Xu, I’ll now read off his remarks regarding current market conditions and the market — and the company performance. So, during the third quarter, continued optimization of operations at our two polysilicon facilities resulted in total production volume of 57,664 metric tons, an increase of 12,358 metric tons or 27% compared to the previous quarter. Our Inner Mongolia 5A facility, which is now in full production, contributed approximately 40% of our total production volume.

So meanwhile, our production costs further decreased by 5.8% from quarter — second quarter to US$6.52 per kilo, primarily due to improvements in manufacturing efficiency, as well as a reduction in the cost of raw materials, particularly metallurgical-grade zircon. So compared to our first quarter average production cost of US$7.55 per kilo, cost has declined by more than US$1 per kilogram. So, based on the company’s most recent production data, we expect our fourth quarter cost to continue to trend downwards from the third quarter levels. So, we shipped a total of 62,967 metric tons of polysilicon in third quarter, an increase of 9,465 metric ton over our second quarter shipments, and significantly higher than our quarterly production volume.

This has resulted in significant decrease in a polysilicon product inventory across our two facilities, now at a level of less than one week of production volume. So for the third quarter, the company generated US$70 million in EBITDA. Net cash provided by operating activities for the first nine months of the year totaled US$1.5 billion, with more than US$711 million in third quarter. The company continues to maintain a very strong balance sheet with no financial debt. At the end of the third quarter, the company had a cash balance of US$3.3 billion and a combined cash and bank note receivable balance of US$3.6 billion. So, our total annual polysilicon nameplate capacity has reached 205,000 metric tons across our two facilities. For fourth quarter, we expect total poly production volume to be approximately 59,000 metric tons to 62,000 metric tons, a continued increase over our third quarter levels.

Full year production is expected to be approximately 196,000 metric tons to 199,000 metric tons, representing an increase of 46% to 49% compared to 2022 levels. With more than a decade of experience in poly production, as well as a fully digitalized and integrated production system that optimizes operational efficiency. We are confident that we can strengthen our position as one of the dominant polysilicon manufacturers in the industry. At the end of the second quarter, after poly prices reached bottom, customers began reordering and taking delivery of products, significantly reducing industry inventory levels. Polysilicon pricing recovered gradually over the third quarter. And in July, as module makers intensified competition, module prices fell from RMB1.5 per watt in June to RMB1.3 per watt in July.

Meanwhile, the high demand in the module sector coupled with lower utilization rate for poly due to a power rationing and system maintenance drove a marginal recovery in polysilicon prices. According to industry statistics, mono-grade polysilicon prices rebounded from the lowest level of less than RMB60 per kilo in June to RMB63 to RMB68 per kilogram by end-July, and an average of RMB87 per kilogram by the end of September. Furthermore, as the current price range is unlikely to be profitable for new entrants given their cost structure, we have seen delays in the production plants. Going into the fourth quarter, production volumes in poly sector are unlikely — are likely to increase marginally as some new capacities come online. During the third quarter, we saw an acceleration in the transition from P-type to N-type cell technology with strong growth in N-type product demand volume and the N-type products’ average selling price premium expanded to RMB10 to RMB12 per kilo in the third quarter.

Going forward, we expect this transition to further accelerate as N-type products expand market share, leading to continued demand growth. To give an update on the company’s US$700 million share buyback program announced in November 2022. By the end of this September, the company had already purchased 8.1 million ADS for approximately US$328.8 million, with an average cost of approximately US$40.58 per ADS. Combined with the program completed in 2022, in aggregate, the company has already purchased approximately 10 million ADS for approximately US$448.8 million. While basic weighted average ADS outstanding for the third quarter were 74 million shares, total outstanding shares at the end of the third quarter were approximately 71.8 million shares, after fully reflecting our recently completed share repurchases.

With the urgent need to address climate change, we’re still at the very early stage of the energy transition from fossil fuel to renewable energy for human’s energy needs on Earth. As one of the most competitive forms of power generation, the continuous cost reduction in solar PV products and the associated reduction in solar energy generation costs are expected to create substantial additional green energy demand, which we believe is unlikely — is likely to exceed most analysts’ expectations. Solar PV is generally expected to eventually become one of the most important energies to power the world. In addition, as solar PV technology keeps evolving, we believe that the increasing needs for very high purity poly, such as our N-type polysilicon, will help differentiate us from most of our competitors.

While many of our competitors will likely struggle in the current market environment, Daqo New Energy has one of the best balance sheet in the industry with no financial debt, and we, as a whole, are confident that we will navigate the near-term market volatility successfully. We’re optimistic that as the solar end market continues to grow, and as our customers continue to transition to higher-efficiency N-type technology, we will benefit from this trend. Daqo will continue to strive to maintain solid growth and capture the long-term benefit of the growing global solar PV market. So, regarding future outlook and guidance, we expect to produce approximately 59,000 metric tons to 62,000 metric tons of poly during the fourth quarter of 2023. And for full year 2023, we expect to produce approximately 196,000 metric tons to 199,000 metric tons of polysilicon.

So now I’ll turn the call to our CFO, Mr. Ming Yang, to delve deeper on the financial performance. Ming, please go ahead.

Ming Yang: Thank you, Anita, and hello, everyone. Thank you for joining our third quarter earnings conference call today. Now, I will discuss the company’s third quarter financial performance. Revenues were US$484.8 million compared to US$636.7 million in the second quarter of 2023 and US$1.2 billion in third quarter of 2022. The decrease in revenue compared to the second quarter of 2023 was primarily due to the decrease in average selling prices mitigated by an increase in sales volume. Gross profit was US$67.8 million compared to US$258.9 million in the second quarter of 2023 and US$978.6 million in the third quarter of 2022. Gross margin was 14% for the quarter compared to 40% in the second quarter of 2023 and 80% in the third quarter of 2022.

The decrease in gross margin compared to the second quarter of 2023 was primarily due to lower average selling prices, which was partially mitigated by our lower production cost. Selling, general and administrative expenses were US$89.7 million compared to US$43.3 million in the second quarter of 2023 and US$280 million in the third quarter of 2022. I will give a little bit more details about the increase in SG&A expenses for the quarter as compared to the previous quarter. And this is primarily related to the resignation expenses and the recognition of the remaining share-based compensation expenses led to the company’s recent management change. The recognition of the remaining non-cash share-based compensation expenses consists of approximately 330,000 shares, which will be vested based on the vesting schedule over the next two years.

And based on the current share price, there’s an approximately US$8 million in terms of expense. However, U.S. GAAP rules requires that the company recognize the related expenses based on the share price at the time of grant and this would be approximately US$23 million. And in addition, our SG&A expenses during the third quarter includes a total of US$46.3 million in non-cash share-based compensation costs, which includes the above expense related to recent management changes as I had mentioned. And so — and this compares to a total of US$27.5 million of share-based incentive expenses in the second quarter of 2023. For the fourth quarter, we would expect our SG&A expenses to normalize and will be in the range of approximately US$35 million to US$38 million per quarter, inclusive of non-cash share-based compensation costs.

Research and development costs were US$2.8 million compared to US$2.2 million in the same quarter of 2023 and US$2.5 million in the third quarter of 2022. R&D expenses vary from period to period to reflect R&D activities that take place during the quarter. And most of our R&D activities currently is focused on increasing the percentage of N-type polysilicon for the company’s product mix. Foreign exchange change was US$3.1 million for the quarter compared to a loss of US$19.7 million in the same quarter of 2023. And this is attributed to the volatility and fluctuation in the U.S. dollar and RMB exchange rate during the quarter. And as a result of the above mentioned, income from operations was US$22.5 million compared to US$213 million in the second quarter of 2023 and US$693 million in the third quarter of 2022.

Operating margin was 4.6% compared to 33.6% in the second quarter of 2023 and 56.8% in the third quarter of 2022. Net loss attributable to Daqo New Energy shareholders was US$6.3 million compared to net income of US$103.7 million in the second quarter of 2023 and US$323 million in the third quarter of 2022. Loss per basic ADS for the quarter was US$0.09 per share compared to earnings per basic ADS of US$1.35 in the second quarter of 2023 and US$4.28 in third quarter of 2022. Adjusted net income, a non-GAAP, attributable to Daqo New Energy shareholders, excluding non-cash share-based compensation costs, was US$44 million compared to US$134.5 million in the second quarter of 2023, and US$590.4 million in the third quarter of 2022. Adjusted earnings per basic ADS was US$0.59 compared to US$1.75 in the second quarter of 2023 and US$7.81 in the third quarter of 2022.

EBITDA was US$70.2 million compared to US$230 million in the second quarter of 2023 and US$720 million in the third quarter of 2022. EBITDA margin was 14.5% compared to 36.1% in the second quarter of 2023, and 59% in the third quarter of 2022. Now I would like to provide some additional color related to our operations. So, from a pure operation perspective, this would exclude the impact of the one-time resignation costs and the non-cash share-based compensation costs of the U.S. [ListCo] (ph). For our operating subsidiary Xinjiang Daqo, in the quarter, pre-tax earnings of RMB888 million or approximately US$121 million. A net income of RMB689 million or approximately US$94 million. Daqo New Energy currently owns approximately 72.4% of Xinjiang Daqo and Daqo New Energy shareholders allocation of the operating net income should be approximately [US$32.4 million] (ph), excluding the above mentioned GAAP accounting related expenses.

And now on the company’s financial condition. As of September 30, 2023, the company has US$3.28 billion in cash and cash equivalents and restricted cash compared to US$3.17 billion as of June 30, 2023, and US$3.05 billion as of September 30, 2022. And as of September 30, 2023, notes receivable balance to the company was US$276 million compared to US$799 million as of June 30, 2023 and US$1.57 billion as of September 30, 2022. Note receivable balance represent bank notes with maturity within six months. And now the company’s cash flow. For the nine months ended September 30, 2023, net cash provided by operating activities was US$1.49 billion compared to US$1.7 billion in the same period of 2022. And for the nine month ended September 30, 2023, net cash used in investing activities was US$954 million compared to net cash used in investing activities of US$605 million in the same period of 2022.

Net cash used in investing activities in the three quarter of 2023 was primarily related to capital expenditures on the company’s polysilicon project in Baotou City, Inner Mongolia, inclusive of both Phase 1 and Phase 2. And for the nine month ended September 30, 2023, net cash used in financing activities was US$602 million compared to net cash provided by financing activities of US$1.47 billion in the same period of 2022. Net cash used in financing activities for the first three quarters of 2023 was primarily related to US$322 million in share repurchases and US$303 million in dividend payments made by the company’s Xinjiang Daqo subsidiary to its minority shareholders. The company continue to maintain a very strong balance sheet with significant cash balances and no financial debt as well as healthy operating cash flow.

And with that, concludes our prepared remarks. Operator, we will now open the line to questions from the audience.

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Q&A Session

Operator: Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] First question will be from Philip Shen, ROTH MKM. Please go ahead, sir.

Philip Shen: Hi, everyone. Mr. Xu, Ming, thanks for taking my questions. Wanted to explore your view on polysilicon pricing for Q4. You came in with about US$7.70 for Q3 per kilogram. And I wanted to see what your expectations are for Q4. And then, also for the beginning of next year, and then by year-end ’24, do you see a recovery, or do you expect polysilicon pricing to remain at current levels? Thanks.

Ming Yang: Okay. Mr. Xu will provide commentary first and then Anita will provide a translation.

Xiang Xu: [Foreign Language] [Interpreted] Hi, Philip. So, Mr. Xu has commented that, for the fourth quarter, the price should stay somewhat similar to now. And for P-type, it should remain around RMB70 per kilo, and for N-type, there’s a RMB10 premium, which is around RMB80 per kilogram. And in December, the price should stay somewhat consistent as of now. And going into the first quarter, because of demand, the price should lower to around RMB65 to RMB70 per kilogram, around that range. But going to second quarter and beyond, it should go right above RMB70 and plus.

Philip Shen: Okay, great. So, the price to RMB65 to RMB70 kilograms lower in Q1, what is driving that? And is that price, are you talking about P-type? And so should we expect N-type to be RMB10 higher? And what will cause the price to go higher in Q2? And what does he think the year-end ’24 price might be? Thanks.

Xiang Xu: [Foreign Language] [Interpreted] The price of the first quarter around RMB65 to RMB70, the price range, is primarily driven by seasonality. So, Christmas and Chinese New Year, that causes lower demand. So that’s primarily the price in January and February, but price should recover starting in March. And that’s the price for P-type. For N-type, we see a price premium of around RMB5 to RMB10 per kilogram.

Philip Shen: Okay. Got it. Thank you. One more question for me and then I’ll pass it on. As it relates to the industry structure and given these low prices, there are a lot of companies that might be having trouble with driving profit. So, just curious if you can talk about what he sees ahead? And can he talk through, does he expect certain companies to stop production or even accelerate the stoppage of production shutdown? What does he see for the evolution for the industry in the coming six months? Thanks.

Xiang Xu: [Foreign Language] [Interpreted] In terms of the industry structure, first of all, we want to highlight that we have a very competitive cost advantage in producing polysilicon and we see that if price goes down to RMB65 to RMB70, there’s roughly a 50,000 to 60,000 of production volume that’s at the — that are not going to be profitable. And for the new entrants, their costs are obviously a lot higher than us, which is around 75,000 to 80,000. So, given that they don’t have enough cash — not enough cash, and the financing route is relatively limited now, they will be struggling in the coming quarters.

Ming Yang: So, we certainly see industry supply adjustments going forward in the coming months, as well as the industry rebalancing and normalize.

Philip Shen: Okay, got it. Thank you for the color. I’ll pass it on.

Ming Yang: Great. Thank you, Phil.

Operator: Thank you. Next question will be from Alan Lau of Jefferies. Please go ahead.

Alan Lau: Thanks a lot for taking my question. Thanks, Mr. Xu and also Ming for the prepared remarks. So, I would like to have more clarity on the share-based expense. This seems to be the item which has a major change quarter-over-quarter. So, I would like to know what is the breakdown on the US$89.7 million of SG&A, because in the prepared remarks, you have US$46.3 million of non-cash share-based compensation, but in your reconciliation, it’s US$50 million. So, I would like to know like how much is the original share-based compensation and how much is related to the resignation of Mr. Longgen Zhang?

Ming Yang: Hi, Alan. This is Ming. I will discuss the increase in SG&A expenses. So, for the quarter, we had a total of US$46 million in non-cash share-based compensation expenses. And of that, approximately half or approximately US$23 million is related to the resignation of our previous CEO, Mr. Longgen Zhang. And this actually is approximately, again, 330,000 shares of his previous equity grant, which would be vested over the next two years. But because of GAAP accounting rules and we are required to recognize this expense during the third quarter based on his resignation as we saw, and this also would be recognized in terms of at the time of the grant, right, which was around US$17 per share or so. So that’s how we quartered the additional US$23 million in additional share-based compensation costs.

And the remaining is also primarily related to other resignation expenses as well. We do expect this to normalize for the next quarter. And we expect next quarter’s SG&A expense to be in the range of US$35 million to US$38 million per quarter.

Alan Lau: Understood. Thanks a lot. So, because it seems that other than these expenses, because the increase in expenses quarter-over-quarter is like US$46 million. So, probably this US$23 million is one-off. It seems there are also other increase in expenses. So, are those cash expenses?

Ming Yang: Yeah. So, I mean some of it is expenses related to, for example, shipping cost as we ship more volume for the quarter, but the remaining is primarily to his resignation cost.

Alan Lau: Understood. So, the next question, switching gear to our buyback plan, so we have already buyback a major portion of our US$700 million buyback plan, but still we have quite a lot of bullets. So, are we planning to declare dividends or what is our plan to execute the remaining of the — make use of the remaining funds for the buyback or dividends?

Xiang Xu: [Foreign Language] [Interpreted] Regarding the US$700 million shareback, we have a remaining US$380 million left. And because our CEO has just been in the position for a quarter and we’ve been in talks with our Board and our management team, we have decided that we will continue to pursue the share repurchase program that we’re committed to repurchase during the last quarter to whatever the upper limit will be based on what we can do to repurchase on a daily basis. But overall, we will continue to repurchase. We will buy back as much as we can in the last quarter.

Alan Lau: Thank you. So, effectively it means US$380 million in the remaining two months?

Ming Yang: Effectively, yes, as much as we could repurchase.

Alan Lau: Okay. Thank you.

Xiang Xu: [Foreign Language] [Interpreted] Yeah. We see the price as being very low at this point, so we are very committed to repurchase at this point.

Alan Lau: Understood. So, as communicated before, the company may also consider to cancel those shares. So, is this still a plan or when will the company cancel those shares?

Ming Yang: Yes, Alan. So, it is the company’s intention that I think by year-end, we would cancel the shares that we have repurchased. So the company’s intention is to cancel those shares, repurchase shares.

Alan Lau: Yes, that would definitely help a lot in increasing the EPS as well. So yeah, thanks a lot. So I think the last question here is, so what is your view on next year? Like, what do you think will be your production plan? Is it full capacity based on the current capacity? And lastly, what is the progress on your semiconductor grade polysilicon?

Xiang Xu: [Foreign Language] [Interpreted] For the production volume for next year, we forecast around 280,000 metric tons to 300,000 metric tons, but that will also be a contingent upon the progress of our construction. And for semiconductor, we’ll start pilot production at the end of this year. So, for next year, the capacity will just be 1,000 metric tons.

Ming Yang: So, Alan, on a high level, we will have full production on our Xinjiang facility, which is around 130,000 metric tons. And then also full production on our Inner Mongolia Phase 1, which is also additional 100,000 metric tons. And finally, our Inner Mongolia Phase 2 to start production around mid-year next year. So, approximately based on 100,000 metric ton capacity, around 50,000 metric ton production. So that’s why we think next year, range 280,000 to 300,000 metric tons. Obviously, this is a very preliminary estimate. It’s not an official guidance. And we will have more formal numbers based on when our Inner Mongolia Phase 2 is more closer to completion and start of production. Okay, thank you.

Alan Lau: Understood. It’s very clear. Thanks a lot. I’ll pass it along. Thank you.

Operator: Thank you. Our next question comes from [indiscernible]. Please go ahead.

Unidentified Analyst: Hello, sir. Just so I understand, repurchasing in the last — I like that the total share will finally — decrease finally. I want to ask one more question. The first question is how much more will shares be issued for management compensation plans in the next one year or two years? Will we see US$40 million or something like that as share-based compensation? That’s the first question. And the second question, you have US$350 million or something like that repurchasing last. Last quarter you were stating that you will finish it by the end of the quarter — by the end of the year. So, we’ll be expecting Q4 for you to deploy all of this capital or as much as possible and at an accelerated pace compared to the anterior quarters. So, till now you bought in three quarters like US$300 million. Are you telling us that you will buy US$200 million or even US$300 of what is left in the last quarter, in one quarter?

Xiang Xu: [Foreign Language] [Interpreted] Regarding the share repurchase, yes, I think we can repurchase — based on the rule, we can repurchase around US$220 million to US$250 million in the last quarter, and we will definitely accelerate, we’ll keep that pace. So we will…

Unidentified Analyst: Okay. And how many in quarter four — I don’t know the exact number, but if you have it on the top of your head or something around that, how many shares will be issued for share-based compensation? If I’m not wrong, this quarter it was like US$45 million. But last quarter, so Q2, you had like US$120 million or something like that. You had a larger one-time. So, my question is, for Q4, how many shares will be issued for share-based compensation for management?

Ming Yang: Around — in aggregate around 350,000 shares.

Unidentified Analyst: 300,000 shares something like that. So that’s 300,000 times US$24 today’s price, it’s — okay, not even US$1 million in share-based compensation, okay. Last question is — actually I have two questions left. You stated in last quarter and I really like that in the transcripts, in the earnings call, you stated in August that you will consider issuing shares in 2024 in the Shanghai-listed shares, the 75% ownership Daqo New Energy has, and you would consider selling shares there to buy shares on the New York Stock Exchange. So, my question is, when will that be available? Is it two years after the IPO or in what month of next quarter — next year, sorry?

Xiang Xu: [Foreign Language] [Interpreted] Yeah. We will — yeah, thank you for the suggestion. And we will consider that proposal. And in fact, I think by July next year, we are able to sell the shares in Asia and then use that amount to continue — maybe deploy another share repurchase plan for 2024.

Unidentified Analyst: Do you have any idea — not an estimate of what this share repurchase, after you finish this share repurchase of this year, the US$750 million, so you have like US$300 million left or US$350 million left. So my question is what will the scale of the 2024 repurchase program be or other dividend yields for investors in the New York Stock Exchange shares I’m talking in DQ on New York stock exchange? If you have any idea or if you could comment on that? And thank you very much for all your answers. It’s very nice of you.

Ming Yang: Hello. Thanks for your question. So, it is still early to say or to estimate what the program size might be like. But starting in July of 2024, after the three-year lockout period for our Asia listing, so the U.S. Daqo New Energy is able to start to sell down some of its shares of the Asia listing. So I’ll just spell out some numbers, right? So let’s assume that we say sell down even a minor 10% stake, based on the current valuation of the Asia listing, which is roughly RMB70 billion, right, so we could potentially raise somewhere in the range of RMB7 billion or so in capital. And I would expect that majority of this could be used for share purchase in the U.S. NYSE listing. That’s the current…

Unidentified Analyst: Very nice way how you stated it. So, Daqo New Energy, just for all shareholders and for me also to understand, we own 75% of the Shanghai listing, right? It’s such a rudimentary question, but I just want to make it clear. It’s the stupidest question ever, but yeah.

Ming Yang: That’s right. 72.4% to be exact, yeah, but that’s right, yes.

Unidentified Analyst: Yeah, the discount is same. Okay. And the last question and final one, what will the free cash flow be for 2024? Or how much CapEx last quarter? I really liked how management talked in the earnings call and I just want to make a revamp of what happened last quarter. So, CapEx, you talked last quarter, actually Ming Yang talked, I think the last CEO if I am — or whatever, he talked that how much CapEx is left into 2024. What will the outflow, what will the CapEx be for 2024, around how much is left to invest?

Ming Yang: Okay, so at the end of the third quarter, so total CapEx remaining for the company’s major projects, including Inner Mongolia Phase 1, Inner Mongolia Phase 2, and our semi project is approximately RMB6.5 billion or approximately US$900 million or so. And then, of that, we expect for the third quarter, total CapEx — planned CapEx is around RMB2.7 billion or roughly US$350 million. And the remaining would be spent for the next year. Yeah, So that’s the total CapEx plan right now.

Unidentified Analyst: So, what is left in 2024 is US$900 million, right? Or that is minus the US$300…

Ming Yang: US$600 million to US$700 million, yeah, approximately.

Unidentified Analyst: Okay. And in 2025, do you have any major plans yet? Or is there any CapEx in 2025 which is eccentric, like about US$500 million?

Ming Yang: No plan right now currently.

Unidentified Analyst: Okay. So, for Mongolia Phase 2 or Phase 1, whatever, is the last thing. Okay. Thank you very much. You were very kind, very nice to hear you.

Ming Yang: Thank you.

Operator: Thank you. Next question will be from [indiscernible]. Please go ahead.

Unidentified Analyst: Hello. I want [clarity] (ph) about the cancellation of the shares. Just now you said that at the end of the year, there might be cancellation of the shares. We would like to know that will you cancel all of it by the end of the year, or at the end of the year, you will start to cancel it? So, what is the schedule of the cancellation of the shares in detail? Do you have plans?

Ming Yang: Okay, most likely it will be one-time around the end of the year and we would likely cancel almost all, if not all, the majority, if not, all of the shares that we’ve repurchased. I think most likely all of the shares that we’ve repurchased at that time will be canceled.

Unidentified Analyst: Okay, thank you. And we also want to know, do you consider any dividend option — dividend for the company?

Xiang Xu: [Foreign Language] [Interpreted] For this year — our priority this year will still be the share repurchase plan. We — as we just stated, will continue to repurchase our shares as much as we can. And for next year, we will contemplate between another share repurchase program or issuing dividends, but that will be contingent upon Board approval and we’ll need to delve deeper into that and consider the plan. But as of now, our primary goal is to complete as much as we can in terms of the share repurchase plan.

Unidentified Analyst: Okay. Thank you. That’s all my questions.

Operator: Thank you. Our next question will be from Gordon Johnson, GLJ Research. Please go ahead.

Gordon Johnson: Hey, guys. Can you hear me? Hello?

Unidentified Company Representative: Yeah, hi, we’re here.

Gordon Johnson: Hey, thanks for taking the questions. So, a lot of my questions have been answered, but there seems to be some concern amongst some of our on-the-ground contacts in China that there could be grid issues with respect to the massive amount of solar that’s been installed this year. I mean, I think over the first nine months, we’re close to 130 gigawatts in China, suggesting we could get 172 gigawatts for the full year 2023. That’s amazing. That’s great for you guys. But what we’re hearing is that could potentially cause issues with respect to grid connects next year, and thus you could get flat to down installs in China. Two questions. Number one, have you heard this? Number two, if you have, what are your thoughts? And then a follow-up. Thank you.

Xiang Xu: [Foreign Language] [Interpreted] Okay, let me translate for Mr. Xu. So, even though this year approximately 130 gigawatts has already been installed, Mr. Xu is still very optimistic about the overall installation here within China. So, it’s the expectation that — again, he’s actually an expert on the grid. So, he’s been a supplier of power equipment to the grid for many, many years. So, he expects that overall next year it could be approximately 200 gigawatts. And what’s happening here in China is — one is it is the Chairman Xi Jinping’s goal and his mandate that China to deploy significant amounts of renewable energy. And also the National Energy Administration is very proactive in terms of allowing and requiring actually local grids to accept as much renewable energy as possible.

At the same time, China is building significant amount of capacity in energy storage. Expect that storage could reach a high of [15%] (ph) of the overall power generation for China over time. Even in the near term, China exploring technology, including not just battery storage but also in terms of hydrogen storage as well as hydro or water-based type of energy storage. So, this is all happening within China. So, I think combining all these factors, including the mandate from Chairman Xi Jinping, we do believe that China will — renewable energy, particularly the solar market, will continue to grow for next year.

Gordon Johnson: Okay. That’s helpful. And then one last one from me. And again, congratulations on your prior execution, guys. Really good in the poly market. So, we’ve heard that there was — in September, there was roughly 60 gigawatts of output, yet the market only absorbed 40 gigawatts. And again, we’re hearing that there could be caps on the market of 200 gigawatts in 2024. So, just wanted to hear your thoughts on, if indeed, those numbers are accurate, is there the potential for some of your competitors to potentially shut down capacity/idle capacity that’s making the market better as we enter the first half of ’24? Thanks again.

Xiang Xu: [Foreign Language] [Interpreted] Some of the production has dropped by 50%. The average of the average of the production is 78% so this is a very good figure. But the demand for this season is of course also the demand of Europe and the US but of course there is also the demand of China. It should be said that the price of the main building is declining so everyone is still looking forward to it. There are about 20 projects and the main building has some of the projects. China’s demand is still there. The price of the oil industry is falling. So we are still looking at the 20-gallon market. The price of the oil industry is falling. But we should talk about the end of the year soon. I think China’s market will have some new changes.

The current statistics show 20 billion, but I think 200 billion. But I think China’s market will be over 200 billion next year. Including the so-called desert and wind power, China has new policies. Desert power is a big growth. Including lemon juice, there is a big problem. Because overall, China is still lacking. The copper industry is not good. Not compared to the gold industry? Not compared to the gold industry, of course, there is no advantage. Because this is a copper industry, it can’t do anything when it’s in trouble. So now it’s a problem. Because he asked the question, he is an expert, so he is right. Some companies are lacking, so it’s a problem. So that’s it. Yeah. So for this quarter, we’ve seen that wafers has some inventory due to seasonality reasons.

So, for instance, our downstream players, our customers like Zhonghuan TCL [indiscernible] from what we’ve known that their utilization rate has dropped to 50%, but overall for wafer, the utilization rate is still around 78%. And because module price has kept falling down, we’ve seen that there should be around 20 gigawatts of inventory by year-end and also at the beginning of the year, but there should be some new changes going forward into next year. And we forecast that China should be able to reach and even exceed 200 gigawatts next year because there’s some new policies launched in Xinjiang, Gansu, Inner Mongolia, et cetera. And regarding the question on our competitors, those who don’t have any competitive advantage would have no edge in this market given the low price.

And yes, they would have some struggles.

Ming Yang: So, I think shutdown, including [indiscernible] shutdown and idling of some capacity is actually a likely situation for non-competitive players within the industry.

Xiang Xu: [Foreign Language] [Interpreted] For players in our industry, cost and quality are the two primary — the key factors in gaining an edge in this competitive landscape. And as a company, we have the lowest cost and they’re high quality, so we believe that we can sustain our position in the market.

Gordon Johnson: Thanks again, guys.

Ming Yang: Great. Thank you. And we’ll take our last question if there’s one more.

Operator: Thank you. The next and final question will be from Frank Fan of Nomura. Please go ahead.

Frank Fan: Thanks, Mr. Xu and Mr. Yang, for taking my question. I think this question has been addressed in the second quarter earnings. I just want to reconfirm that we do not consider any privatization plan in this year and also in the next year, right? And the second question is, are the voting rights of shares hold by management is equal to those voting rights hold by minority common shareholders? Thank you.

Unidentified Company Representative: Sorry, Frank, can you repeat the second question?

Frank Fan: Yeah. My second question is about voting rights. Shares hold by management, all the Board members, I wonder if the voting rights is similar at one-to-one ratio to those shares hold by minority public shareholders. Thank you.

Xiang Xu: [Foreign Language] [Interpreted] We don’t have any plans in terms of privatization at this point, but we will see how the market evolves. But as of now, we don’t have any plans in terms of privatization this year and in the coming years.

Ming Yang: Okay. And regarding your second question regarding voting rights, so the majority of shareholders does not have super voting rights. So, they do have the same one-to-one voting right as the minority shareholders or the public shareholders. So, the voting rights are the same amongst shareholders.

Frank Fan: Understood. Thank you, Mr. Xu, and thanks, Mr. Yang.

Ming Yang: Okay, great. Thank you, Frank. Okay, operator, I think that concludes the session.

Operator: Yes, that concludes the question-and-answer session. Now, I’ll turn back to management side for closing remarks.

Unidentified Company Representative: Thank you everyone again for participating in today’s conference call. So, should you have any further questions, please do not hesitate to contact us. Thank you, and have an awesome day. Goodbye.

Operator: Thank you. This concludes the conference call today. Thank you for attending today’s presentation. You may now disconnect.