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spk01: Go New Energy First Quarter 2021 Results Conference Call. Our participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please know this event is being recorded. I would now like to turn the conference over to Kevin Herr from Investor Relations. Please go ahead.
spk13: Hello, ladies and gentlemen. I'm Kevin He, the investor relations of DaQ New Energy. Thank you for joining our conference call today. DaQ New Energy just issued its financial results for the first quarter of 2021, 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, we have Mr. Longgen Zhang, our Chief Executive Officer, 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 quarter. After that, we will open the floor to Q&A from the audience. Before we begin the formal remarks, I would like to remind you that certain statements on today's call including expected future operational and financial performance and industry growth, are forward-looking statements that are made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ maturely from those containing 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, I now turn the call over to our CEO, Mr. Zhang, please.
spk12: Thank you, Kevin. Hello, everyone. Thank you for joining our conference call today. During the quarter, we continue to see strong momentum in customer demand for high-purity polysilicon, which led to a significant shortage of polysilicon and high polysilicon SPs. Our ASP in the first quarter of 2021 was $11.90 per kg, approximately 10% higher than Q4 2020. Due to the elapsed time from contract signing product shipment to revenue recognition upon product's arrival at customer sites, It takes time for market prices to be fully reflected to our SPs during the periods of rapid price change. Based on current customer contracts and product deliveries, we expect our SP in the second quarter of 2021 to be in the range of $19 to $20 per kg, a significant improvement compared to Q1. that better reflects recent market pricing trends. As of today, current market pricing for high-pure monograde polysilicon has already reached the level of $23 to $25 per kg. With strong end-market demand, driven by global carbon neutrality commitments by all major economies, major Weaver manufacturers continue their capacity expansion, and new entrants build new Weaver 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 metric tons 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 to 83,000 metric tons, from 80,000 to 81,000 metric tons. During the quarter, approximately 99% of our polysilicon products were sold to mono-weaver customers, and we already began commercial shipments of N-type polysilicon to our four major clients. Our production cost was up by 4% in the B10s 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. As we continue our efforts to reduce cost and improve quality, as we expect to see the benefits 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-weaver manufacturers as well as major integrated solar manufacturers. More importantly, In connection with these long-term supply contracts, we have received $800 million of prepayment from customers this year to date, which will help us find our future expansion plans and ensure our future market share. This shows the tightness of our political market and the strong momentum in demand growth, as well as the fact that our customer's mind. DaKu is the leading supplier of high purity monograde and anti-polysilicate with high reliability, stability, and consistency. In middle March, we began construction for our new Phase 4B project, which which will add 35,000 metric tons 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 stock 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 lower carbon economy and decarbonization of the energy sector. We are entering a new era of accelerated growth for the solar industry. We believe Darko New Energy is very well positioned to benefit from this tremendous opportunity. Now let's move to our outlook and the guidance for our company. The company expects to produce approximately 20 to 21,000 metric tons of polysilicon and sell approximately 20 to 21,000 metric tons of polysilicon to external clients during the second quarter of 2021. For the fall year of 2021, the company expects to produce approximately 81,000 to 83,000 metric tons of polysilicon. 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.
spk09: Thank you, Longyan, and hello, everyone. Thank you for joining our conference call today. Now I will discuss our company's financial performance for the first quarter of 2021. Revenues were $256.1 million compared to $247.7 million in the fourth quarter of 2020 and $168.8 million in the first quarter of 2020. The increase in revenue was primarily due to higher ASPs, partially offset by slightly lower polysilicon sales volume. As Longan indicated earlier, based on our current customer contracts and product deliveries, we expect our ASP in the second quarter of 2021 to be in the range of $19 to $20 per kilogram, a significant improvement compared to the Q1 average selling price of $11.90. While we saw a rapid and significant rise in market ASP during the first quarter, Due to GAAP accounting revenue recognition policies, there is a significant time lag from customer order contracting based on market price to policy production and scheduled shipments to products finally arriving at customer side for revenue recognition. Due to this impact, we believe our Q2 ASP will better reflect the recent market pricing trends. Gross profit in Q1 was $118.9 million, compared to $109.5 million in the fourth quarter of 2020 and $56.6 million in the first quarter of 2020. Growth margin was 46.4%, compared to 44.2% in the fourth quarter of 2020 and 33.5% in the first quarter of 2020. The increase in growth margin was primarily due to higher ASPs. Our polysilicon production cost in Q1 2021 was $6.29 per kilogram, an increase of 6.3% compared to $5.92 per kilogram in the fourth quarter of 2020. The sequential increase in cost was primarily due to an increase in the market price of metallurgical grade silicon raw material and lower production volume in Q1 compared to the previous quarter. as well as exchange rate fluctuations, which had a roughly 2% impact to cost in U.S. dollars. For the second quarter, we expect our production costs to be stable as compared to the first quarter. Selling general and administrative expenses were $9 million, compared to $11.2 million in the fourth quarter of 2020 and $8.9 million in the first quarter of 2020. SG&A expenses during the quarter included $2.5 million in non-cash share-based compensation costs related to the company's share incentive plan, compared to $4.5 million in the fourth quarter and $4 million in the first quarter of 2020. Research and development expenses were $1.2 million. compared to $1.5 million in the fourth quarter of 2020 and $1.7 million in the first quarter of 2020. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter. As a result of the foregoing, income from operations was $109.2 million compared to $98 million in the fourth quarter of 2020 and $45.8 million in the first quarter of 2020. Operating margin was 42.6% compared to 39.6% in the fourth quarter of 2020 and 27.1% in the first quarter of 2020. Interest expense was $7.8 million compared to $8.3 million in the fourth quarter of 2020 and $6.3 million in the first quarter of 2020. Net income attributable to DACA New Energy shareholders was $83.2 million compared to $72.8 million in the fourth quarter of 2020 and $33.2 million in the first quarter of 2020. Earnings per basic ADS was $1.13, compared to $1.01 in the fourth quarter of 2020 and $0.47 in the first quarter of 2020. EBITDA was $128.1 million, compared to $115.2 million in the fourth quarter of 2020 and $63.1 million in the first quarter of 2020. EBITDA margin was 50% compared to 46.5% in the fourth quarter of 2020 and 37.4% in the first quarter of 2020. As of March 31, 2021, the company had $227.8 million in cash and cash equivalents and restricted cash compared to $118.4 million as of December 31, 2020, and $120.8 million as of March 31, 2020. The increase in cash balance of $109 million sequentially was primarily a result of positive operating cash flow offset by capital expenditures related to our Phase 4B project. As of March 31, 2021, The notes receivable balance was $38.5 million, compared to $0.2 million as of December 31, 2020, and $4.4 million as of March 31, 2020. As of March 31, 2021, total bank borrowings were $222 million, of which $100.4 million were long-term borrowings, compared to total bank borrowings of $193.7 million, including $123 million of long-term borrowings as of December 31, 2020, and total borrowings of $265.6 million, including $149 million of long-term borrowings as of March 31, 2020. For the three months ended March 31, 2021, net cash provided by operating activities was $159.2 million compared to $31.1 million in the same period of 2020. The strong increase in operating cash flow compared to last year was primarily due to higher net income, as well as customer prepayments related to our long-term supply agreements. For the three months ended March 31, 2021, net cash used in investing activity was $79.9 compared to $12.9 million in the same period of 2020. The net cash used in investing activities in 2021 was primarily related to capital expenditures on the company's Phase IV-B public silicon expansion project. For the three months ended March 31, 2021, net cash provided by financing activities was $31.7 million, compared to NACASH used in financing activities of $10 million in the same period of 2020. And that concludes our prepared remarks. Operator, we will now open the floor to questions from the audience.
spk01: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, press star then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Gary Zhu from Credit Suisse. Go ahead.
spk07: Hello, management. Thank you for taking my questions. First of all, congratulations on the record high quarterly earnings. So I have three questions from my side. So first is a measurement share with us your latest polysilicon ASP outlook for the second half of this year and also possibly for next year. And secondly, I want to ask for the latest progress of our Xinjiang DAPO IPO and if possible, what kind of valuation or market cap we expect to get from the Asian markets. And certainly, so given the very likely kind of a record high profit and cash flow we are going to get this year, so how do we think of the further capacity expansions into the next few years? Thank you.
spk12: Okay, Gary. To answer your first question, the ASP, I think currently you see the polysilicon ASP, I think, go up very fast. And as you can see that this week, our, you know, I think a small order reached to even more than $20 per kg. We believe the month of June, I think the selling price also went higher. So that's why we're given, I think, a second quarter. The average SP is around $19 to $20, and that should we compare our Q1 is $11.9, a bigger jump. And that will affect our growth margin, bottom line in second quarter. We've got a big improve. And the reason is because, you know, for the second half of this year, the S&P, you know, what's the trend? Basically, you know, the policy is, It's very difficult to forecast, I think, the peak price. However, you see, our Weaver customers will continue to buy as their operating cash flow remains positive. That's what I say. You see, the peak will go to until the Weaver industry, you see, the average, the gross margin will go to break even. Right now, as you see there, last week, the Weaver price continued to go up. So that's why it's difficult for me to give you a forecast of polysilicon price. But I think the polysilicon price will continue to go up in the second half of the year, because it didn't have any additional polysilicon capacity, new capacity added in. And for the next year, the first half of next year, maybe around 1,010 new capacity come in. But if you look I think the waiver capacity continues to expansion. I think by the end of this year, we'll reach around, I think, 450, maybe 450 gigawatts on the waiver capacity. So we think, you know, I cannot give you the ASP for the next year, but I think the first half next year should be around, I think, more than 150 lemminbi per kg. Then second half of the year, because the new, I think, capacity coming, what I think, I talk to industry other people, we think it should keep above, you know, above like 120, let me be per kg. Second question about, you know, our stock market listing. And we cannot guarantee the timetable. The reason is a lot of uncertainty in China, you know, capital markets. But we have updated our Xinjiang Q1 financial data and also the first half of this year estimates to Shanghai Stock Exchange last week. We think maybe this week will be released to public very soon. And we are waiting to start the registration process with CSRC. The registration process is expected to begin be completed within 20 working days after CSRC officially accepts our documents. So after completion, I think, of the registration with the CSRC, we can start into listing processing. That takes maybe around one month. So basically, if everything goes smooth, I think we can be listing maybe early July. And for the valuation, it's difficult for me to tell you the valuation because the Chinese capital market, they have a special, I think, you know, the price determining mechanism. And we think, you know, from our side, we hope, you know, the IPO, the shareholders can make money, you know, make money. But definitely, I think this year, the financial results, Plus, next, the financial results can support our, I think, the future. After IPO, the future, the price may continue to go up. The third question about the cash flow. Because I think if you look, you know, this quarter, I think the earning cash right now and the cash equivalents, even risk to cash, almost $227 million in hand. And also, we continue, you know, have some like $400 million, let me be, you know, deposits long-term contract deposit we received by the rest of the year. And if you look at our Q2 financial results, plus second half of the year financial results, the cash flow, operation cash flow, I think is very high. So we're very confident, even without the stock market listing, we can, to support our 4B, continue to expand and expansion. So by today, you see, our 4B total investments is estimated around like 3.6 billion lemming B. I think we already paid 1 billion lemming B. So I think the CapEx for this year, we will pay, I think, 4B more than, I think, 3 billion we will pay this year. Maybe only 600 to 700 million lemming B We leave to next year, 2022 to 2023. So basically, I think everything so far is very good business.
spk06: Thank you, Mr. Zhang. Thank you, Mr. Zhang. This is very helpful, and I'll have some. Thank you.
spk08: Great. Thank you, Gary.
spk01: Again, if you have a question, produce a star, then one. This concludes our question and answer session. I would like to turn the conference back over to Kevin Herr for closing remarks. Oh, wait, we have two more. I'm sorry. The next question comes from Kim Powell from Rosem. Go ahead.
spk10: Hi, I missed your price guidance for the second half of 2022. Would you mind repeat it again?
spk12: And I have a second question. Okay, the price guidance for 2022. Okay, basically, you know, I cannot give you the guidance, okay? But based on my personal knowledge and we talked to, you know, the industrial people, We believe even in the second half of next year, the reason is because the wave expansion, capacity continued expansion, and also the industry, the final ending products, the module, I think the market is very prospectus. So we believe the SP is still about 120 lemming B per kg.
spk10: OK. In the second half of 2022. Yeah. Okay. My second question is your realized price and the lag time between the realized price and the market price. um given the fact that right now we're seeing market prices at maybe 150 160 rmb per kg and our real realized price for uh second quarter uh you guided at maybe 19 to 20 us which is probably like still below the the current market price um generally how um
spk12: your your your realized price for the quarter represents a lag time normally of how many months from the market price okay yeah kim i think first of all if you look at the market price okay basically we have to i think to clear to you know you have two prices why is you call market price and that is sp when we're talking about market price Okay, right now, let's say, you know, let me be 190, 200 right now per kg. That's a top small, I think, mona silicon grade. That's the good price, okay? So when you're selling that, so bigger chunk, maybe it will be only like, you know, let's say 190 is a small, I think, re-import, you know, good mona. I think, you know, perfect, I think, silicon materials. So, the second is the bigger chunk. The bigger chunk is, you know, you take two lemminbi away. So, it's like 188. Then you talked about, you know, the sample of the flower, popcorn. The popcorn may be four lemminbi per kg, you know, lower. So, ASP may be around six lemminbi per kg down. Okay, first of all, to answer your question. So basically, what we're talking today, if we're going to market, you know, contract, you know, I think June, next week we're going to contract. So basically, their price is not ASP, okay? Their price is within tax, is the top price. So, for example, if June, the price is $190, so ASP only maybe is $100, you take $6 away. So it's 184 is the ASP, okay, first of all. Second, the price is one month lag behind. So usually, you see, the Q2, we're giving you guidance. First of all, the ASP is $19 to $20. That means without tax, it's ASP, okay, period, to recognize revenue. But the market country, you see, the price, when you talk in second quarter, Because in the one month delay, so that's why in April, the shipments, the price is determined by March. So the March price actually is the April shipment products. The revenue recognized also in April. So it's a one month delay. So that's why it's a little delay. Okay. So did I answer your question? So always, next month, we're determining right now. So next month, maybe jumping another $20. Let me be packagey. Because the price changed so quickly, it's difficult for us to tell you, you see, what's the ASP, what's the price. We have to base on whatever the actual contracts we signed and we deliver. But so far, I think the price is going to stabilize. right now is around 190 to 195, I think. Let me be packaging.
spk10: 190 to 195 includes VAT, right?
spk12: Yeah, including the VAT.
spk13: Yeah, Kim, please always be aware that in the industry, when we talk about the price in R&D terms, it's always VAT included. When we say U.S. dollar terms, it's always VAT excluded.
spk10: I'm just wondering, when I look at PV info, the price that they quote there in RMB, they're normally ex-VAT or with VAT? With the VAT. RMB always with VAT, yeah. Okay, okay. How much do you think our cost would go up in the next quarter or two?
spk12: Basically, if you look at our Q2, our costs go up 4%. The major reason is because Q1 compared, I think, to Q4 last year, go up 4%. The major, I think, is the raw material, silicon powder. Secondly, is the steam price, which we increased, I think, from the price increased in Q1, and we signed with the supplier. So we think in the future, the price will be stable because we didn't see further the silicon powder continue to go up. Basically, seasonally, they should be stable, even go down. So basically, I think the cost will stay, I think, the same. Only you have to consider the foreign exchange rate effect. Okay.
spk10: Okay. Thank you very much. Great. Thank you.
spk01: Our next question is from Philip Shen from Roth Capital. Go ahead.
spk05: Hey, guys. Thanks for taking my questions. The first one is on pricing, but from a different angle. With the substantial rise in pricing for polysilicon, are you starting to see demand slow down anywhere in the value chain, whether it's wafers or further down or even for polysilicon, is there any talk at all that there's a slowdown in demand? And what's your latest outlook for China demand in 2021 in terms of gigawatts? What's the range and perhaps how does that compare versus what you were thinking back on the Q4 call? Has that changed either lower or higher? Thanks.
spk12: Okay. First of all, I think, you know, Philip, it's difficult for me to give you the forecast on the price today. But the mechanism, you have to know that. From now on to middle of next year, I think for the ending market, for this year, for example, maybe globally, I think forecast is around like 165, 170 gigawatts. So the total demand for silicon is around, I think, 55,000 tons. Then you need to put some inventory. Right now, the oil supply right now is 550,000 tons. Right now, oil supply is 500,000 tons there. The shortage is there. Second is, the polysilicon price is driven by the capacity of the weaver. The weaver prices continue to go up. That's why silicon prices continue to go up. I think the peak should be waiver, I think the growth margin go to break even, then I think the silicon price may be starting to turn around. I can't tell you when will happen. The reason is because the waiver producer, the major waiver producer right now in the industry, they continue to increase the price almost every month or several weeks. You ask me, then you should ask, you know, will the waiver continue to increase the price, can it sell or not? But I think the market is still there because high efficiency, high output, you know, watts, the panel, I think you can sell at a high price. So that's why today China market is accepting, you know, the module, I think the price 1.8, 1.9, let me be, per watt. So the polysilicon only accounted for maybe 13% to 15% of the module price, only accounted for 7% to 8%, right now maybe 9% of total investments on the solar power station installation. So basically, I think the market is continuing to drive this price to go up. So I cannot tell you when and how, but I can tell you is by the middle of next year, the poly, I think, supply is still tight. Supply still keep in the high, I think, range. That's I can answer to you. Second question you said about this year. China's market definitely, I think, right now is starting to hot. So this year, I think China may be around 65 gigawatts, even to 70 gigawatts. And the global market, I'm not sure, maybe, I think, you know, 120, 130. So I'm very, you know, optimistic. I think the globally, I think this year, maybe around 180, 190 gigawatts.
spk05: Philip. Okay. Thank you, Logan. My next question is on your outlook for 2021. I think you said you're sold out. So actually, it's more about 22. Can you talk about how much of your expected production has been tied up with long-term customer agreements for 22, 23, and maybe even 24? And then when do you think you'll be able to lock up all of 2022 capacity? Do you think that might happen soon, or do you think that you'll keep some production or capacity available for the spot market?
spk12: I think after we signed the long-term contract with Jing'ou last week, I think we locked all our production output this year and next year. Basically, next year, based on we can start in 4B, try production November this year, and can reach the full capacity running Q1. So basically, based on next year is 120,000 tents. So basically, the long-term contracts right now, this year is already over 80,000 tents. Next year is, I think, around 120,000 to 130,000 tents. So basically, right now, we stopped signing any long-term contracts for this year and next year. And for year 2023, we right now locked, I think, 70,000 tents. For, I think, year 24, 25, and together, it's also around 80,000 tents. we will now lock our long-term contracts. So especially, I think, for the contracts that we signed originally, we collect, you know, 6% based on market, I think, as deposits to guarantee in the future, you see, we can lock those amounts.
spk05: Okay. Thanks for that. And then back to the China listing. It seems like... Maybe the requirements for the listing have been tightened, and there's been a slight delay in the process. I know you answered the question earlier, but can you talk about the timing, you think, now for the actual listing? Do you think it becomes complete by the end of Q2, or is there a chance that it goes into Q3? And we've seen that there might be some challenges maybe due to something about increased pricing or increased R&D spending. So just curious if you might be able to comment on that as well. Thanks.
spk12: I think the issue is not what you mentioned, R&D or other stuff. I think first we have to update right now the Q1 financial data. I think actually we updated last week. So we need to wait for Shanghai Exchange to review those figures. Then the public may be within one week or soon. So basically right now, so far, I think we believe, based on our knowledge, I think we can start registration definitely by the end of this month. We can start to do that. We believe, I think, we can finish the listing, registration and listing by the end of July. So, yes, some uncertainty because we are the first U.S. listing company to listing the subsidiaries in China. So we also face questions and go through. So, so far, we go through everything. So I think we believe we can finish, I think, early July.
spk05: Okay, that's really helpful. Thank you. And best of luck, obviously, with that process. As it relates to CapEx, with the rising input costs, not only in solar, but just globally, do you expect that to impact your CapEx for Phase 2b? And what is your current expectation for CapEx for 21 and 2022?
spk12: Okay, I think a regular CAPEX maintenance, I think maybe Ming can tell you. But for 4B, total right now, we almost finished, I think, total investment is around 3.6 billion lemming B. So we almost finished everything in the contract. I think excluding around 300 million lemming B didn't sign the contract. So basically, I think we're pretty sure is under 3.6 million lemming bee, of which I think we will pay this year maybe around 2.8 to 2.9 billion lemming bee. We'll pay it by end of this year. So leave around 600 to 700 lemming bee. We'll pay next year or even the year of next year. That's 10% is a guarantee. It's one year after our smooth run of the production. So basically, I think, as I said, without... the stock market IPO, our inside cash generated can support 4B. So basically, if we can raise more money from IPO, basically, the IPO money, we can continue to future expansion the capacity. So the annual maintenance, maybe Min can tell you how much CapEx every year, the regular.
spk08: Regular maintenance capex is only about $30 million or so per year.
spk05: Okay. Great. Thanks. And I may have missed it, but what's your expected quarter for maintenance this year? Is it Q3 or Q4? Yeah, what's your latest view? Thanks.
spk12: I think we already finished, I think, one production line. So the rest of, I think, the full production line, we're starting in June, July, August, and September. So maybe what happened, I think, occurred in, I think, in Q3. Okay, great.
spk05: Thanks for the question.
spk08: It will be great so far, yeah. Great. Okay, thanks Phil.
spk01: Our next question is from Dora Liu from JP Morgan. Go ahead.
spk00: Hi, this is Dora. I have two questions. The first is regarding the inventory level. So could you share with us the current inventory level of DaKu and how about the industry average level? And the second question is regarding the N-type polysilicon. I think Mr. Zhang just mentioned that DaKu started the commercial shipments of N-type polysilicon to major customers. So I'm just wondering what is the current mix or percentage of N-type product of our polysilicon output? Thank you.
spk12: Okay, first of all, I think maybe, and I just answered, I mean, maybe you can add in more, okay? By the end of Q1, our inventory is around 1,295 tenths. And compare the Q4, it's 2,491. Actually, we dropped down 1,196. So that's why we recognize revenue, the quantity is higher than our production. So basically, the industry, we don't know other people. Basically, you know, we always, you know, keep our inventory as low as possible, okay? So if you look at our history, our inventory usually is below, I think, 3,000 metric tons, you know, never higher than that because we are chemical industry is continue production. We don't want to keep any inventory. So basically, we also not go ahead to, you know, to speculate the SP, the selling price. So that's why whatever we produce, I think we're going to sell. That's the first question. Second question about end type. Today we have four major clients right now use our end type products. And the major customers may be taking around like $210 per month. So right now, I think every month, we're selling N-type maybe less than 1,000 tenths. So the Q1, the total quarter, is I think around 2,000 tenths is N-type. But the SP of N-type actually is not higher, only 2 lemming B higher than the regular, I think, P-type products. The reason is because right now, the use is still lower. We don't want to differentiate the price difference. So we just want to stimulate the client to use our N-type products. But for the future, as you can see that, our downstream clients, for example, like Longi, like Jinko, I think the N-type sale production line is already starting to commercial running. So we think... the M-type silicon, the demand will more and more. Basically, you know, besides Walker, OCI, then I think domestic producer, I think we are one of the, I think the biggest one right now provide M-type silicon today. Dora, back to you.
spk00: Thank you so much. Yeah, that's quite helpful. Thank you. I'll pass on.
spk08: Great. Thank you.
spk01: Our next question is from Tony Fei from Bank of China International.
spk11: Hi, Madeline. Thanks for your time. This is Tony from BOCI. I just have one follow-up question on the competition landscape. So last week we all noticed that East Hope announced they will build a 250,000-ton project in Ningxia Province. That's quite huge. So, of course, we don't know when or even whether they will finish it. But let's assume for the time being that the project has materialized. How would it affect DACO's future expansion plans, I mean, beyond Phase 4b? Thanks a lot.
spk12: Tony, first of all, we have to go ahead and comment, you know, our competitors, because competitors are also friends, okay? And yes, we also see the news. And basically, we very respect our competitors. New Hopes, I think, in Xinjiang, they're already starting I think silicon produce. They take five years and they're ramping up. I don't know how much they produced and what's the quality. Basically, all competitors definitely, I think the total, the market supply will affect in the future, you see, or continue expansion. We need it based on the market supply and demand. In the future, I think the market ending and the market, you know, the future, especially, I think, the module in the future, the selling situation. So we see the market is so big. So some of our competitors even, you know, some new, I think, commerce maybe will invest money in this industry. But, you know, because silicon industry, the chemical industry, is a long-term investment, security and also the quality technology, and priority, processing, technology, all these, I think, experience, add together, you see, the quality is most important. Safety also is most important. So we are focused on, you see, our quality and try to reduce our cost, and we try to make ourselves, you know, to differentiate ourselves from other people is to, I think, you know, to make I think high gross margin than the industry average. I think to survive. I think that's our competitive age. So I cannot comment on others. But yes, I think currently right now the expansion capacity maybe for the silicon is around 400,000 tons on the way. But we don't know when they're going to put into production and whether they can success or not. So that's why we are focused on 4B. I think we want 4B, I think, to start triple-dashing by November of this year to full capacity running by Q1 next year to, I think, make sure next year we can produce more than 120,000 tons. Tony? Okay. Thank you, Longyan. That's very helpful.
spk01: Our next question is from John Segrich from Hillier Sky. Go ahead.
spk03: Hey, guys. I wanted to see if we could talk a little bit about some of the issues that people are looking at in the Shenzhen province in terms of forced labor. I know that you guys recently did a tour of And, you know, the feedback has been positive. You know, unfortunately, there have been examples in the past of tours like Sino Forest that, you know, frankly, have gone wrong. So, you know, in terms of what you're going to do to independently certify that there is no forced labor, you know, at DQ or even in the entire supply chain, you know, there's been a couple of reports in broad daylight citing that your raw material suppliers have direct ties to to XPCC, that you buy your power from companies that are tied to XPCC. So how do we get through this and how do you guys not get subjected to a potential ban of your products in the US or the EU? What steps are you going to take?
spk12: Okay, I think, Jian, first of all, we were not left political in the way and we are continuing to focus on our own business to continue to expansion and produce high-quality polysilicon to support the global, I think, the green energy solar industry. We did our, you know, I think the best, the efforts. So we hosted a site tour with, you know, many analysts and the investors, also media from home and abroad from May 11 to 13. We also post, I think I put the video, on the Internet to let other investors to see that. I think it's just like you, judgments. We have reiterated many times of our zero tolerance gains from the forced labor. Basically, we want to take this opportunity to show our investors what is advanced policy silicon plant looks like and how we operate it and manage it. In the future, we don't know because we cannot involve any political issues. So even in the future, maybe we need a high third party to do the audit. So we can answer that question.
spk03: Okay, that's it. Are you two main suppliers of silicon, Hoshine and Socos? Excuse me? Who are your two main suppliers of raw silicon? Socos and Hoshan?
spk12: Oh, you mean the, the, the silicon powder, right? Yes. Yeah. The silicon powder is from, why is it from, I think, yeah, Socos. Another is from Hoshan. Yes. Hoshan. Okay.
spk03: And so if both of those were tied to XPCC, would you stop buying?
spk12: Listen, John, those providers only provide us the silicon powder, but they also buy silicon maggots, you see, from all around the world. Okay, they mix together. They're going to produce powder, silicon powder. For Hershen, they not only supply the silicon powder to us, they also supply silicon powder to Walker, OCI. So that's the question I answer to you.
spk03: So that doesn't change whether or not if they use forced labor, you would buy from them. I mean, just because everyone buys doesn't mean that it's okay.
spk12: First of all, I already said we are zero tolerance for the forced labor, okay? Okay. I'm going to comment there, but also I can tell you they also sell imported silicon powder to overseas. For example, OCI Walker also bought the silicon powder from them.
spk03: I understand that. That doesn't mean that they don't use forced labor. I'm just curious. You've seen Apple cut off suppliers. Will you cut off suppliers that are proven?
spk13: We don't see any clear evidence of our suppliers be involved into the forced labor issue. So if we see any clear evidence, we definitely take the stance of zero tolerance.
spk03: So you would drop them as a supplier. Perfect. Okay. Look, it's an important issue that needs to be addressed.
spk13: Yeah.
spk01: Our next question is from Colin Yang from Daiwa Securities. Go ahead.
spk02: Hey, management. This is Colin. Just one quick question about our future capacity expansion after 4B. If the location has been decided, will that be in Xinjiang, Inner Mongolia, or And I'm curious about our future financing plans for our future expansion. As you mentioned, if there is any left money from the stock market IPO, it could continue for the future expansion. But what if it's not enough? Can we consider another round of equity financing? Thank you.
spk12: Okay, Mr. Wang. I think basically right now, if you look at Q1 financial statements, and we have enough I think, you know, inside the cash flow to continue to support our 4B, to, you know, finish our 4B. Even by the end of this year, without star market, you know, IPO proceeds, we can run very well. By the end of this year, the cash flow. So, basically, if we can successfully run the IPO, and the IPO planning, I think, right now, the prospectus, I think, will raise $5 billion, let me be. And maybe more, okay, we don't know. Maybe less. I think basically after we finish the IPO, yes, we will throw the ball and basically we have to evaluate the market situation, demand and supply future, I think other competitive expansion. And we will look in some place. Yes, definitely I think besides Xinjiang, in China other place, we have looked at four places, for example, like in Mongolia, Yunnan, Gansu, even Shanxi province, so even abroad. So, yes, definitely at that time, we will make the change. We will let you know.
spk02: Thank you. Thank you very much. Great.
spk01: Thank you. Our next question is from Ji Chao from Goldman Sachs. Go ahead.
spk04: Hi, thank you for taking my question. I hope to ask about regarding the N-type polysilicon that you mentioned that you already start the commercial shipment. Can you maybe share your production cost level for the N-type and also what is our kind of effective supply capacity for the N-type shipment? kind of poly, if the downstream demand pick up quickly, how can we kind of reshuffle our kind of supply mix? Do we need to do a little bit upgrade to our existing kind of facility in order to increase the mix of the anti-poly? Thank you.
spk12: Okay, I think that's a good question. You see, so far right now, I think in China, The bigger major, I think, wave of producer, they're already starting, I think, maybe one production line, anti-production line. As you see the announcements like Longgi, Jinko, and also Zhonghuan and other players. So basically right now the quantity, I think, is lower. Their producer also is lower. So that's why they can use, I think, the import silicon poly for example, you know, from Walker, OCI, and also like, you know, the high-quality produced domestic like us. So I mentioned that in Q1, we sold, I think, around less than 2,000 tons N-type polysilicon. But we can actually, I think, you know, produce right now around, you know, 20% to 30% of poly is N-type. So it's no problem to us. based on right now the equipment and the technology, we even can increase N-type quickly, I think, to even 40%, 50%. So based on the market right now, we think in the future that N-type will become more and more. But it's the transition period. It takes time. We still think it will take three to five years. Maybe N-type will reach to 60%. But definitely, I think P-type is still there. The reason is because of cost-effective and also, I think, other coordination, I think. So basically, I think the market will see the N-type in the future. They can increase the efficiency. On the cell efficiency, they can reach about 25%. Compare the PERC right now, it's 22%, 23%. Definitely, I think it's a big jump, also on the module side. And to increase the output watts per panel, to reduce the total light cost per watt. So that's most important. I think that's the future. I think one of the future. I think the next revolution, technology revolution. We are ready, I think, prepared for it. For the cost, I think, you know, today is not, you know, we just select the N-type, actually, basically, you know, classical N-type, you know, from, you know, the P-type. So it's cost is even the same, you know. So it's not a big difference.
spk04: Understood. Super clear. Thank you.
spk08: Great. Thank you.
spk01: This concludes our question and answer session. I would like to turn the conference back over to Kevin Herr for closing remarks.
spk13: 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 bye-bye.
spk01: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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