Daqo New Energy Corp. (NYSE:DQ) Q4 2022 Earnings Call Transcript

Daqo New Energy Corp. (NYSE:DQ) Q4 2022 Earnings Call Transcript February 28, 2023

Operator: Good day, and welcome to the Daqo New Energy Fourth Quarter and Fiscal Year 2022 Results Conference Call. All participants will be in a listen-only-mode. Please also note today’s event is being recorded. And at this time, I would like to turn the conference call over to Kevin He, Investor Relations. Please go ahead.

Kevin He: Hello, everyone. I’m Kevin He, the Investor Relations of Daqo New Energy. Thank you for joining our conference call today. The Company just issued its financial results for the fourth quarter and fiscal year of 2022, 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. You can also find a PPT presentation at our website. Today, attending the conference call, we have Mr. Ming Yang, our Chief Financial Officer; and Mr. Longgen, our Chief Executive Officer; and myself. So today, I will read — so before we begin, the formal remarks, I would like to remind you that certain statements on today’s call, excluding 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 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 conference 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, now I will turn the call to our CEO, Mr. Zhang.

Longgen Zhang: Thank you, Kevin. Good evening, everyone. We are very pleased to report a second — to report a record result for the year 2022. We would like to thank our entire team for achieving such a strong financial and operational performance. Our annual polysilicon production volume 33,812 metric ton in 2022, exceeding our guidance of 130,000 to 132,000 metric ton and a 54.5% higher than the 86,587 metric ton produced in 2021. Our sales volume was 132,909 metric ton in 2022, 76.4% higher than 75,356 metric ton in 2021. Thanks to the robust demand for solar PV products globally, polysilicon ASPs increased by approximately 50% year-over-year from $21.76 per kg in 2021 to $32.54 per kg in 2022.As one of the most profitable and fastest-growing polysilicon manufacturers in the world.

We achieved a strong financial results with revenue of $4.61 billion in 2022, an increase of 175% compared to US$1.68 billion in 2021. Gross margin improved to 74.0% in 2022 from 65.4% in 2021, and net income attributable to our shareholders was US$1.86 billion in 2022, an increase of 148.4% compared to US$749 million in 2021. We generated approximately $2.47 billion in operating cash flow for the year, and ended the year with a very strong balance sheet with $4.65 billion in combined cash, cash equivalents, restricted cash and bank notes with maturity within 6months. For the year of 2022, approximately 99% of our production volume was mono-grade polysilicon. We continue to be one of the world’s leading suppliers of ultra-high purity N-type mono polysilicon, the foundation for next-generation N type solar cell technology.

Towards the end of 2022, a temporary seasonal slowdown in solar PV market caused inventory adjustments across the value chain, similar to the year-end of 2021. As a result, the downstream sectors, especially wafer, cell and module manufacturers, reduced inventories and significantly lowered production utilization rates. This led to widespread price declines across the value chain. In February 2023, lower module prices effectively stimulated market demand, and downstream production utilization rates quickly ramped up back to normal levels, reducing channel inventory significantly and leading to a meaningful recovery of polysilicon ASPs. Current polysilicon prices of approximately RMB230 to RMB250 per kg are very healthy and reflect the strong demand for solar modules in the range of RMB1.7 to RMB1.8 per watt.

Global solar PV installations were approximately 268 gigawatt in 2022, a 53% annual increase from approximately 175 gigawatt in 2021, growing faster than most had forecasted at the beginning of the year. The increase in polysilicon supply, in conjunction with supportive global climate change policies as well as favorable economic conditions driven by grid-parity, made 2022 one of the industry’s fastest growing years. Meanwhile, solar module price increased from approximately RMB1.8 per watt in Q1 2022 to RMB2 per watt in Q4 2022. Despite higher solar module market pricing that many expected would lead to a slowdown in China’s PV installations, the Chinese PV end-market also saw robust growth for the year, with installations of 87 gigawatt, an increase of 59% compared to 2021.

These market conditions suggest that the global PV market demand was actually limited by supply, specifically of polysilicon. Key global trends, including the urgent need to address climate change, the drive for greater energy independence as well as positive economic conditions driven by grid-parity, have led to strong demand momentum for renewable energies, including solar PV. We believe energy transformation is still in its early stage and has opened a huge potential market for solar PV, which is likely to be far beyond expectations. The high-purity polysilicon sector will continue to benefit strongly from these positive developments. Daqo New Energy is well-positioned to benefit from the above trends and deliver continued growth. The construction of our Phase 5A 100,000 metric ton polysilicon capacity expansion project in Inner Mongolia is progressing smoothly.

We expect to complete construction and start pilot production in April 2023 and ramp up to full capacity by the end of June 2023. Therefore, we expect to produce approximately 190,000 to 195,000 metric ton of polysilicon in 2023, 38% to 46% more than in 2022. Furthermore, our Phase 5B project for an additional 100,000 metric polysilicon in Inner Mongolia will start construction in March and is expected to be completed by the end of this year. Solar PV will continue to play a critical role in transforming the global energy infrastructure by powering the world with sustainable, cost-effective and renewable energies at a pace much faster than thought possible. As a leading player in polysilicon industry, we outperformed most of our peers in terms of unit profitability, cost structure, and product quality in 2022.

We believe our focus on our core competitiveness, solid growth road-map, and our strong balance sheet will allow us to benefit from the long-term growth of the global solar PV market. For the future outlook and guidance, we expect to produce approximately 31,000 metric tons to 32,000 metric tons of polysilicon in the first quarter of 2023 and approximately 190,000 metric tons to 195,000 metric tons of polysilicon in the fourth year of 2023, inclusive of the impact of the company’s annual facility maintenance. Now I will turn the call to our CFO, Mr. Yang, please.

Copyright: lassedesignen / 123RF Stock Photo

Ming Yang: Thank you, Longgen, and hello, everyone. Thank you for joining our earnings conference call today. Now I will discuss the company’s financial performance for the quarter and for the year. Revenues were $864 million compared to $1.22 billion in the third quarter of 2022 and $295.5 million in the fourth quarter of 2021. The decreasing revenue compared to the third quarter of 2022 as Longgen mentioned was primarily due to a decrease in sales volume mitigated by an increase in average selling price. Gross profit for the quarter was $668.9 million, compared to $978.6 million in the third quarter of 2022 and $239.8 million in the fourth quarter of 2021. Gross margin was 77.4% compared to 80.2% in the third quarter of 2022 and 60.6% in the fourth quarter of 2021.

The slight decrease in gross profit compared to the third quarter was primarily due to lower sales volume as well as higher production costs. Sales, general and administrative expense was $44 million, compared to $280 million in the third quarter of 2022 and $10.2 million in the fourth quarter of 2021. SG&A expenses during the fourth quarter included $28.4 million in noncash share-based compensation costs related to the company’s share incentive plan. And this compares to the third quarter cost of $263.4 million in the third quarter of ’22 of noncash share-based compensation costs. Research and development expense for the quarter was $2.7 million, compared to $2.5 million in the third quarter of 2022 and $1.3 million in the fourth quarter of 2021.

R&D expenses vary from period to period reflect R&D activities that take place during the quarter. Currently, most of our R&D are spent primarily on our entire technology research as well as research to reduce production costs. Income from operations was $623 million, compared to $693 million in the third quarter of 2022 and $228 million in the fourth quarter of 2021. Operating margin was 72% compared to 56.8% in the third quarter of 2022 and 57.7% in the fourth quarter of 2021. As a result of the above, net income attributable to Daqo New Energy Corp shareholders was $372.9 million, compared to $223.4 million in the third quarter of 2022, a 1.13 million in the fourth quarter of 2021. Earnings per basic ADS was $4.78 compared to $4.28 in the third quarter of 2022, a $1.90 in the fourth quarter of 2021.

Adjusted net income attributable to Daqo New Energy shareholder, excluding noncash share-based compensation costs was $403.3 million compared to $590.4 million in the third quarter of 2022 and $143.6 million in the fourth quarter of 2021. Adjusted earnings per basic ADS was $5.17 compared to $7.81 in the third quarter of 2022 and $1.93 in the fourth quarter of 2021. EBITDA for the quarter was $648.5 million, compared to $720 million in the third quarter of 2022 and $251.1 million in the fourth quarter of 2021. EBITDA margin was 75% compared to 59% in the third quarter of 2022 and 63.5% in the fourth quarter of 2021. Now for a review of our full year 2022 results. Revenue for the year 2022 were $4.6 billion, compared to $1.68 billion in 2021.

The increase was due to higher polysilicon average selling prices saw a significantly higher . Gross profit was $3.4 billion compared to $1.1 billion in 2021. Gross margin for the year was 74% compared to 65.4% in 2021. The increase in gross profit was due to higher sales volume and higher selling prices. SG&A expenses for the year was $354.1 million compared to $39.9 million in 2021. The increase of SG&A expenses for 2022 compared to 2021 was primarily due to our noncash share-based compensation costs related to our shared incentive plan, which was $299 million for 2022, compared to $8.4 million in 2021. R&D expenses were $10 million compared to $6.5 million in 2021. Income from operations for the year was $3.04 billion, compared to $1.05 billion in 2021.

Operating margin was 66% compared to 62.6% in 2021. Interest income for the year was $14.5 million, compared to $24.5 million in net interest expense in 2021. The interest — increasing interest income was due to our higher cash balance. Income tax expense for the year was $537 million, compared to $170 million in 2021. The net income attributable to Daqo New Energy shareholders for the year was $1.86 billion, compared to $748.9 million in 2021. Earnings for basic ADS for the year was $24.51 compared to $10.14 in 2021. Adjusted net income attributable to Daqo New Energy shareholders was $2.16 billion, compared to $759 million in 2021. Adjusted earnings per basic ADS were $28.50 per share compared to $10.28 in 2021. EBITDA for the year was $2.15 billion, compared to $1.13 billion in 2021.

EBITDA margin for the year was 68.4% compared to 67.5% in 2021. And now on the Company’s financial condition. As of December 31, 2022, the company has $3.52 billion in cash, cash equivalent and restricted cash compared to $2.05 billion as of September 30, 2022 and $724 million as of December 31, 2021. And as of December 31, 2022, a bank note receivable balance, which can be immediately redeemed for cash was $1.1 billion, compared to $1.57 billion as of September 30, 20.2, and $386 million as of December 31, 2021. The bank notes typically was maturing about 6 months timeframe. And now on to the Company’s cash flow. For the 12 months ended December 31, 2022, net cash provided by operating activities was $2.46 billion, compared to $639 million the same period of 2022.

The increase was primarily due to higher revenue and higher gross margin. And for the 12 months ended December 31, 2022, net cash used in investing activity was $1 billion, compared to $782 million in the same period of 2021. Net cash used in investing activities in 2022 was primarily related to total capital expenditures on the company’s 100,000 metric ton polysilicon project in Baotou City, Inner Mongolia. And the for the 12 months ended December 31, 2022, net cash provided by financing activity was $1.47 billion, compared to $736 million in the same period of 2021. The net cash provided by finance activities in 2022 was primarily related to net proceeds of $1.6 billion from our Xinjiang Daqo’s private offering in China’s A share market.

And that concludes our prepared remarks and now we will open the call for questions from the audience.

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Q&A Session

Operator: Our first question today comes from Philip Shen from ROTH MKM. Please go ahead with your question.

Philip Shen: Hi, everyone. Thanks for taking my questions. Wanted to start off with your latest drive on pricing. So specifically, Longgen, I think you talked about rise of modular prices stabilizing, polysilicon prices . How do you expect polysilicon prices trend by quarter for the rest of the year? Thanks.

Longgen Zhang: Thank you, Philip. I think since the last year, December, that’s every year, I think, since the year 2020 and because all the fees is Thanksgiving holiday, New Year, plus Chinese New Year, so the downstream is a waiver, I think producer of every year reduce their utility capacity. Utilization rates we call. So last year, same things happened. because Chinese New Year very close to I think the New Year. So basically, in December, last year December, we didn’t sell any silicon, 1 per kg silicon. The reason is because I think the player, player, almost the utilization expected down to, I think it’s something to zero, even 10% and clean all the inventory. So basically, then Chinese New Year is coming, I think early February.

So January, we also didn’t selling anything. So February, we’re starting, I think, whenever we — its — at the end of last year, we have inventory around 5,200 tons. So we believe I think we’ve given guidance. I think right now, the price, I think come back from last year, December, almost lower — as lower as like RMB1.8 per kg. Right now it come back to normal RMB210 to RMB250 per kg. So we sold I think more than 10,000 tons in February, as the price is higher. So we will continue selling. So we believe I think Q1, the selling price should be above RMB220. The reason is because I think in the second quarter of this year it’s not too much new player coming. So it’s not too much output, new output to come out. So we think we’ll continue to digest or even tolerate come to normal.

So my forecast, I think before mid of this year, before end of June, the selling price should be about RMB210, even higher to RMB250. For the Q3, I think the only new capacity come from our Mongolia Phase 1 , as the market demand is continued go up. So we believe I think we can keep the silicon price between 150 to 200. Q4, definitely, I think, the picture is not clear. It’s like crystal ball. So the silicon price, maybe even go down to 100 to 120. So overall, this year, we’re still thinking of very profitable for Daqo. Second is we do not think the model price will continue to go down, because we see that high performance module like module, even today in Canada, we can sell at RMB1 or RMB2 per watt. And overseas OUR costs depend on different region.

I think original almost 80% overseas they fixed the price. So it’s a very profitable. And yes, maybe the module price will go down in Q4 this year. But doesn’t matter. If — let’s say if the module price is $1.70 per watt, you can support polysilicon price above 200. So the only thing is the gross margin allocation between the silicon, wafer and the sales of module. But we believe silicon segment still is very, I think capital intensive investment, long-term constructing period, still is a challenge, yes. And I think maybe next year, then — I think it’s not only silicon, maybe all the supply and demand, but also wafer cell module the same. So, maybe come back and see the lowest module price will stimulate the whole market to come back. So I think it’s sort of .

So what I can say is this year polysilicon is very profitable. And we will continue to make money.

Philip Shen: Great. Thanks for all that color, Longgen. It’s really helpful. You mentioned you didn’t sell any poly in December or January. And you said you sold 10,000 tons in February. If you’re producing 10,000, at least are you saying that incrementally you sold another 10,000 and also did — do you still have any of that excess inventory leftover? Or have you already sold it all in the month of February? Thanks.

Longgen Zhang: Basically, I think for the Q1, we’ve given guidance. I think we were — I think sale or the production, new production for the Q1. So end of the Q1, we maybe still have inventory around the 10,010, around okay. But, yes, we were what do we do . Still that’s a stable price, very high price, yes about renminbi like around $220.

Philip Shen: Okay.

Longgen Zhang: In February, okay, we saw more than 10,000, I’m not saying 10,000, more than 10,000. So for March we were selling more than .

Philip Shen: Very good. Thank you. to your bookings, I think on the last call your 90% booked for 2023. You can’t really move much more than that. I was wondering if you can talk through what your contracted for ’23 and perhaps even for 24. And then I have one more final follow-up. Thanks.

Longgen Zhang: Give me the last . I think, for this year, our planning is given guidance is the 190,000 tons to I think tons, right. I think for long-term contracts, we almost cover right now almost covered 90% — more than 90%. So I think we continue — I think working with the client to sign long-term contracts. So majority, I think for ’23, well more than 90%. For ’24, right now is more than if we didn’t have any any capacity expansion. I think we’ve covered at least I think next year 70%. I think the year 2025 we will cover more than 65%. But the long-term contract is a rollover.

Philip Shen: Great. Okay. And then the final question I had was on your cost structure. Q4 was a little bit higher. Just curious I expect your cost structure to . Thanks.

Ming Yang: Okay. Hello, Philip this is Ming. So the increase in cost structure for Q4 compared to Q3 was primarily due to increase in raw material costs, particularly the market costs for silicon metal, as well as increase in electricity rates. So I think, as you know and investor are aware that China actually broadly did see increase in electricity rates across all China, including areas like as well as in Mongolia and Xinjiang as well. And so, so all the costs increase has been fully reflected, say the cost structure for Q4. So, in terms of our cost trends, we do expect overall the cost structure for the first half of 2023 should be similar to our Q4 costs. While after we ramp up our Inner Mongolia facility, we expect our cost to trend down. I think based on our latest internal estimate, we do think, for example, our cost in Q4 for 2023 should be above 5% plus lower than for example, our first half cost. To mean the same silicon metal cost.

Philip Shen: Great. Okay. Thanks very much guys. I will pass it on.

Ming Yang: Great. Thank you.

Operator: The next question comes from from Daiwa Capital Markets. Please go ahead with your question.

Unidentified Analyst: Thanks management. First of all, congrats on the solid of 2022 results and also we deeply appreciate for your encouraging production target for 2023. My first question is on cost. We noticed that there has been some power shortage and . How do you expect it to your polysilicon metal price? And also do you expect that will be cost driven polysilicon price hike? This is my first question. Thank you.

Ming Yang: Okay. So actually, interestingly, silicon metal cost in Q4 of last year was substantially higher than Q3 of last year primarily due to higher energy costs within China. And silicon metal price recently declined in January of this year. And now it is a little bit on the trends. rising trend, but we haven’t really seen any significant increase of silicon metal cost due to the issue with the . That’s what we’re seeing currently. So as a result we do think our Q1 costs should be relatively stable compared to our Q4 costs.

Unidentified Analyst: Thank you so much. That’s clear. My second question is on can you share a little bit color on the industry inventory level of polysilicon? Thank you.

Longgen Zhang: Industry inventory level for polysilicon?

Unidentified Analyst: Yes.

Longgen Zhang: I think the — China as you know, that every month, our production output is around 1,000 ton. And for the inventory as everyone, but I think the end of last year, the inventory is around less than 50,000 ton. The reason is because continue vertically integrated. And also, I think just material outside to do the processing, and then take the wafer back continue to produce sales. So because I think the market come back to normal, I think Tongwei and I think the inventory gradually . So if you ask me, by the end of Q1, how much inventory is there? I think it should be less than 50,000 ton.

Unidentified Analyst: Thank you. . My first — my third question is on technological development. We noticed that technology over first quarter of this year. How do you expect the competitiveness of use in comparison with the SDR granular silicon . Thank you.

Ming Yang: Okay, hello. So I Believe your question is, for example, granular silicon SDR process versus our CMOS, traditional CMOS process, right?

Unidentified Analyst: Yes.

Ming Yang: Okay. So I’ll take it from two perspective, okay. So, I think one is really from quality perspective, okay. The SDR process, because it has much higher contamination of both hydrogen and also because of uses of graphite stacks for heating. So, a lot higher carbon contamination as well as because of the high surface area compared to the interesting area of much higher surface metal contamination. So, if you compare the quality of the CMOS, advanced CMOS process especially in high purity supplies like compared to a typical SDR type of process, our purity is around 100x higher, okay. So a lot of our purities are now on the parts per billion, parts per level, right. So from a purity perspective, I think if you look at what’s happening in the market is that company — our customers will use our product as their primary use of silicon and SDR only generally used to as a mix because that’s what I think.

So, I think, SDR as the market grows, I think it does have a relatively more limited addressable market. And then in terms of cost structure, I think, even ideally, if you’re talking about maybe saving 20 to 30 kilowatt hour of electricity, you’re talking about RMB6 to RMB8 per kilogram of cost reduction. But what we’re seeing in the market is that generally offers between RMB15 to RMB20 or more in cost discount or price discounts. So I think that’s fully reflected in that kind of environment.

Unidentified Analyst: Thank you. My last question, and I will jump back to the queue. Can you share with us the price premium of N type polysilicon over P type polysilicon right now, either in like absolute terms or percentage terms? And where do you expect ? Thanks.

Longgen Zhang: I think right now the impact on the P type, the price, I think is not too much a difference. The reason is because the selling price is higher. like last year $72. Right now renminbi is around 220, 230. So the impact maybe RMB3 per kg higher. But I think the silicon price back to normal and then as the demand continue for high quality, high purity of N type, I think the difference become larger. So when silicon price go down, let’s say to 100, I think N and P type will be more than RMB10 per kg difference. That mean, maybe $1 or $2 difference is there.

Unidentified Analyst: . Thank you so much.

Ming Yang: Okay. Thank you.

Operator: The next question comes from Alan Lau from Jefferies. Please go ahead with your question.

Alan Lau: Congratulations to the and also thanks a lot for taking my question. So my first question is about the progress of your Inner Mongolia . It is supposed to be completed in April, right, 3 months to ramp up. Is it correct? And I would like to know you have also mentioned that supply addition. So we’d like to know if you may share with us more color on those because there are a lot of peers on new players scheduled to have their to be completed in 2Q.

Longgen Zhang: I think on Mongolia, I think we — I think Phase 1 we call 5A. We are planning I think April this year. We believe we can I think in May of this year. So these were adding for this year, I think more capacity to our total guidance. So we’ve given guidance is 190,000 to 195,000. So it’s around that I think we already calculated, I think 60,000 ton this year, maybe adding to our total guidance. For the Phase 2, I think we are starting, I think we already announced that we are starting design. And for this month, we’re also starting I think, field work. So we are planning to early, maybe end of this year or early next year starting to try production. So that will help us I think next year capacity. Then total together, I think in Mongolia is 200,000 ton that for N type, okay.

For the P type will maybe produce a little more, maybe 5% to 10% more. So the Mongolia capacity, I think, besides that 200,000 metric tons of polysilicon, we also I think in silicon metal. Silicon metal because I think we are waiting for the pool, supplier pool. We believe maybe by the end of this year or next year, I think 150,000 or 200,000 metric tons were put into production. Meanwhile, the semiconductor I think 1,500 tons I think in the 5A we are starting maybe production — semiconductor in this year, September of this year. So this is our total planning for I think, Mongolia.

Alan Lau: Thank you. So would just share updates on your peers, like some of the peers like or other players because they are supposed to have their completed in 1Q and 2Q. So do you think that will add to the poly supply and may cause poly prices to drop or ?

A – Longgen Zhang: We will not comment on peers, especially those , right. So we’re not doing any comments. But as you will see, I think the — as the timing continue going, we believe, I think newcomer some challenge is there, both, I think product quality, and on time schedule delivery et cetera. So, we’re not going to comment on peers.

Alan Lau: Thank you. Thanks. So we’d like to check on the dividend ratio, because the company has posted a excellent return and also the company has also announced the $700 billion of buyback level. So wonder if it implies what level of dividend ratio in order for the U.S ADR to have the required amount of cash to carry out the buyback?

Ming Yang: Basically, I think next month, the Asia company, we have shareholders meeting, and at that time, we’ll announce the — I think dividends declare. But we also — I cannot give you a detailed figure. But as we already announced, we were buyback basically — we all I think U.S company own 73%. And the buyback is US$700 million. So you can calculation. We believe between 35% to 40% our net profit were distributed as dividend. But I think .

Alan Lau: Thank you. And my last question here on the PCAOB investigation, how do you and will this be a positive catalyst to the company?

Longgen Zhang: I think the four bigger firms, I think two is already basically, of course, the report here is not on the website, PCAOB verified. But I think they’re already starting, I think Deloitte and PwC in right now. I think the government — Chinese government is very and we also very open as a public company. I don’t think any challenge so far. I think hopefully we may, the PCAOB can they are regular, I think regularly . So, we believe I think the bigger four firms in China will be okay.

Alan Lau: Understood. Thanks a lot for taking my questions. I will pass it on. Thank you.

Ming Yang: Thank you.

Operator: The next question comes from Gary Zhou from Credit Suisse. Please go ahead with your question.

Gary Zhou: Hello, management. Thanks for taking my question. So just a two quick follow-up on the — on the share buyback program. So firstly, I want to ask in terms of your timing, so when do we expect to receive the dividends from Asia, from Asia, Asia, Asia, such as a subsidiary? And secondly for biotech. So is it possible that we will consider to do some small biotech before receiving the probably going to be after we receive the dividends on . And lastly because I did a simple calculation, so that’s almost 20% our current market cap and probably even bigger in terms of our . So just wondering, does this imply that how to relatively aggressive?

Longgen Zhang: Gary, let me answer the first question, then Ming answer the second question, okay. Basically we cannot complain anything in the marketing, right, market always correct. So right now, . We also didn’t care we know this is below our I think equity value. So we just finished I think reached US$140 million, basically I think that could subsidiaries in . The money is deposited to China Merchant Bank, then we got the loan I think it’s around US$140 million. So, yes, in this window open, we will buyback the amount is around US$140 million. Then we already declare the dividends I think next month. There will be $700 million. Then you take US$140 million you have like US$560 million left, that’s for the next window. That’s mean, May and June, the window open for buybacks. So basically, I can tell you that there were two window, we’re going to execution our stock buyback pull off. We’re ready to do that. Ming, you answer the second question.

Ming Yang: Yes. So like Longgen has mentioned, right, so I think both our Board and our management team believe our current share price in the U.S is extremely undervalued, it’s trading at huge discount, whether it’s to the company’s cash level or equity value or future potential earnings. I think we announced our results for 2022, you can see our cash generation, or current cash balance on hand, while I think forecast and the expectations of poly pricing for this year, right, given that you’re around US$30 per kilogram. Today in the market, we will continue to generate significant cash flow for further share and likely for future periods because we are the lowest cost producer in the world effectively right with some of the highest quality especially N type products become — likely to become the mainstream over the next year or so, and we are going to be one of the primary supplier of N type poly as well.

So we do believe now it’s really a good opportunity for the company to be very active in terms of our share buyback program. So, I think in terms — your comment in terms of the market cap will — while it does look like it’s a fairly high percentage, I think it’s because market cap is extremely low compared to our cash flow generation and also the capital that we have. So, that’s the .

Gary Zhou: Thanks a lot. And secondly, just a very quick question on the future capacity expansions. So, when we consider the kind of a possibility to expand it in other countries outside China, so if we go if we see kind of a more kind of a trade restrictions.

Longgen Zhang: Yes, we always research all the situation and the overseas capacity I think especially I think the market, global market is more than regional critical I think et cetera. So, yes, we will compare the reason we go to overseas, we have to considering the local resources and the people, the talent, and so on. So, definitely we do the study and .

Gary Zhou: Okay, thank you. That’s all my questions. I will pass it on. Thank you.

Operator: Our next question comes from Alan Hon from JPMorgan. Please go ahead with your question.

Alan Hon: Hi. Congratulations on great result. I just have one question on your CapEx. Can you share with us like what is the CapEx commitment for Phase 5A and Phase 5B? How much is already spent and how you expect to spend this year?

Ming Yang: Okay. So I have the numbers in R&D first and I’ll kind of translate to U.S dollar. So CapEx for 5A, total CapEx is around RMB9.5 billion or so. And then for 5B total CapEx is expected to be about RMB9 billion. So, really I guess 5A is around US$1.4 billion, and then 5B is around US$1.3 billion or so. And then actually for the full year of 2022, we spent approximately US$1.3 billion in CapEx. Most of it is related to Inner Mongolia 5A. But some of it was also . And in terms of CapEx for 2023, I think for the full year, we’re expecting roughly $1.2 billion of CapEx for the full year, of which roughly US$900 million to a US$1 billion is for in the Mongolia, around US$300 million is for our — the remaining payment for our Phase 5A Inner Mongolia.

Alan Hon: Got it. Thanks very much.

Operator: Ladies and gentlemen, at this time we’ll end today’s question-and-answer session. I’d like to turn the floor back over to Kevin for any closing remarks.

Kevin He: Thank you, everyone, again for participating to this conference call. Should you have any further questions, please don’t hesitate to contact us. Thank you and bye, bye.

Operator: Ladies and gentlemen, that does conclude today’s conference call. We do thank you for joining. You may now disconnect your lines.