Earnings Call: Q2 2021

Aug 18, 2021

Good day, and welcome to the Docu New Energy Second Quarter 2021 Results Call. All participants will be in a listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Kevin He. Please go ahead. Hello, everyone. This is Kevin He, the Investor Relations of Daqiu New Energy. Thank you for joining our conference call today. Daqiu New Energy just issued its financial results The Q2 of 2021, which can be found on our website at www.dqsolar.com. To facilitate today's conference call, we have also prepared a CPT presentation for your reference. Today attending the conference call, we have Mr. Longbin Zhang, our Chief Executive Officer and Mr. Ming Yang, our Chief Financial Officer. The call today will feature an update from Mr. Zhang on market and operations, Then Mr. Yang will discuss the company's financial performance for the quarter. After that, we will open the floor to Q and 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 Statements 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 statements. Further information regarding these 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 views as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties. All the information provided in today's call is as of today, and we undertake no duty to We generally reference monetary amounts in U. S. Dollar terms. Please keep in mind that our functional currency is Chinese rmb. We offer these translations into U. S. Dollars solely for the convenience of the audience. Without further ado, I'll now turn call over to our CEO, Mr. Zhang. Please go ahead. Thank you, Kevin. Hello, everyone. Thank you for joining our conference call today. We are very excited to report An excellent quarter with strong revenue growth and better than expected profitability. As the company achieved Record high production volume, gross profit and net income with a global forecast on addressing The climate challenge with plans to reach carbon neutrality, market conditions remain Strong for the polysilicon sector. The strong increase in downstream demand has led to A shortage of polysilicon and the cost of our polysilicon ASP to rise significantly from 11 $0.9 per kg in Q1 to $20.81 per kg in Q2. In July August, the market price for mono grade polysilicon has remained at approximately $26 to $28 per kg, and we expect the strong price momentum to continue into the second half of this year. Despite the rise in solar module prices in the first half of this year, we continue to see Stronger than expected market demand even at the new market prices. Recently, the forward Value chain has been stable at the new market prices and downstream manufacturers are currently able to pass through Price increases to their customers during the week of August 9. Major solar weaver and Solar cell manufacturers in China announced price increases for solar wafers and sales, Further demonstrating the strong end market demand, we saw the uptick in polysilicon pricing in the last 2 weeks with a surge in orders from our diverse customer base. We expect the constrained Polysilicon supply to be the main limiting factor to the size of the global Solar market this year. Polysilicon production is a complex chemical process And has the highest barrier to entry in the solid value chain. Based on our research, we expect to see approximately 180,000 to 220,000 metric tons of additional polysilicon supply in 2022, considering a potential 6 month ramp up period for other polysilicon producers, This total global polysilicon supply can be used to produce approximately 240 to 250 gigawatts of solar modules, Which can support approximately 200 gigawatts to 210 gigawatts of solar installations in 2022. So the polysilicon sector will still be the one with most constrained supply Across the main solar PV manufacturing value chain in 2022, on the demand side, More and more countries have set up timetables for peak carbon and carbon neutrality targets There were significantly increased demand for renewable energies, including solar PV. In addition, there is still meaningful room for potential cost reduction across the value chain, which will effectively stimulate Large demand, especially given that solid PV has already reached a grid parity in many countries and regions in the world. As a result, we believe polysilicon pricing will remain healthy in 2022, Making our sector one of the most attractive sectors in the solar PV Industries in the wrong Ron, given its high entry barrier and operational complexity, on the policy front, during the Politburo Central Committee meeting on July 30 regarding economic activities in the second half of 2021, with China's President, Mr. Xi Jinping presiding over the meeting. The Central Government We reiterated the urgency for national coordination on carbon peak and carbon neutral energy growth And development of the Peak Carbon 2,030 action plans and related policies as early as possible. In addition, China recently announced an ambitious program to massively deploy Distributed generation solar projects at the local government level, that is the county level. We believe Solar will continue to be a strong beneficiary of the government policies and support. With regard to our ESG initiatives, we are in the process of incorporating environmental, social and governance Factors in all of our major business decisions and we published our Inaugural ESG Sustainability Report in July, we are already making Substantial progress on the sustainability front, including installing Whereas optimizing our production process, we reduced our comprehensive energy consumption density by 40% in 2020 Compared to 2017, we will continue to work on our ESG efforts, including planning For greener renewable energy use as part of our energy sources in the future, We continue to focus on initiatives to strengthen the company's long term competitiveness. Our major operational subsidiary, Xingjangdaku Newellish, Successfully completed its IPO listing on China's Asia market and started trading on Shanghai Stock Exchange, FITAC Innovation Board, the ticket code is 6,88,303. On July 22, 2021, the total growth precedes of the IPO Approximately RMB6.45 billion, which were funded Xinjiang Daqo's polysilicon expansion project and provide additional capital For our future growth plans, following the Xinjiang Daqo's IPO, Daqo New Energy Directories hold approximately 79.6% of Xinjiang Daqo's share and indirectly hold 1.1 percent of Xinjiang Daqo's shares, followed Daqo New Energy's wholly owned subsidiary, Chongqing Daqo, for a total ownership of 80.7% of The Asia listed subsidiaries, there is no variable interest entity, VIE, Structure between Daqo New Allergy and Xinjiang Daqo. The successful IPO will offer us an additional Valued to access the attractive capital markets in China for future growth and expansion. With our advantages of competitive Cost structure, quality and technology advancement, outstanding operational expertise and experience management team. We have set up a roadmap to increase our capacity to 720,000 metric tons by the end of 2024, Representing an approximately 50% annual average growth rate of our Production capacity over the next 3 years to better serve the fast growing global solar PV market. Now I will discuss outlook guidance for the company for this year. The company produced 41,287 metric ton of polysilicon and sold approximately 42,531 metric tons of polysilicon in first half of this year, Representing full utilization level of the company's production facilities, for the second half of this year, The company expects to remain the full utilization with sales volume similar to production volume. For the full year of 2021, the company raises its production guidance from the previous level of 81,000 to 83,000 metric tons to the level of approximately 83,000 metric tons to 85,000 metric tons of polysilicon for the full year. Inclusive of the impact of the company's annual facility maintenance, now I will turn The call over to our CFO, Mr. Yang, who will discuss the company's financial performance for the quarter. Thank you. Thank you, Langhan, and good day, everyone. Thank you for joining our conference call today. Now I will discuss our financial performance for the Q2 of 2021. We are pleased to report very strong financial performance for the Q2 with strong revenue growth and record profitability. Revenues were $441,400,000 compared to $256,000,000 in the Q1 of 2021 $133,500,000 in the Q2 of 2020. With strong market demand for our products, ASP was $20.81 per kilogram in Q2 2021 compared to $11.90 per kilogram in the Q1. As Langan mentioned, for the months of July August, the market price for monograde polysilicon has further increased to Approximately $26 to $28 per kilogram. And we expect the strong price momentum to continue into the second half of this year. Gross profit was $303,200,000 compared to $118,900,000 in the Q1 of 2021 And $22,700,000 in the Q2 of 2020. Gross margin was 68.7% compared to 46.4% in the Q1 of 2021 17% in the Q2 of 2020. The increase in gross margin was primarily due to higher average selling prices. Selling, general and administrative expenses were $9,300,000 Compared to $9,000,000 in the Q1 of 2021 $10,100,000 in the Q2 of 2020, SG and A expenses during the quarter include $2,400,000 in non cash share based compensation costs related to the company's share incentive plan compared to $3,000,000 in the Q1 of 2021 $4,500,000 in the Q2 of 2020. Research and development expenses were $2,100,000 compared to $1,200,000 in the Q1 of 2021 $2,000,000 in the Q2 of 2020. Research development expenses vary from period to period and reflect R and D activities that take place during the quarter. As a result of the foregoing, Income from operations was $292,400,000 compared to $109,200,000 in the Q1 of 2021 and $10,800,000 in the Q2 of 2020. Operating margin was 66.3% compared to 42.6% in the Q1 of 2021 and 8.1% in the Q2 of 2020. Interest expense was $7,200,000 compared to $7,800,000 in the Q1 of 2021 $6,700,000 in the Q2 of 2020. Net income attributable to Daqo New Energy Corp. Shareholders was $232,100,000 compared to $83,200,000 in the Q1 of 2020 $2,400,000 in the same quarter of 2020. Earnings per basic ADS was $3.15 compared to $1.13 in the Q1 of 2020 And $0.03 in the Q2 of 2020. EBITDA was 311,700,000 Compared to $128,100,000 in the Q1 of 2021 $26,800,000 in the Q2 of 2020, EBITDA margin was 70.6% compared to 50% in the Q1 of 2021 20% in the Q2 of 2020. As of June 30, 2021, the company had $269,700,000 in cash and cash equivalents and restricted cash Compared to $227,800,000 as of March 31, 2021, and $115,800,000 as of June 30, 2020. As of June 30, 2021, notes receivable balance was $97,000,000 Compared to $38,500,000 as of March 31, 2021 $8,200,000 as of June 30, 2020. With the company's strong earnings and operating cash flow, we took the opportunity to further reduce our interest bearing debt balance during the quarter. As of June 30, 2021, total bank borrowings were 156,600,000 of which $70,900,000 were long term bank borrowings compared to total bank borrowings of $222,200,000 including $100,400,000 of long term bank borrowings as of March 31, 2021, and total bank borrowings of 264,800,000 including 116,900,000 long term bank borrowings as of June 30, 2020. With our strong cash balance and cash generation for this year, we expect that we would pay off all of our interest bearing bank borrowings before the end of the year. For the first half of twenty twenty one, net cash provided by operating activities was $442,300,000 compared to $47,000,000 in the same period of 2020. And for the 6 months ended June 30, 2021, Net cash used in investing activities was $255,000,000 compared to $60,000,000 in the same period of 2020. The net cash investing activities in 2021 2020 was primarily related to the capital expenditures on the company's Polysilicon Expansion Projects. For the first half of twenty twenty one, despite the strong increase in capital expenditures related to our polysilicon The company generated $186,000,000 of free cash flow. For the 6 months End of June 30, 2021, net cash used in financing activities was $37,000,000 compared to net cash provided by financing activities $16,000,000 in the same period of 2020. The net cash used in finance activities in 2021 It was finally related to the repayment of bank loans. And that concludes our prepared remarks. Operator, we will now open the floor to questions from the audience. Thank you. We will now begin the question and answer session. And the first question comes from Phil Shen with ROTH Capital Partners, please go ahead. Hi, everyone. Thank you for taking my questions. You mentioned, Longgen, that the Outlook for poly pricing remains healthy in 2022. I was wondering if you could talk through how you expect Your pricing trend in Q3 and Q4 and then also in 2022? Thanks. Okay. Basically, by the end of this year, We see we didn't have new any capacity or new adding any new poly I think the supply into the pipeline. So we see right now, I think The current price, okay, around the average price, around like $26 to $28 For KG, it's well transferred to right now to ending the module price right now selling around 175 to even high 1.9 no, I'm sorry, 1.9 1.9 let me be cut to what Right now, from 1.75 to 1.99 renminbi per watt. So we see right now, I think the poly supply is very tight basically right now. So As we mentioned that for next year, we see from now on to end of this year, I think The price will continue, I think, will stay at the high in the second half of the year. The reason is because I think the module price It's higher than expected with demonstrating a strong and expected demand. Also, within the price increase in cell and waiver sector Also shows that the demand is very strong. I think in 2022, Based on the our industry search, we expect to see I think approximately 180,000 metric tons to 280,000 metric tons Of additional polysilicon supply, in which can be used to produce approximately 240 2 50 gigawatts of solar module. We think the overall cost reduction We are contributing around the RMB0.05 to RMB10 per watt and bring down the module price to maybe RMB1.6 RMB5 per watt. So if the power price continue to go down, let's say, to RMB2.22 to RMB23 per KT, the module price can be further Lower to 1.55 per watt. So basically, you can continue calculation on the module. So we believe I think next year, first half next year, the average ASP of the I think of polysilicon, we think is around RMB 150 per kg. For the second half of the year, we think it should be around like 130, I'm just around, okay. You can range for the 10%. So RMB 130 per kg. So I think for next year, as you see that, our 4B capacity will put into production by the end of this year. So next year, we think our production will get a 50% increase. So the bottom line continue can get growth. Hello. Great. Thank you, Logan. That's really helpful. And then from the cost side, We've seen your costs increase a little bit, not much, but just a little bit. What's the outlook for your cost structure On cash cost structure this year and Q3 and Q4 and then also for 2022? Okay. If you look at Q2, the cash cost is around $5.41 compared to Q1 $5.37 The cost of goods sold is $6.31 compared to Q1 is $6.29 The all costs plus everything together, I think is $47.30 compared to Q1, dollars 7.15 So yes, I think we slightly increased. The reason is because I think when the sales price go ASP go up, the value adding tax It also go up. So that's adding to the operation expenses. So basically, I think from Noah, especially in Q3, we see the polysilicon The powder, the silicon powder price has gone up. So I think for Q3 and Q4, our cost maybe continue to slightly keep, I think, Maybe same, maybe slightly, I think, a little up, 1%. Because of The polysilicon metal powder price jumped a lot. Especially this week, I think right now the prices are mostly go to, I RMB20000 per ton. But for next year, definitely because with additional For B, finished, the scalability of the production line, the plus the total, I think, The output, the scale, we think we still have like 2% to 5% the cost, the cutting in the future In the next year. Great. Okay. Thanks. Congratulations on your successful IPO in China. Wanted to get your view on your thoughts on the U. S. ADR. Some investors are asking Under what conditions would you consider taking the U. S. Shares private given the cash that you're generating through the cycle and also Future capital raises, you'll probably use the A Share entity. So your stock has performed well in China, While the New York Stock Exchange shares have trended lower, so under what conditions would you also consider a buyback or dividend? So Just curious on how you're thinking about the U. S. ADR? Thanks. It's a good question. Actually, also it's a factor. Our share price right now in the U. S. Market is here with honor value compared to Asia. Basically based on your calculation right now, Daqo New Allich Listing in U. S. Holds A total ownership of 80.7 percent of the Asia listed subsidiaries. Right now, almost it's kind of more than 80% on the price, right? So there is also Doctor. New Energy It's not the VIE structure between Daqo New Energy and Xinjiang Daqo. So Xinjiang Daqo right now is Daqo New Allergy's shareholding on Xinyuan Daqo can be traded 3 years in Asia's Market after Xinjiang Daqoo IPO, which is, I think, July 22, 2024. That means we can selling shares. I think to pay back the U. S. Shareholders, that's mean from 3 years from Noah, okay, from the IPO. Also has made a commitment letter to its shareholders that it will pay cash dividends in the next 3 years No less than 30% of its distributable profit during the 3 years period. In China, Asia is averaging 10% of annual profit as a baseline, okay. So we think Xinjiang Daxi Plan needs to be also be approved by its shareholders meeting and announced together with its 2021 Annual Report, usually in the middle of April 2022. So as the 80% shareholder of We expect to receive cash dividends as a financial sources for potential buyback Or even dividends distributed in the U. S. Market. Of course, for the further developing expansion, we can So we needed to all these, I think, information, I just also want to remind you that we cannot guarantee the dividend plan of Xinjiang Daqo because it needs to be approved by Xinjiang Daqo's shareholders. So basically, yes, we have some channel to arbitrate in the future. But definitely, I think we are not The arbitrator player, we are the manufacturer, we are, I think, the manager company And make all efforts to reward our shareholders of both Asia and U. S. Shareholders. Thank you, sir. Thank you very much for the detail. One last question. If you were to If the Xinjiang Board, Daco Board approves the dividend plan, how difficult is it to get the cash out of China to Pay the U. S. Shareholders. Is it no problem or is it or do you think there might be Challenges to get the cash out. It's no problem because you see when we listen in Asia, you see the China, I think what it calls, China SEC called CR CSRC. CSRC, it's already approved. The dark new energy is the foreign Holders, as a shareholders, so when we declare dividends, basically we have Basically, it's easy to exchange to the U. S. Dollar, but we just pay the dividend tax. So if we settle middle company, Hong Kong, we just paid 10%. If we directly pay the Cayman Company, we have to pay 10% dividend tax. So with that money, We can do either buyback or just continue to distribute our dividend to the U. S. Shareholders. Great. Really appreciate the color. Thank you again, Longgen, and I'll pass it on. Great. Thank you. Thanks, Phil. The next question comes from Gary Zhou with Credit Suisse. Please go ahead. Hey, hello. This is Gary from Credit Suisse. And firstly, congratulations on the very strong second quarter results. And I have 3 quick questions. So first one is actually to follow-up with the earlier question on the kind of plans For the U. S. Listing platform, so just wondering, as you mentioned, as you mentioned, that the country has a huge kind of valuation gap Between Asia and the U. S. ADR. So it seems like kind of a big kind of arbitrage opportunity here. So just wondering What does the company or the kind of controlling shareholder been thinking of kind of like use kind of like free loans or other kind of financing vehicles, so that it is actually if you kind of privatize the U. S. ADI, you actually Much higher kind of valuation is your stake. So just wondering if it's kind of a possible option the company will think of. Thank you. Okay, Gary. I think, first of all, from now on, because to my knowledge, To the Board, also the controller, shareholder controllers, from I think at least I think the short term, We're not interested in privatization. We know there is a lot of opportunities to do the arbitration. It's easier to privatize U. S. Shares than transfer to, I think, to the Asia. It's not our purpose because we think right now the company is on the, I think the uptick side, we want the U. S. Shareholders to enjoy The returns. So that's why our strategy is continue to raise capital in Asia market, continue to expansion our future capacity. In the next 3 years, by average 50% every year continue to increase to guarantee or To make sure our bottom line can continue at 20%, 25% increase to maintain The market value to reward I think the shareholders. In the meantime, I think what we do is continue to distribute I think the dividend to maximize use of the Chinese law, I think as you can see, at least 30% of Distributable profit can be distributed. So I think we will do that. I think, no, declare the dividend and exchange the foreign U. S. Currency to the Cuban company And either to buyback or continue to declare the dividend to the U. S. Shareholders. Ming, do you have any comments or any questions? Gary? Thank you. Okay. Thank you. This is very helpful. And then my second question is on the expansion plan. So earlier you mentioned that by 2024, your target to achieve 270,000 On silicon capacity, just wondering if you have a more kind of a specific timeline for this expansion. And secondly, given that your current kind of very strong finance kind of a cash position and also the further kind of proceed I already got the proceeds from the Asia IPO. So is that possible the expansion target can be even kind of raised I think, first of all, if you look at our balance sheet, By the end of July 30, I think the balance sheet is very strong. And I think with the We want to maintain I think the market share continue to maintain the market share. Definitely, yes, we want to expansion. First of all, With successful, I think, IPO, we can be, I think, the 4B name place is 35,000 tons, metric tons, we were starting, I think, a trial production by the end of this year. Next year, we're full capacity running. So we think that we'll add maybe 40000 to 50000 metric tons for the next year. But the detailed figures we will do, I think, in a 7 point in time of later this year. Then for the year after, just I mentioned that in order to keep the market share, We see the whole market, the solar market continue to end market continue to be at least in average, I think, compound Growth 20%. So with the Asia market, I think capital access possible with The company inside generation the cash with our strong management team, I think we have the ability to maintain the market share, Continue to from right now to I think around 20%. So we're planning to looking for, besides Xinjiang, Another place in our production base, I think it's possible, Yunnan Province, Qinghai Province, In the Mongolia or even in Shanxi, it's another place we can continue expansion around 200,000 tons. So we will divide into the 2 phases. The first phases is 100,000 tons with I think The semiconductor, I think the production line is 1500 So that's I think we are planning. We are right now looking as soon as we finalize the I think, finalize The place, we will announce that. Thank you. Okay, okay. Okay. Thank you. Yes, so My last question is, so I know it might be too early to tell, but just wondering if management can share with us your view for the kind of a longer term Polysilicon price outlook, so for example, by 2023, so when there may be more Polysilicon capacity to be commissioned, so when do you be or where do you think the part is a kind of a more sustainable polysilicon price can Thank you. I think I just answered Philip's question about the ASP of This year and next year. So yes, for 2023, 2024, Really, we have to considering the demand and the supply. From supply side, we continue to see, I think, At China, a lot of, I think, existing player continues expansion, plus some new, I think, karma. But you have to consider that as the technology continue to improve, maybe I think in the next generation It is from P to change the P silicon cell P cell to change the N cell that's asking for high quality. So who can produce N type polysilicon? That's most important, the market share. You can continue to have the market share. 2nd, we just mentioned that this is a CMC. It's a chemical manufacturing control. It's not easy For newcomers, even let's say existing player, new hopes, today the monosilicon, I think the percentage only, I think around 50%. We can reach almost 99.5%. So I think the quality, Also, I think it's a chemical assay. The ramp up to reach the I think the real supply will call, it takes time. So I think that's on supply side. From a demand side, Really, I can't tell you because look at the global, I think the carbon I think neutrality targets, I think we think at least I think the compound Growth rate should be around 20%. China right now, if you look at the country level, distributed generation It's a very, very I think potential market is very, very big. Besides, of course, the U. S. And China, I think The trade war, I think but I still think new energy, you see the renewable energy is the future, It is a major toll to reach the global, I think, the carbon neutral areas targets. So from I think the demand side really, Gary, you may be the expert because We really don't know. Some people the figures are flying. Some people say that the 500 megawatts maybe by the 2025? And Mr. Li, I think if I'm wrong, he estimated that maybe even by 2030 is 1,000 gigawatts. So it needs a lot of silicon, High quality silicon, it's around like 300,000 no, it's 3,000,000 tons, metric tons. So we're not worried about that. The reason is because we think we own the largest scale, the largest scale Capacity in Xinjiang, which is as far as we finish, I think 4B, our capacity may be around 120 to 130,000 tons. Then we have another new place we are looking for Maybe by the middle of the 2022, coming to try production, It's around 100,000 tons, then continue to add another 100,000 tons. We think we are we have the competitive page. So that's our, I think, long term strategic plan. Okay, okay. Yes, this is very helpful. And this is all the questions from me. Thank you. Great. Thank you, Gary. The next question comes from Tony Fai with Foti. Please go ahead. Good evening, management. This is Tony from BOCI. Three questions from my side. And the first one is still regarding the industry Capacity expansion. So just yesterday, the NTIC held a conference to update on the energy consumption status in China, according to which there was 9 province China has been increased in the energy intensity in the first half of this year, including Xinjiang, Qinghai and Ningxia. We know these three provinces host most of the new capacity announced by your peers. So do you think this will slow down the pace in terms of new capacity expansion? Yes. Everybody read that the NRDC, I think, report. He gave three level of warning. I think unfortunately, I think Qinghai, Yunnan and Xinjiang, Those I think have a hefty energy supply province is the first I think first, I think, cost, I think a warning. But you have to think about that. China, they have we put a priority. We think the polysilicon production line polysilicon capacity is support continues the solar industry. It's in the first priority, I think. So the government, I think, definitely will put it adding new additional adding new energy, I think it will priority Put I think the solar polysilicon projects as first. So then even existing I think the Energy consumption, some provinces have to change the structure to reduce, I think, the carbon the energy, I think, supply To increase the green energy, I think, supply. So I'm not worried about that because I think the government is very clear to reach these targets. The need, I think, the solar continue to grow. Definitely, the solar growth need, I think, polysilicon. Tony? Okay, great. So my second question is a follow-up on the silicon powder supply. So you just mentioned the price has gone up a lot recently. So it seems that the smaller producers are troubled by the increasing power tariffs as well as the energy control measures. So of course, the current prices won't be a big problem for your margins, given the poly prices right now. But long term, do you think the silicon powder supply will be a bottleneck To the future product production, which China does not allow new build up in the silicon powder capacities? We think this situation right now, I think, momentumally, I think, the poly powder price go up is a short term, I think, situation. The reason is because in China, the silicon mantle majority produced I think in Yunnan Province And also Shichuan Xinjiang, because of the shut off water, So a lot of water power plant shut down. So that's why a lot of, I think, the polysilicon metal, I think, the plant, I think it's shut down. Secondly is also the new hope, I think for some accidents, they are closed. I think they are Temporary cost, they are mantle silicon mantle plants. So that's why cost, I think, short term Mantle silicon mantle price go up, I think in the future, it will go down. Secondly, we also pay very attention to this situation. To us, We are also looking for upstream, I think vertically integrated to upstream. That means the Silicon Mantle, I think, projects. We are looking for that. Also possible, maybe we go to investment, 1 of the 300,000 tons projects in the future or maybe acquire some existing, I think, Plans to maintain, I think sustainability, the powder supply It's not just from, I think, existing supply, like successful poly powder manufacturers. So basically, we are looking for that. Yes. In the future, definitely, we will, I think, also invest in this area. Because 300,000 total investments only like around RMB3.5 billion, the best investment is not too much. Plus, the technology also is not the bigger deal. I think the silicon mantle, the key issue is The storm resources. 2nd is the I think the electricity, I think supply. But do you think the energy quota will be an issue for the powder supply? I don't think so. The reason is because I think they're also in the value chain for the solar industry. Also, I think I think the Polymental basically is not only just provide, I think, The powders for our solid industry, but also provide, I think, silicone. Silicon. Silicon. Then also provide to some other irons, see the Aluminum alloy. Yes, aluminum Arren? Yes. So it's a lot of usage areas, yes. Okay, great. That's good to know. And my last question is on your incentive plan. So we all know that you had a very great incentive plan in place in the past for the U. S. ADRs. Now that you have In Asia, I moved most of your staff to the Asia entity. So is it fair to guess that in the future you will also have a new incentive plan at the Asia level and reduce Your incentives and share based compensation at the U. S. ATR levels? We think the I think a strong execution team Need to match, I think, we have, I think, incentive policy. I think this is very important. Our U. S, I think the incentive plan, I think help us to maintain our strong team together And continue to expansion, have the people to continue expansion. Today, you see, our team, management team, no one lead. Because in China, you know that it's a lot of attractive outside. So I think for Asia today, We didn't have new, I think, incentive plan. Yes, in the future, we will do that. But look, the valuation is so big, right? It's almost RMB120 1,000,000,000. So I think they have called second share plan. We can issue employee at half Price of the share price of the market price to issue to the employee, the investment period from 3 years to 5 years. So I think, yes, we were thinking consider that in the second half of this year. Okay, great. Thank you very much, Alunkan. I'll pass it on. Great. Thank you, Tony. The next question comes from Lou Wang with Bernstein. I have two questions. Firstly, do you have a targeted market share in terms of solar grade polysilicon by 2024? Secondly, can you please share the progress and future plans of your semiconductor grade polysilicon production? Thank you. Thank you, Lu. Basically, if you look our I think first half of this year, our market share I think is around 18% to 20%. I didn't have extra figure, Frank speaking, on the, I think, a solid polysilicon side. And in the future, yes, we are continuing to keep 50% capacity annually Average, okay, growth. But we think all payer maybe expansion quicker than us. So we think by the year 2024, our capacity can reach 270,000. Our market share can maintain around 18%. So that's our type. Secondly is, yes, we are starting to do I think semiconductor polysilicon, first project I think is 1500 metric tons. We're with, I think, that new project, I think, 100,000 tons of polysilicon production line together. We have to taking at least 2 to 3 years to make this production line successful. I mean successful in not only produce the polysilicon in a semiconductor polysilicon, but also to I think to To qualify by the downstream, I think, the user, it takes time. As you know that the semiconductor chips and also the weavers, I think take at least I think 2 to 3 years. But in China right now, the good thing is in China right now is the downstream on the semiconductor is very expansion very quickly. So it gives us opportunity, maybe we can I think the qualification period down to maybe 1 to 2 years? Yes, in the future, I cannot tell you how much market share in the future the semiconductor side we can Taking the market share, but I can tell you right now that probably I think around the 50,000 tons semiconductor, I think polysilicon supply, We think China right now is around, I think, 20,000 tons right now, the usage. We want first to replace the import. That's our first question. Thank you, Lu. Thank you. And to follow-up on the targeted market share, I think one potential problem is that the faster mover and the 1st mover It's probably going to secure the areas or the provinces where they have the cheap electricity And also the energy quota in terms of total energy consumption and energy intensity. So potentially, Which makes Daqo left with provinces with higher electricity prices and also Some bottleneck in terms of securing this energy quota. Do you think that can be a potential problem? And even if We are Darko is able to expand capacity. Will that be the case that the new capacity cost Will it have to be higher than existing capacity in Xinjiang? Lu, I think it's a good question. But if you look at our history, Daqo always, I think, did more than said. And Frank speaking, we are very conservative. The reason is because we started looking for another place, it's not today. I think 2 years ago, like semiconductor, we are 3 years ago, we are 5 years ago, we are starting to collect the technology. For the I think a new place, we're already starting feasibility study, contact local is more than I think 1.5 years. Don't worry about that. I think today, most right now, because I think the governments, local governments I think the solar industry is the first priority, I just like to say. From the electricity, the power price right now, as we contact 4 to 5 places, I think outside of Xinjiang, mostly is around $0.25 to $0.30 per gigawatt. We don't think in the future, I think the power price is the major competitive, I think key factor. Rather than I think the polysilicon quality and the cost control and scalability, I think is most important. Also the labor, I think the management. So as you can see, our cost structure, our cost Cutting map in the history also in the future, we are I think at the number one in the China. So we're not worried about that, Frank speaking. So even though some people has already signed some agreements, I think it's not For example, like Qinghai right now, the price is around $0.26 Right now, we talk to local governments, they are very welcome as to there. The price is also the same. The only thing is some stimulation policy may be different, but we just like we said, We also want to it's an ESG. We also want to contribute to the society, the governance, local people. So we're not wanting to take in, take in. So basically, we're not worried about that. The reason is because even today, we all have capacity in Xinjiang. We're shipping to the Weibo Manufacturing Center, for example, like in Mongolia or Yinan Province or Gansu Province. The shipping costs are almost RMB2 per kg. Thinking about that, today polysilicon Consume and every consume in Q2, Q1 is around 60 KWH per kg. So it's almost $0.03 Extra, because we do the shipments from Xinjiang to our wafer producer. So if we can move to, let's say, in the Mongolia, in that province, so we can save that $0.03 per KWH from The power price, all right, to pay to the local government, local, I think, power greeting. So I'm not worried about that. Thank you. That's really helpful. The next question comes from Colin Jen with Daiwa Securities. Please go ahead. Good evening, management. This is Colin from Daiwa. I've got three questions. The first one, can I share the cost difference current P type and N type polysilicon and do you have any expectations of the potential price difference Between the P type and N type processing price because it's relevant to the ASP for 2023 and beyond? Collin, I think it's a good question. Basically, right now, I just mentioned that today, we're already starting, I think, to provide N type silicon to Our major 4 major clients. The only thing right now, the N type of sales production line in China is not massive. I think still I think in the research, it's not commercial, very high commercial, I think, level. So for example, we provide our major four clients is around like every month is around like 200 tons per Polo is around like 600 to 800, I think, tons per month. So the price is not adding too much. It's around like only at RMB2 per kg. But today, I think basically we can from our output, We can I think N type is around like 30% to 40%? So if let's say in the future, the shift From P to M type, as the I think HDP, IBC, dotcom, think the downstream, I think the N type cell production line, I think, are popular. We think we can continue to increase N type to 70%, 80% based on today our technology. So it's not a big issue. The cost, we don't think the cost will add too much, maybe around like renminbi, 1 or 2 renminbi per kg. The only thing is the volume, okay, the output maybe we will go down. The reason is because it takes more time to depository for the furnaces. But that would affect the output maybe around 5% to 8%. So it's not a big deal to shift from for us, okay, today for our knowledge. I'm not talking about other player. To us, because we very digitalize also AI, I think, calculation on the Furnaces, so it's a very modern, I think, technology. So it's easy for us to shift. Thank you, Colin. Thank you. Thank you, Robin. So my second question, we have been adding to the U. S. In catalyst for like Almost 2 months. I'm just wondering what is the actual inspection from the U. S. Customers. So do we have any products Which contained Hexings, the powder was actually contained by the U. S. Customer. So I was wondering if any updates from that. We didn't have the exact information. Basically, we only can read some information from U. S, I think From some, I think, loud, I think, researcher, I think, basically, we see some The module producer right now, some shipments, I think, are in the U. S. Customers. I think basically, U. S. Customers are holding, I think, want To see the traceability, to us, I think we are manufacturing, I think, polysilicon. Our customer is China, All in China is a weaver producer. So we're not adding product finally shipping outside to especially to U. S. So Yes. Currently, I think no effect to us. Of course, I think we see The Hexim product maybe export to U. S. Maybe holding and also maybe in the future On the module side, the module manufacturer has to show the traceability. So I don't think it's a good idea to doing that. The reason is because the impact were To us, it will be temporary and very limited. But if this issue prolongers, I think the net impact to the U. S. Market will be much bigger than I think to China solar players Because you see approximately 85% of Poly and 98% of Weibo, I think are made in China. And currently, there is no alternative source for U. S. To replace. So we believe I think it is common interest to both U. S. Market and Chinese solar producers, I think, to address the issue ASAP, especially to reach the common, I think, East area, that means the common nutritionality So I'm not worried about that. Thank you. Thank you, Wang. So lastly, can I Confirm one thing because I think I heard you mentioned a bottom line growth of 20% to 25% year on year In the long run, so is this the company's official guidance for like at least 20% to 25% year on year growth for net profit For 2022, 2023 and beyond? Okay. I want to answer that. We cannot Given the future, I think, forecast, the only thing I'd say that because we just assume, let's say, Next year, the capacity we can continue 50% expansion, okay. As far as we finish the 4B, I think around the 40,000 to 50,000 metric tons we're adding to the existing, I think, the plants. So I think for next year, I just mentioned that assume the selling price for the first half of this year, next year is around like 150, 2nd half of next year is around like 1 year study. We believe the bottom line definitely I think that we can achieve 20% to 25% increase. In the future, we can only do this. We will make efforts to continue expansion at the annual average, I think, Think a rate of 50% to extension the capacity, but we cannot guarantee the bottom line. Really it's because I cannot Crystal Ball, the demand and the supply of polysilicon in the future. Just I mentioned that, We, on the supply side, have two factors, right? How much of real polysilicon we can supply? How much if the technology shift from just like you said, from P to N, how much we can provide the anti silicon? From demand side, we really don't know the potential market in the future, the growth. So basically, I cannot answer your question in the future. But yes, we make efforts. Got it. Very clear. Thank you, Long Bin. That's all my question. This concludes our question and answer session. I'll now turn the conference back over to Kevin He for any closing remarks. Thank you everyone for participating in today's conference call. Should you have any further questions, Just feel free to send us e mail or give us a call. Thank you. Bye bye. Have a nice day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.