Earnings Call: Q4 2017

Feb 28, 2018

Good day, and welcome to the Daaco New Energy 4th Quarter and Fiscal Year 2017 Results Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Kevin He, Investor Relations. Please go ahead. Hello, everyone. I'm Kevin He, the Investor Relations of Daqo New Energy. Thank you for joining our conference call today. Daqinewenergyenergy just issued its financial results for the Q4 fiscal year results of 2017, which can be found on our website at www.dqsolar.com. To facilitate today's conference call, we have also prepared a PPT presentation for your reference. Today attending the conference call, we have our Chief Executive Officer, Mr. Longgen Zhang and Mr. Min Yang, our Chief Financial Officer. The call today will feature an update from Mr. Zhang on market and operations, and then Mr. Yang will discuss the company's financial performance for the Q4 and the fiscal year of 2017. 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 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 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 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 amounts in 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. Without further ado, I now turn the call to our CEO, Mr. John Li. Thank you, Kevin. Good evening and good morning, everyone. The Q4 of 2017 was an excellent quarter for Darko Newell Edge in terms of both operational and financial performance, which concluded our fiscal year of 2017 as the best year in the company's history. I would like to thank our entire team for their hard work and dedication for delivering such an outstanding performance. Despite the annual maintenance of our facilities and its impact on our operations during the quarter, we were able to produce 5,000 339 metric tons of polysilicon during the quarter, a new record for the company. This was a direct result of our continuing focus on improving operational efficiency and maximizing overall output. Demand for our high quality polysilicon products remained strong, allowing us to sell a record high of 4,730 metric tons of polysilicon during the quarter to external customers, while generating total revenue of US103.7 million dollars an increase of 16% sequentially and 125% year over year. During the Q4, the company generated US33.7 million dollars in net income attributable to Darko New Energy Shareholders and $53,600,000 in EBITDA with an EBITDA margin of 51.7%. The 4th quarter earnings per basic ADS were $3.16 an increase of 38.6 percent from $2.28 in the prior quarter and up 710 0.3% from Q4 of 2016. 2017 was the strongest year in the company's history. We produced 20,200 metric tons of polysilicon throughout the year, 12.2% more than our nameplate capacity of 18,000 metric tons. Our financial performance in 2017 was significant better than in 2016 with revenues of US352.9 million dollars EBITDA of $167,500,000 net income attributable to Darko New Energy shareholders of $92,800,000 and net cash provided by operating activities of 142 $700,000 while we are in the capital intensive industry. Our debt ratio improved to a healthy level of 47.3% by the end of the year 2017, compared to 58.6% at the end of the year 2016, which further strengthened our competitive positioning in the market. Our forecast throughout the quarter and going into 2018 remains reducing costs, Having successfully completed an annual maintenance of our facilities in October 2017, we resumed production with improved manufacturing efficiency, while average polysilicon production costs increased sequentially during the quarter, primarily due to higher raw materials prices and impact of our and the impact of an appreciation of renminbi. Our 2 biggest polysilicon manufacturing cost components, unit electricity consumption and unit silicon metal consumption hit their lowest levels ever in December 2017. We are already working on several additional technological improvements that we expect will further reduce our costs in 2018. We are also devoting increasing resources to R and D and quality improvement. We continue to improve our front end manufacturing process and the post production handling techniques to reduce impurities. This resulted in record levels of production for both electronic grade polysilicon and mono crystalline grade polysilicon in January 2018. We are pleased with this achievement and believe it demonstrates the strength and effectiveness of our overall strategy and is another step towards becoming the leader supply of electronic grade and crystalline grade polysilicon in China. In 2017, approximately 100 gigawatts of solar PV panels were installed globally. China continued to rank as the leading solar PV market in the world with total installations of approximately 53 gigawatts. The United States, India and Japan ranked as other top solar markets globally in 2017. According to the latest solar PE market reports, we expect to see lower double digit installation growth globally in 2018, with growth expected to pick up further in 2019. In addition, we are seeing rapid growth in demand for high efficiency mono crystalline wafers as well as continued growth in demand for extra high purity mono crystalline grade polysilicon, which only very few Chinese producers are able to produce. Demand for high purity polysilicon products continues to be strong. We will continue to improve the quality of our polysilicon products and expect to increase production levels of polysilicon for molar, wafer applications. We completed the foundation and initial preparation work for our Phase IIIb capacity expansion project during the quarter. Facility design and equipment procurement are progressing well and on schedule. With a strong customer demand for our high quality polysilicon products, we are planning to accelerate the construction pace so that we can begin production through that. We expect to complete the entire Phase 3b project and begin pilot production in the first half of year twenty nineteen and reach full capacity of 30,000 metric tons by middle 2019. With the newly added capacity and our competitive advantages in polysilicon quality and the production costs, we are strengthening our polysilicon manufacturing leadership position and are confident in our ability to meet growing demand and create additional value for our shareholders. Outlook and guidance. The company expects to produce approximately 5,000 300 metric tons to 5,500 metric tons of polysilicon and a sale approximately 4,900 metric tons to 5,100 metric tons of polysilicon to external customers during the Q1 of 2018. The above external sales guidance excludes shipments to polysilicon shipments of polysilicon to be used internally by the customer by the company's Chongqing Solar Waver Facility, which utilizes polysilicon for its wafer manufacturing operation. Wafer sales volume is expected to be approximately 15,000,000 to 20,000,000 pieces for the Q1 of 2018. For the full year of 2018, the company expects to produce approximately 22 1000 to 23000 metric tons of polysilicon in closing of the impact of our annual facility maintenance. Now, I would like to turn the call to our CFO, Mr. Ming Yang for financial updates. Thank you, Log In, and good day, everyone. We appreciate your interest in the company. Revenues were $103,700,000 in the 4th quarter compared to $89,400,000 in the Q3 of 2017 and $46,100,000 in the Q4 of 2016. Revenues from polysilicon sales to external customers were $89,800,000 compared to $72,900,000 in the Q3 of 2017 and $32,800,000 in the Q4 of 2016. External polysilicon sales volume was 4,730 metric ton compared to 4,500 metric ton in the Q3 of 2017 and 2,209 metric ton in the Q4 of 2016. The sequential increase in polysilicon revenue was primarily due to higher polysilicon sales volume and higher ASPs. Revenues from wafer sales were $13,900,000 compared to $16,500,000 in the Q3 of 2017. Wafer sales volume was 22,300,000 pieces compared to 26,400,000 pieces in the Q3 of 2017. Wafer volume during the quarter was impacted by our upgrade of wafer slicing equipment as we upgraded our entire wafer facility from formerly slurry based wire saw cutting to now diamond water saw cutting and we had experienced some ramp up initial ramp up issues. However, we're seeing meaningful decline of wafer processing costs after upgrade and our non silicon wafer processing cost is expected to decline by approximately 25% after the equipment upgrade is complete. Gross profit was approximately $46,900,000 compared to $36,400,000 in the Q3 of 2017 and $14,200,000 in the 4th quarter of 2016. Non GAAP gross profit, which includes costs related to the non operational polysilicon assets in Chongqing, was approximately $47,300,000 compared to $36,900,000 in the Q3 of 2017 and $15,800,000 in the Q4 of 2016. Gross margin was 45.2% compared to 40.8% in the Q3 of 2017. The sequential increase in gross margin was primarily due to higher quarterly polysilicon and selling prices offset by slightly higher polysilicon production costs affected by cost increase in raw material and RMBs appreciation. In the Q4 of 2017, total costs related to the non operational Chongqing polysilicon assets, including depreciation, were $400,000 compared to $500,000 in the Q3 of 2017 and $1,600,000 in the Q4 of 2016. The decrease in such costs was due to relocation of the idle equipment from the company's Chongqing polysilicon plant to Xinjiang polysilicon plant. Excluding such costs, the non GAAP gross margin was approximately 45.6% compared to 41.3% in the Q3 of 2017. Selling, general and administrative expenses were $4,700,000 compared to $4,400,000 in the Q3 of 2017. R and D expenses were approximately $100,000 compared to $100,000 in the Q3 of 2017 and $2,800,000 in the Q4 of 2016. R and D expenses could vary from period to period and reflected R and D activities that took place during the quarter. Other operating income was $4,400,000 compared to $800,000 in the Q3 of 2017 and $1,900,000 in the Q4 of 2016. Other operating income was mainly composed of unrestricted cash incentives that the company received from local government authorities, the amount of which varies from period to period. The company recognized $3,000,000 $200,000 of fixed impairment loss for its Chongqing Polysilicon facilities in the Q4 of 2017 2016, respectively. The company has relocated and will continue to relocate some of the company's temporarily idled plastic and machinery, same equipment in Chongqing to the company's Xinjiang Plastic Sequium manufacturing plant. However, after further evaluation, some assets were identified as non transferable and or not able to be utilized by our Xinyuan policy manufacturing or expansion projects. Such assets were recorded as an impairment loss of long lived assets. This is a non cash impairment charge and had a negative impact of $3,000,000 on net income and $0.28 on earnings per ADS for the Q4 and full year 2017. Operating income was $43,600,000 compared to $32,800,000 in the Q3 of 2017 and $9,600,000 in the Q4 of 2016. Operating margin was 42% compared to 36.7% in the Q3 of 2017 and 20.7% in the Q4 of 2016. Interest expense was $4,100,000 compared to $4,300,000 in the Q3 of 2017 and 4 $100,000 in the Q4 of 2016. EBITDA was $53,600,000 compared to $42,300,000 in the Q3 of 2017 and $17,600,000 in the Q4 of 2016. EBITDA margin was $600,000 in the Q4 of 2016. EBITDA margin was 51.7% compared to 47.4% in the Q3 of 2017 and 38.3% in the Q4 of 2016. Net income attributable to Daqo Nue Energy Corp. Shareholders was $33,700,000 compared to $24,100,000 in the Q3 of 2017 and $4,100,000 in the Q4 of 2016. Earnings for basic ADS were $3.16 compared to $2.28 in the Q3 of 2017 and $0.39 in the Q4 of 20 16. As of December 31, 2017, the company had $72,700,000 in cash and cash equivalents and restricted cash compared to $61,600,000 as of September 30, 2017 $31,900,000 as of December 31, 2016. As of December 31, 2017, the accounts receivable balance was $3,000,000 compared to $4,600,000 as of September 30, 2017 and $4,800,000 as of December 31, 2016. As of December 31, 2017, the notes receivable balance was $27,300,000 compared to $25,300,000 as of September 30, 2017 and $13,000,000 as of December 31, 2016. As of December 31, 2017, total borrowings were 200 and $12,900,000 of which $113,600,000 were long term borrowings and compared to total borrowings of $216,800,000 including $119,300,000 of long term borrowings as of September 30, 2017, and total borrowings of $217,900,000 including $111,900,000 of long term borrowings as of December 31, 20 16. For the 12 months ended December 31, 2017, net cash provided by operating activities was $142,700,000 an increase of 44.6 percent from $98,700,000 in the same period of 2016. The increase was primarily due to the improved profitability of our polysilicon segment. For the 12 months ended December 31, 2017, net cash used in investing activities were $63,100,000 compared to $66,100,000 in the same period of 2016. The net cash used in investing activities in 2017 2016 was primarily related to the capital expenditure of our Xinyang Phase 3a polysilicon project. For the 12 months ended December 31, 2017, net cash used in financing activities was $37,400,000 compared to $30,300,000 in the same period of 2016. Net cash used in financing activities in 2017 2016 primarily consisted of repayments of related party loans and bank borrowings. Now we'll provide a summary of our full year 2017 results. For the year of 2017, revenues were RMB352.9 million, an increase of 54 percent from RMB229 1,000,000 in 2016. Revenues from polysilicon sales to external customers were $294,000,000 in 20.17, an increase of 75.5 percent from $167,500,000 in 2016. During the Q1 of 2017, we fully ramped up our Xinjiang pilot shipment facility to 18,000 metric ton of annual nameplate capacity and achieve full production. Our annual processing production volume increased by 54.6 percent from 13,068 metric ton in 2016 to 20,200 metric ton in 2017. Additional polysilicon sales volume increased as a result by 64.9% from 10,883 metric tons in 2016 to 17,950 metric tons in 2017. In addition, our polysilicon SVPs also improved from $15.42 per kilogram in 2016 to $16.41 per kilogram in 2017. Revenues from wafer sales were $58,800,000 in 20.17 compared to $51,600,000 in 2016. Air Force sales volume was 98,000,000 pieces, an increase of 18.4% from 82 800,000 pieces in 2016. The decrease in wafer revenue as compared to 2016 was primarily due to lower wafer ASPs. Gross profit was $143,500,000 in 20.17, an increase of 78.4% from $80,400,000 in 2016. Gross margin was 40.7% in 2016, increased from 35.1% in 2016. The improvement in gross profit and gross margin primarily attributable to our polysilicon segment. Gross profit of the company's polysilicon segment, excluding costs related to the Chongqing idle polysilicon facilities, was $143,000,000 in 20.17, an increase of 83% from $78,200,000 in 20.16. Gross margin of the company's Poly segment was 48.7%, increased from 46.7% in 2016. The increase in polysilicon gross profit and gross margin, excluding costs related to the Chongqing item polysilicon facility, was primarily due to higher solar volume, higher ASPs and improvement in polysilicon cost structure. The company sold 7900 and 50 metric tons of poly to external customers in 2017, the increase of 65% from 10,883 metric tons in 2016. The company's annual average polysilicon production costs, including depreciation, decreased by 4.2% from $9.23 per kilogram in 20 16 to $8.84 per kilogram in 2017. Gross profit of our wafer segment was $2,800,000 in 2017, a decrease from $9,200,000 in 2016. Gross margin of our wafer segment was 4.7% in 2017 as compared to 15% in 2016. The decrease in wafer gross profit and gross margin was primarily due to lower wafer ASPs despite lower average manufacturing costs compared to 2016. Total costs related to nonoperational Chongqing polysilicon plant, including depreciation, were $2,400,000 in 2017, a decrease from $6,900,000 in 2016. The decrease was due to relocation of either equipment from the company's Chongqing Plastics and Xinjiang Plastics and Plastics and Plastics and Plastics and Plastics costs, non GAAP gross margin was approximately 41.4% in 2017, an increase from 38.1% in 2016. SG and A expenses were $17,700,000 in 2017 compared to $16,100,000 in 2016. The increase in SG and A expenses was primarily due to increased shipping costs as a result of higher polysilicon sales volume. R and D expenses were $900,000 in 2017 compared to $4,000,000 in 2016. R and D expenses vary from period to period, reflecting the R and D activities that took place during such period. Other operating income was $6,800,000 in 20.17 compared to $5,300,000 in 20.16, which primarily consisted of unrestricted cash incentives that the company received from local government authorities, which vary from period to period at the discretion of the government. Operating income was $128,700,000 in 20.17, an increase of 96.7 percent from $65,400,000 in 2016. Operating margin was 36 0.5% in 2017, increasing from 28.6% in 2016. Interest expense was $18,000,000 in 2017 compared to $14,600,000 in 2016. Income tax expenses were $17,300,000 in 2017 compared to $7,400,000 in 2016. Net income attributable to Daqo New Energy Corp. Shareholders were $92,800,000 in 20.17, an increase of 113.5 percent from $43,500,000 in 20.16. Earnings per basic ADS were $8.76 in 2017, an increase of 111.1 percent from $4.15 in 2016. Adjusted net income attributable to Daqo New Energy Corp. Shareholders was $99,500,000 in 20.17, an increase of 87.3 percent from $53,100,000 in 2016. Adjusted earnings per basic ADS were $9.38 in 20.17, an increase of 85% from $5.07 in 2016. And that concludes the official part of our presentation. Now we'll have the Q and A session. We will now begin the question and answer session. The first question comes from Philip Shen of ROTH Capital Partners. Please go ahead. Hi, Sam, Ming. Congrats on the great results. My first question is around guidance. You guys consistently produce well above your nameplate capacity, but I think this quarter in Q4 was higher than normal at 25% above nameplate. On a go forward basis for your 2018 well, I guess the question is how are you operating so much above nameplate? And when you bring on your Phase 3B capacity now, which is 30,000 metric tons, would you be able to continue to expect to operate at 25% greater than that nameplate as well? Philip, I think good morning. Thank you for the question. It's a good question. The nameplate basically just the design, the full capacity, 18,000 metric tons, because we are the chemistry company. So basically, the actual capacity always larger than the name place. So as you can see that this year, our guidance is around 23,000 metric tons. We think is very I think is doable. In terms of the question, the 3B, 13,000 metric tons, of course, I think that's our planning right now. Actually, nameplate is 10,000. So actually we maybe conservative speaking is 13,000, but actually we maybe can reach 15,000 metric tons. Basically, I think to answer your question, if we finish the 3B, we theoretically we can achieve to the annual output is above, I think, 35,000 tons, maybe reached to 37,000 tons, it's possible, but we cannot guarantee. Does that answer your question? Yes. Thank you, Sam. That helps a lot. It's always 30%, even 60% more than the nameplate, the extras output. Good. That's very helpful. And then also for full year 2018, can you help us understand what the wafer volumes might be? I mean, you gave the poly side for production, but how much we saw in the guidance for Q1, the wafer production stepped down lower than what we typically are used to by maybe 25%. So do you think the poly consumption by wafer will be similarly lower for most of 2018 because you want to divert more of the shipments now or more of the production of poly externally? Is that the plan in general? Okay. I think, Philip, I think since I took over the CEO position, I look at the whole industry because Darko, we focus on polysilicon manufacturing. If you look our Chongqing wafer production, basically, okay, I spent the whole week in Chongqing. We right now the capacity only 500 megawatts on the wafer capacity. But we have right now beginning of this year, we have employees, 516 people. So I immediately cutting people, 168 people. So right now, we're cutting people to 5 100 349. Because right now, if you look at our last year 2016, our AVEVA gross margin only 4%. Compare that is not only compare the benchmark company, let's say Jinko, let's say, LONGi, their wafer capacity, their wafer gross margin maybe around the even LONGi because it's mono wafer, the high capacity, we are multi. So even you apple to apple, we compare with, let's say, Trina and Jinko, our gross margin is still lower. They may be around 5% to 15%. So that's why come back, we need to consider that even though we were now since the Q4, we changed to the diamond wide cutting system, but we still have the quality issue. So basically right now, we are basically slow down the wafer capacity, the production. We have to first to make sure the quality is 100% use the diamond Y saw cutting, that's first. 2nd is our non silicon costs right now is higher basically. If you look at our Q4, it's almost $2 It's not competitive to our competitors. So we have to make sure our non silicon cash cost for to within $1.15 plus our depreciation maybe right now per piece, okay, right now it's $0.39 So even RMB0.39 plus RMB1.15 add together, it's almost RMB1.60 6 zero per piece. Still no competitive advantage compare our the competitors. So basically, we have to watch right now plus, okay, after New Year, the silicon price fluctuate a lot. Then also the wafer price also reduced a little, slightly reduced. So that's why for February, we almost I think the capacity right now running maybe around 10%. So we're waiting for the market to come back to see in March, whether if we can make some money or not from cash flow points. So for whole year, for the wafer capacity, basically, we cannot give you the precisely projection, but we were very importantly to continue to, I think to maximize or whatever our wafer production in the future. So we will give guidance quarter by quarter. But in the world, our strategy is right now, the forecast continue to expansion on the, I think, polysilicon, especially high quality monostylecrystalline polysilicon. In the meantime, we're going to continue to keep the cost, especially I think to reduce the cost of the wafer to see whether we can full capacity running the waiver capacity or not. We're maybe seeking other opportunities to working with other people, let's say, to present it with other producers. For example, you give me the polysilicon, I help you to produce the wafer then back to you. So that's our strategy. Great. Sam, that's very helpful. Thank you for the color. It's very detailed. So shifting gears, you mentioned that you want to focus more on the high quality polysilicon for mono. I noticed the ASP in Q4 was higher than we had expected. It was very much in line with the spot domestic pricing in China. Typically, your ASP is maybe 10% lower than some of the domestic spot pricing that we see. Should and this time it was kind of in line. Should we expect this to continue, meaning you're getting it seems like maybe a premium for your price. What's driving this premium? Or is it simply just the overall supply demand dynamics? Or are you able to actually command a bit more of a premium these days because of the greater mono demand by Longxi and Dongwan and some of these downstream customers? And as a result, that shift is causing the Okay. I Okay. I think that's a good question. Okay. 1st to answer your question, first of all, today, all production this year especially, we've given guidance 22,000 to 23,000 of which we think at least 60% we are mono crystalline products to sell to the market. That's first. Secondly, if you look at our clients, mostly it's LONGi, Zhongtang and also Jinko for the mono crystalline silicon. Then also we have small minority piece of the multi polysilicon. Speaking of the ASP, if you look at our Q4, I think it's around like $19.1 per kg. So just like you said, this time we're even a little above the spot price. I think if you look at the whole year last year and the price trend and always before the Chinese New Year, the price still keep a little higher. Then during the Chinese New Year, because we are the chemical company, we will continue continuously in the production to build inventory. Then while those weaver manufacturer company, they were stopped, they were location in a holiday. So they were utilized to consume out their inventory. So after Chinese New Year, especially this year, because the wires, the heavy snow in China postponed the installation of the downstream, the solar projects. 2nd is maybe 201 U. S. And adopting those regulations to give the market that maybe is not very confident. But I think that's not the major issue, okay. 3rd issue, I think that China, if you look at last year, total consumption on the polysilicon is around 370,000 tons of which 170,000 tons is import. And the import majorly because in terms of U. S. Dollar like OCI, like other, their cost is around $12 to $13 Then if you look at the domestic manufacturer, 70% of the output produced by the Chinese, I think, producer, their cost also is around $11 to $12 Including GCL, 75,000 tons, Their cost may be around overall cost may be around $12 So what I want to tell you is, in Baqing and TBEA is only 2 right now, the low cost in China, but their output only account for 20% of the output. So basically right now, the polysilicon price is determined by majority producer output. So if you today use our lower cost compared to FAC, the average cost of the silicon, we already have what I call the cushion margin around 20 percent to 25%. Then plus the industry overall gross margin is 20% or 25%. So you can see our Q4 gross margin is almost 54%. So I think this year, after Chinese New Year, maybe the polysilicon price will slightly go down, especially right now we already see the pressure. Maybe today the market is around mono is around 130 to 135 kilograms then the multi is around 120 kilograms to 125 kilograms But as I mentioned that this year, the overall, the PV solar market, I think it should be around 110 to 120 gigawatts. So still continue to keep double digits in close, especially China. If you look at China, the Chinese government, the next 5 years the focus, the major two tasks, 1 is the poverty improvement in rural area. Secondly, environmental protection. All these is were to I think to support the solar industry in China. So what I think is the price the polysilicon price maybe was slightly go down from Noah. Then in the second quarter, Q3 maybe was slightly go up. Then to the Q4, we keep, I think, at Q. So if you look last year, ASP is around $16 What I'm thinking this year should be still between $15 to $16 Great. Thank you, Sam. One more, if I may, on more of a housekeeping question on CapEx. With your nameplate being and then your ability to operate above nameplate being a little bit higher for the Phase 3b expansion, Can you just update us on the amount of CapEx required for Phase 3b? I recall the number of about $100,000,000 plus and so just remind us what is the CapEx for Phase 3B if it's higher than what you had expected before or the same or lower? And then what the timing of those expenditures could be, especially since you're pulling forward some of the Phase IIIB start? Okay. So actually, the most recent forecast that we've already placed order for the equipment are and we finalized the design and then we're also doing the bidding for the construction. So the latest expectation is CapEx for the entire 3B project will be about $140,000,000 to $150,000,000 And so there's about $14 to $15 per kilogram of nameplate capacity. We expect not to fully ramp up with some potential development, we might squeeze more capacity out of that. So this is going to be the highest capital efficiency of the company's history. And in terms of CapEx, we've already spent roughly $10,000,000 mostly on equipment in Q4, so mostly on the equipment prepayments and some initial foundation work, for example. So this year, we expect probably around $80,000,000 to $90,000,000 of CapEx related to this particular project. And if we compare it to our cash flow for last year, we think that's still pretty healthy. And the remaining CapEx is expected to finish by next year. So that's the current plan right now. Great. Thanks, Ming. And then go ahead, Sam. That's helpful. I'll just add one comment, okay. If you look at right now, the currency you see the Asia company, I think Yongxiang, I think Tongwei, you know Tongwei, right? Yes. They just announced the CapEx for 2 factories, each is 25,000 tons. So if you look at the 2017, December 2017, I think, the date of announcement, So they are 25,000,000 tons. Their total invested is around RMB3.3 billion. So again, calculation there per kg CapEx is around up calculation is around like $20, dollars 25 But if you look our 13,000 tons, our total investment is 140 $1,000,000 So it's around you can calculation, right, like $12 So we the CapEx is very more efficiency. Good. And so for maintenance CapEx, how much do you expect in 2018 being for the model? And when do you plan on the maintenance? Last year, I think it was you had a week in Q3 and Q1 week in Q4. Would it be a similar type of timing for 2018? So at least in terms of maintenance, we're still expected currently as of today, we expect it to be conducted in Q3 based on our normal schedule. I think last year, we ran it a little bit later than we normally would. Yes. Okay. Sam, sorry, go ahead. I was going to say, maintenance CapEx, we're expecting roughly $10,000,000 to $15,000,000 for the year. Okay, great. Will pass it on. Thank you both. Congrats on the great results again and I'll pass it on. Great. Thank you, Phil. The next question comes from Gordon Johnson of Vertical Group. Please go ahead. Hey, guys. Thanks for taking the question and congrats on a good quarter. I guess just with respect to polysilicon prices, we've noticed numbers haven't updated at least for the source we look at for the past 2 weeks. But the prior 2 weeks before that, you had some pretty sharp declines 4.5%, 2 weeks ago and 3 weeks ago, 4.2%. So given the numbers you guys suggested, what prices are right now from multi and mono, at 120 to 125 and 130 to 135, do you guys think we've reached the low point in polysilicon as of right now? Or do you think they can go lower? And then the second question would be, the Head of the TV, the China TV Industry Association, Wang Baohao, I don't know if I'm saying that name right. But nonetheless, he recently put out comments saying that the China installations in 2018 would come in around 33 gigawatts or 40% drop from 20 17. And the reason given was excessive costs associated with the 130 gigawatts that have been installed, roughly $79,000,000,000 CNY per year of state subsidies required. Do you guys have a view on those comments? Have you heard those comments? Do you see them as accurate or not? Thank you. Okay. Let me first answer your question, then maybe Ming can add more comments. First of all, I think right now after Chinese New Year, we see, I think the demand and supply, the negotiation, I think the final we see right now, the price for the monosilicon is around RMB 130 to RMB 135 renminbi per kg, then the multi is around 120 to 125. Yes, we see the price maybe will continue to slightly go down. And we think it may be possible go to like 115 to 120. It's possible. It depends on how quickly the market where the insulation will quickly pick up and also market will come back. But one thing I want to emphasize, why is the U. S. Market? Everybody thinking the U. S. Market because 201 regulations and we reduced the market, I think, the insulation PV. But that's wrong, because if you look at Jinko, look at other Asia companies, as I know, at least 3 companies right now is going to U. S. To build up the module or even sell manufacturing company. So if they're going to do that, the weaver still come from China. The silica still come from majority of the weaver manufacturing is still in China. So in terms of your second question about the Chinese market, as I said, I just mentioned that if you look at Chinese Party, this term, 5 years, the 3 major tasks, one is to prevent the real financial risk. 2nd is the poverty improvement in rural area. 3rd is the environmental protection. The 2 major tasks is related to I think in a solid industry. So I do not think the solar industry will be hurt. The reason why, just like you said, the news, you have to look at that. As far as the solar, the farm field you build up, let's say the projects you build up, distribute I think the solar projects you build up. It doesn't matter how much it costs, how much subsidized you didn't collect Because for those projects, actually yesterday generated its cost is 0 because it doesn't matter because anyways, they're going to generate the yesterday, right? The cost is 0. So how much you already installed doesn't affect the teacher how much we're going to install. So how much are we going to this year to install in China? It depends on the projects we could build, what the government gives the subsidies, especially in the China Eastern area. It's not the central government subsidies, but also local governments give subsidies. For example, like Shanghai, Jiangsu province. First of all, you generate per KWH, you collect the regular selling price, let's say, even or RMB0.67 per KWH. The local government already gave you RMB0.45 per KWH. Even you're not collecting the central government subsidies, it still is okay, still make money. So what I say, all the project is already installed. All the cost is a sink. What I'm saying, sink is sink investments, that matter, didn't affect anything. So for the new adding capacity this year in China, I don't think the 73 gigawatts is correct, okay? But I'm not saying go to 90 gigawatts in China. What I'm thinking last year, 55 gigawatts, this year should be around 50 I think 65 to 75 gigawatts. That's why I gave you guidance. Did that answer your question, Gavin? Yes, it does answer my question. I guess one follow-up I would have is, are you guys concerned at all about the amount of polysilicon that was reported to be produced in China in January of I think it was a record of 24,000 tons by the non various metals association. And when you add in the 16,300 tons of imports, which was the 2nd highest ever, I mean, we're on a run rate to do 115 gigawatts of poly supply globally or specifically in China for the year. So does that concern you guys at all? That seems like a high level and clearly January isn't the high mark for polysilicon production or imports into China? Okay. To answer your question, yes, this we concern, okay. I think it should in you speak of the poly price, you have to consider 2 facts. One is in China, because always exaggerate, China, the production capacity will be increased dramatically. Look, new horizon, right? 3 years ago, they're going to say, they're going to invest 80,000 tons capacity. Okay, we're only 3 years, how much is the manufacturing? Last year, maybe 5,000 tons maximum, but lower quality. But this year, they say they're going to run full capacity 15,000 tons. So what I'm saying from starting from beginning to enter the new to polysilicon industry like New Horizon, it takes a long time. It's not easy just like the middle wafer cell and the module. You can to form the capacity immediately like 3 months or 6 months, you can do that, but 1 gigawatt capacity immediately from weaver to module. But for polysilicon, it's difficult, okay, first of all. 2nd is, by trend, we have to differentiate ourselves from other people. 1 is right now 70% of our capacity right now is produced mono polysilicon. That's the future of the module market. Last year, I think at Loakey and other, I think the mono module only accounted for maybe 27%. This year will increase to maybe more than 50%. So if you look at in China, the manufacturer only at TVEA, BaTran, those 2 plus maybe I think Yongshan maybe also produced partial of them can produce the mono polysilicon. That's the first advantage. Second advantage is, I'm just mentioning that our gross margin last year is around 45%. So we compare our industrial average, when I say 80% of those producers, even importer, their gross margin maybe around 20% to 25%. So yes, we still have the question there. Maybe the newcomer will continue lower cost. Yes, the same gross margin as us. So what I think, yes, we maybe cannot continue to keep such a high gross margin, 45%, but we still think this year we can achieve 35% to 40% gross margin. So when you say 35% to 40 percent gross margin, given we're already almost through clearly we're through February and we're into March, can you give us an indication of what that margin will look like in Q1? Would you say the Q1 margin will be lower than that 30% to 40% target and it will get higher through the year as prices rebound? Or will Q1 be higher than that 30% to 40% target and will get lower through the year? Okay. First of all, we don't give guidance, any guidance for the future on the gross margin because it's difficult to projection, okay? But I can say the month of January, we are very well sales, okay? The ASP is very well. Yes, during the February 2020 year, that's every year. So if you look at our history, the Q1, you can look. So I cannot give you guidance. But I say, I give you something is, for whole year, we believe, I think we can keep back here. I think I'm not giving guidance. I just we think we can keep maybe that even let's say I'm just saying example, if that channel we keep gross margin around 35%, then the industry majority 80%, maybe they only, let's say, 15% to 20%. I'm just assuming, okay, the low cost to compare the higher cost. Okay. So you're basically saying you're not giving guidance, but your gross margin could fall 5% this year, but you'll still keep it around the 35% range, that's the target? I'm not giving the guidance, okay. I'm just giving you some more color. I got you. That's helpful. That's helpful. This is very helpful. And again, congrats on the solid 2017 performance. Thanks a lot guys. Very great. Thanks, Gordon. This concludes our question and answer session. I would like to turn the conference back over to Kevin He for any closing remarks. Thank you, everyone, again for participating in today's conference call. Should you have any further questions, please don't hesitate to contact us. Thank you, and goodbye. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.