Daqo New Energy (NYSE: DQ) reported Q1 EPS of $1.18, $0.01 worse than the analyst estimate of $1.19. Revenue for the quarter came in at $256.1 million versus the consensus estimate of $297.97 million.

First Quarter 2021 Financial and Operating Highlights

• Polysilicon production volume was 20,185 MT in Q1 2021, compared to 21,008 MT in Q4 2020
• Polysilicon sales volume was 21,471 MT in Q1 2021, compared to 23,186 MT in Q4 2020
• Polysilicon average total production cost(1) was $6.29/kg in Q1 2021, compared to $5.92/kg in Q4 2020
• Polysilicon average cash cost(1) was $5.37/kg in Q1 2021, compared to $5.04/kg in Q4 2020
• Polysilicon average selling price (ASP) was $11.90/kg in Q1 2021, compared to $10.79/kg in Q4 2020
• Revenue was $256.1 million in Q1 2021, compared to $247.7 million in Q4 2020
• Gross profit was $118.9 million in Q1 2021, compared to $109.5 million in Q4 2020. Gross margin was 46.4% in Q1 2021, compared to 44.2% in Q4 2020
• Net income attributable to Daqo New Energy Corp. shareholders was $83.2 million in Q1 2021, compared to $72.8 million in Q4 2020
• Earnings per basic American Depositary Share (ADS)(3) was $1.13 in Q1 2021, compared to $1.01 in Q4 2020
• EBITDA (non-GAAP)(2) was $128.1 million in Q1 2021, compared to $115.1 million in Q4 2020. EBITDA margin (non-GAAP)(2) was 50.0% in Q1 2021, compared to 46.5% in Q4 2020
• Adjusted net income (non-GAAP)(2) attributable to Daqo New Energy Corp. shareholders was $86.2 million in Q1 2021, compared to $77.3 million in Q4 2020
• Adjusted earnings per basic ADS(3) (non-GAAP)(2) was $1.18 in Q1 2021, compared to $1.07 in Q4 2020

Management Remarks

Mr. Longgen Zhang, CEO of Daqo New Energy, commented, "During the quarter, we continued to see strong momentum in customer demand for high-purity polysilicon, which led to a significant shortage of polysilicon and higher polysilicon ASPs. Our ASP in the first quarter of 2021 was $11.90/kg, approximately 10% higher than Q4 2020. Due to the elapsed time from contract signing, product shipment, to revenue recognition upon products' arrival at customers' sites, it takes time for market prices to be fully reflected in our ASPs during periods of rapid price change. Based on current customer contracts and product deliveries, we expect our ASP in the second quarter of 2021 to be in the range of $19.00-$20.00/kg, a significant improvement compared to Q1 that better reflects recent market pricing trends. As of today, current market pricing for high-purity mono-grade polysilicon has already reached the level of $23-$25/kg. With strong end market demand driven by global carbon neutrality commitments by all major economies, major mono-wafer manufacturers continue their capacity expansion and new entrants build new wafer capacity. As a result, we believe that supply in the polysilicon market will remain tight until the middle of 2022, when the market will finally see some additional supply of polysilicon."

"During the quarter we produced 20,185 MT of polysilicon which lays a solid foundation for achieving our production target this year and also gives us the confidence to raise our guidance for annual production volume to the range of 81,000 MT to 83,000 MT from 80,000 MT to 81,000 MT. During the quarter, approximately 99% of our polysilicon products were sold to mono-wafer customers and we already began commercial shipments of N-type polysilicon to four major customers. Our production cost was up by 4% in RMB terms in the quarter as compared to Q4 2020, primarily due to the rise in the cost of silicon raw material and the impact of lower production volumes. We expect production costs to stabilize in the coming quarters as the cost of silicon raw material has stabilized for the time being. We will continue our efforts to reduce cost and improve quality as we expect to see the benefit from our newly implemented digital manufacturing system to stabilize production, maximize output and optimize efficiency."

"On the business development front, we have already sold out our production volume of this year through the long-term supply agreements with customers that span all the major mono-wafer manufactures as well as major integrated solar manufacturers. More importantly, in connection with these long-term supply contracts, we have received RMB 800 million of prepayments from customers this year to date, which will help us fund our future expansion plans and ensure our future market share. This shows the tightness of the polysilicon market and the strong momentum in demand growth, as well as the fact that, in our customers' mind, Daqo is the leading supplier of high-purity mono-grade and N-type polysilicon with high reliability, stability and consistency."

"In mid-March we began construction for our new Phase 4B project, which will add 35,000 metric ton capacity for high-purity polysilicon. We expect to complete the project by the end of 2021 and ramp up to full capacity by the end of Q1 2022. Our Phase 4B project and the potential IPO on China's STAR Market will bring us into a new phase of development and enable us to quickly expand capacity to address the fast-growing demand from the global solar PV market for ultra-high purity polysilicon."

"In the present context of global carbon neutrality goals, major economies in the world including China are launching ambitious policies to mandate the use of clean energy and address climate change. With the megatrend of the transformation to a low-carbon economy and de-carbonization of the energy sector, we are entering a new era of accelerated growth for the solar industry. We believe Daqo New Energy is very well positioned to benefit from this tremendous opportunity."

Outlook and guidance

The Company expects to produce approximately 20,000MT to 21,000MT of polysilicon and sell approximately 20,000MT to 21,000MT of polysilicon to external customers during the second quarter of 2021. For the full year of 2021, the Company expects to produce approximately 81,000 to 83,000 MT of polysilicon, inclusive of the impact of the Company's annual facility maintenance.

This outlook reflects Daqo New Energy's current and preliminary view as of the date of this press release and may be subject to changes. The Company's ability to achieve these projections is subject to risks and uncertainties.

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