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spk01: Good day and welcome to the DACU second quarter 2022 financial results conference call. All participants will be in a 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. To ask a question, you may press star, then one on the touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Kevin He, Investor Relations. Please go ahead.
spk06: Hello, everyone. I'm Kevin He, the Investor Relations of DarkU New Energy. Thank you for joining our conference call today. DarkU New Energy just issued its financial results for the second quarter of 2022, which can be found on our website at www.bqsolar.com to facilitate today's conference call. We have also prepared a PPT presentation for your reference. Today, attending the conference call, we have Mr. Longgeng Zhang, our Chief Executive Officer, and Mr. Ming Yang, our Chief Financial Officer. The call today will feature an update from Mr. Zhang on market and operations, and then Mr. Yang will discuss the company's financial performance for the quarter and the year. 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 conference 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 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 Security 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 incentives. 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 US dollar terms. Please keep in mind that our functional currency He is the Chinese R&B. We offer these translations into US dollars solely for the convenience of the audience. Without further ado, I now turn the call to our CEO, Mr. Zhao. Hello.
spk04: Good morning. Good evening. We are very proud to deliver an excellent quarter with a record production volume and profits. Revenue reaches 1.24 billion US dollars. growth profit was $947 million, with a growth margin of 76%. Net income attributable to DACU shareholders was $628 million, an increase of 17.2% from $535.8 million in the first quarter of 2022, and an increase of 170% from $232 million in Q2 2021. Our cash position at the end of the quarter, an increase of approximately $2.2 billion from $1.1 billion at the end of Q1 2022. Reflecting our strong cash flow generation, cash and banking note receivable combined balances reached 4.6 billion US dollars. Operating cash flow was 1.1 billion for the first six months of this year. During the quarter, we operated at a full capacity and produced 35,326 metric tons of polysilicon. More than 99% of our production were high purity, monograde polysilicon products. We successfully ramped up our new Phase 4B facility to full capacity and further optimized its operational performance. Our sequential improvement in gross profit and gross margin were primarily driven by a 28% reduction in our polysilicon production costs with higher manufacturing efficiency and better economy of scale. We reduced our per unit electricity cost and depreciation cost by 7% and 13% in Lemming B, terms quarter over quarter, respectively. In addition, our metal logical grade silicon cost in the second quarter was reduced by 37% as compared to the first quarter. With our facility in optimized stable operations, we believe we will be able to maintain and possibly further improve our cost structure in Q3 and Q4 this year. We expect an even more favorable outlook for the cost as our new inner Mongolia facility. As a chemical refining facility, Safe and stable operations are extremely important for polysilicon production, and our facilities perform the best under such conditions. In order to minimize the impact on operations, we will conduct our annual maintenance in phases throughout the third and fourth quarters. During the same time, we will conduct some technology improvement projects which are expected to further save energy and optimize efficiency. As a result, we expect our polysilicon production volume in the third quarter to be in the range of 31,000 to 32,000 metric tons. With our better than expected operational performance in the first half of this year, we are increasing our guidance on annual production volume to 129,000 to 132,000 metric tons for the whole year of 2022, up from our previous guidance of 120,000 to 125,000 metric tons. In June 2022, our major operating subsidiary, Xinjiang Daqi, received a total growth per of approximately 11 billion RMB from its private offering on the Shanghai Stock Exchange. Upon completion of the private offering, Piper, Daku New Energy beneficiary owns approximately 72.68% of Xinjiang Daku, precedes from the offering will be used primarily for our Phase 5A polysilicon project of 100,000 measure tons in Inner Mongolia. This new project is currently under construction and expected to be completed by the second quarter of 2023. Driven by several favorable trends, the global solar industry saw robust demand in the first half of this year, and the demand both in China and overseas continues to exceed market expectations. According to data from the China Photovoltaic Industry Association, China's production of polysilicon and solar modules in the first half of this year was approximately 365,000 nitrate and 123.6 gigawatts, respectively, an increase of 53.4% and 54.1% compared to the same period of last year, while solar PV product supply increased significantly compared to last year. ASTs kept rising across the entire solar value chain due to stronger than expected end market demand. Despite rising ASPs, during the first half of this year, solar PV installation in China reached 30.9 gigawatts, and China exported 78.6 gigawatts of solar modules, up 137% and 74%, respectively, over the same period of 2021. Given by strong end-market demand and increased orders from waiver supplies, polysilicon SPs and profitability improved continuously during the first half of this year despite increased supply. According to the China Silicon Association, the average price included that for high-end density monograde polysilicon increased significantly by 29.3% from lemming bee 229 per kg in the first week in January 2022 to lemming bee 296 lemming bee yuan per kg in the last week of July 2022. Nevertheless, our production is sold out for August and we have a strong order for our products. We understand that many newly built waiver facilities are idle because of the shortage of polysilicon. Earth capacity expansion is much faster in downstream than in polysilicon sector. Beyond the urgency to address climate change, that is driving various supportive policies to accelerate the adoption of solar energy globally. In real, the conflict in Europe has led to an energy crisis with substantially higher natural gas and oil prices. Solar PV is easier and faster to deploy its costs, which has already reached grid parity is locked in for the next 20 to 30 years. The rise in energy costs has made solar PV increasingly attractive, especially in the countries saving energy shortages and seeking energy safety and independence. For instance, in the second quarter, European solar PPA price increased substantially. and the market saw a substantial increase in demand from Europe, with module exports to Europe greater than 50% of total module exports for China. In June, our Board of Directors authorized the company to repurchase up to $120 million worth of its own issued shares on the open market As of today, we have already repurchased approximately $50 million worth of our ADRs, and we will continue to do so as we believe our current ADR price is seriously undervalued and not reflect our position as an industry leader with strong profitability and operating cash flow. With growing global policy support and attractive We are confident that solar PV market demand and the prices will remain strong, providing sustainable and healthy profits to the solar manufacturing value chain. In the first half of this year, despite a 53.4% increase in production volume in China over the same period of last year, polysilicon was still a drug on the entire solar PV manufacturing value chain, and the capacity expansion was meaningful for a slower than in the downstream sectors. Challenges in gaining energy consumption approvals, long construction times, and delayed rental times, as well as the operational experience of new players, make polysilicon one of the sectors With the highest entry barriers and slowest expansion growth in the solar PV manufacturing value chain, we expect its imbalance to continue for a while and help our sector greatly benefit from the robust market demand. We will continue to focus on our core business and further strengthen our industry leadership by increasing capacity. reducing our cost structure, and improving product quality so as to continuously reward our shareholders. Our vision is that in the not too distant future, renewable energy will displace fossil fuels to become the primary source of energy for humans, with solar energy playing the biggest role. And our mission is to help market, to help make that vision a reality. The company expects to produce approximately 31,000 metric tons to 32,000 metric tons of polysilicon in the third quarter of 2022 and approximately 129,000 metric tons to 132,000 metric tons of polysilicon in the four year to 2022. Inclusive of the impact of the company's annual specific maintenance, now I will turn the call to our CFO, Mr. Yang.
spk08: Thank you, Longan, and good day, everyone. Thank you for joining our earnings conference call today. Now I will go over our second quarter 2022 financial results. Revenues were 1.24 billion compared to 1.28 billion in the first quarter of 2022 and 441 million in the second quarter of 2021. The slight decrease in revenue as compared to the first quarter of 2022 was due to a slight decrease in sales volume compensated by a slight increase in average selling prices. Gross profit was 947 million for the quarter, compared to $813.6 million in the first quarter of 2022 and $303 million in the second quarter of 2021. Gross margin was 76.1% compared to 63.5% in the first quarter of 2022 and 68.7% in the second quarter of 2021. The increase in gross profit and gross margin compared to the first quarter was primarily due to lower production costs. and higher average selling prices. Selling general and administrative expenses were $14.4 million compared to $15.5 million in the first quarter of 2022 and $9.3 million in the second quarter of 2021. SG&A expenses during the quarter included $2 million in non-cash share-based compensation costs related to the company's share incentive plan. R&D expenses were 2.7 million compared to 2.1 million in the first quarter of 2022 and 2.1 million in the second quarter of 2021. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter. But most of the R&D activity during the quarter related to the development of our end types, the polysilicon product. Income from operations but was $927.6 million compared to $796.9 million in the first quarter of 2022 and $292.4 million in the second quarter of 2021. Operating margin was 74.6% compared to 52.2% in the first quarter of 2022 and 66.3% in the second quarter of 2021. EBITDA was $965 million compared to $827 million in the first quarter of 2022 and $312 million in the second quarter of 2021. EBITDA margin was 76.8% compared to 64.6% in the first quarter of 2022 and 70.6% in the second quarter of 2021. Net income attributable to DACA New Energy shareholders was $627.8 million compared to $535.8 million in the first quarter of 2022 and $232 million in the second quarter of 2021. Earnings per basic ADS was $8.36 for the quarter compared to $7.17 in the first quarter of 2022 and $3.15 in the second quarter of 2021. And as of June 30, 2022, the company has $3.3 billion in cash and cash equivalents, compared to $1.1 billion as of March 31, 2022, and $270 million as of June 30, 2021. And as of June 30, 2022, no receivable balance was $1.27 billion. compared to $1.5 billion as of March 31st, 2022, and $97 million as of June 30th, 2022. As of June 30th, 2022, total bank borrowings were nil, compared to nil as of March 31st, 2022, and total bank borrowings of $156.6 million as of June 30th, 2021. And now on the company's cash flows. For the sixth month, ended June 30, 2022, net cash provided by operating activity was $1.13 billion, compared to $442 million in the same period of 2021. The increase was primarily due to higher revenues and higher gross margins for the company. And for the sixth month, ended June 30, 2022, Net cash used in investing activity was $80 million compared to $255 million in the same period of 2021. Net cash used in investing activity in 2022 was primarily related to the capital expenditures of the company's 100,000 metric ton polysilicon project in the Mongolia and offset by $265 million in redemption of short-term investment. And for the six months ended June 30, 2022, NCASH provided financial activity was $1.58 billion, compared to NCASH using financial activity of $37 million in the same period of 2021. The NCASH provided by financial activities in 2022 was primarily related to the net proceeds of $1.63 billion from Xinjiang DACO's applied offering. in China's Shanghai Stock Exchange. And that concludes our prepared remarks. And now we will open the call for questions from the audience.
spk01: Thank you. Operator? Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Philip Shen with Roth Capital Partners. Please go ahead.
spk00: Thanks for taking my questions. Congratulations on the strong results here. Wanted to talk about your view for Poly pricing. You could share a little bit more color on how you expect it to develop in Q3 and Q4 with the announced capacity expansions from competitors. And then how do you expect poly pricing to trend and be in 2023 by quarter? Thanks.
spk04: Thank you, Philip. I think, you know, today, because we didn't have any, you know, technology barrier, so we've sell and module. So basically, poly silicon price is in a positive core relationship with the module price. So today the module price, I think, selling at $2.00, $2.01, so can support the poly. Right now I think the market price is almost close, I think, $320, $310. So basically we believe, you know, the module price will continue to keep at that level, this level. So we think of the price, I think, you know, right now Q3 is very strong. The Q4 we think will continue to keep maybe to the, you know, end of the year. It depends on the situation in China, with China in the rush, you know, installation. If that's the case continue, then also considering, you know, new production, political production will be, I think, you know, produce, I think, saleable polysilicon. But we believe the poly price will continue to keep higher for the rest of this year. And for the next year, we believe there's not too much new polysilicon come out as we see that, even though Just like I said, some new players come in because of the design time, because of construction time, because of the technology, because of the equipment, I think the design needs, and also installation. All these factors add together. I think at least a newcomer needs to take 18 months to 24 months So even though considering the policy that can come out, the price, I think, jumped back last year, let's say second half of last year, some new coming coming. So they, I think, will maybe produce some new capacity in the second half of next year. So we consider, you know, the 2023, the first half of the year price will continue keep about $250 per kg. For the second half of next year, the price maybe will go down. I think maybe it will be $180 to $200. Then beyond next year, really we cannot project the price will go to which direction. But considering the market potential is higher if the polysilicon price is correlated, positive correlated with the module. Unless the polysilicon supply is totally, you know, higher than demand. If that's the case, for the waiver, sale, and the module production, only taking three to four months to install, to construct, to put into the production. So basically, Only the model price go down, then the polysilicon price will go down. Considering that, if the model price go down, then the market demand will be higher. I think that will stimulate the demand of polysilicon. So I think at a certain time, there's some balance there. So basically, we're not thinking polysilicon will drop to below 120 lemmings per kg. That's what we believe. Thank you.
spk00: Thank you, Logan. That's a lot of detail. I appreciate the color. You talked about your capacity expansion phase 5A. Congratulations on your recent capital raise, and now you're funded for the expansion, and you're targeting the Q223 ramp-up of 5A. When do you think you make the decision on 5B, and can you remind us how much more – capacity you could have in Inner Mongolia or elsewhere? Thanks.
spk04: As you see that, you know, considering today combined all the cash and accounts of, you know, the banking nodes, we almost have 4.4 billion U.S. dollars sitting in our accounts. So even though, let's say, we're considering, I think, Mongolia 5B, there are 100,000 investments That's maybe considering around, I think, 1.2 billion or 1.3 billion U.S. dollar investments. We still have enough cash sitting there. The reason why, why is we are going to do in the future, and based on Asia, the public company requirements to continue with distribution, the dividends. Second is, during the the whole industry, I think, lower circle, we are considering, you know, we are really have a strong balance sheet to do consolidator. I think that's our major purpose. So basically our planning is for the next three years, we planning the capacity every year increase 50%. Just like this year, we already given guidance. I think our guidance is 129,000 132,000 natural tens. So next year, as you can see, our Mongolia 5A, we're putting into production. We believe, I think, maybe around 70,000 tens will come out next year, come out from 5A. Then, by the end of next year, the 5A for the year 2004, 24, definitely is 100,000 tens, plus, you know, Xinjiang 100,000 tens, 130,000 tons, so total together is 230,000 tons. Then plus, the 5B, we are planning starting maybe certain time, depending on the board make decision, but we are starting to do some prepared work. We are going to start, I think, the second half of this year. Yeah, but we will announce that.
spk00: Okay, thank you. That's great, Colin. Just to explore something you said earlier, Logan, you talked about how you have a strong balance sheet to consolidate. Does that suggest that with some of your peers struggling to get the capacity online and efficient and low-cost, are you open to potentially acquiring some facilities in addition to your greenfield, you know, 5B and 5A? Thanks.
spk04: Yes, definitely. I think, you know, first of all, basic our announcements, we will do the, I think, a mantle silicon, I think, in Mongolia, in Mongolia, Guyan. So we also, we're starting from, I think, the ore, I think, you know. Then from, for the, you know, industrials, uh silicon then to the solar silicon i think the whole product production upstream i think you know to the expansion to show all products always from mongolia that's the first i think then for all those production right now expansion in mongolia we will use around a 60 to 70 percent of green energy got it okay so is that the question about the green energy
spk00: No, I think, Logan, it wasn't about green energy. It was about do you prefer to – could you consider acquiring other polysilicon projects that are struggling? Is that something that you're open to, or do you think you might – to expand capacity, would you only do your own construction, or do you think you might actually go out and buy other facilities that are under –
spk04: Of course. It's only depend on, you know, in which situation, just like you said, you know, if some, you know, under, you know, the, what's it called?
spk08: Underperformance.
spk04: Underperformance or whatever, you see, the struggling assets, you know, of course, we're with it. That's why we keep a strong financial, you know, financial statements and balance sheets. Yes.
spk00: Great. Okay. Do you have a sense of timing as to when you could acquire another company's polysilicon assets?
spk04: We think at the best time, maybe, I think, you know, in year 2024. Or maybe next half of, you know, second half of next year. It's no time schedule. Because right now, yes, we see, it's already two projects in China for selling. But the price is still too high.
spk00: Got it. Okay, great. One last question. I'll pass it on. As it relates to the Chinese government, there have been some reports that maybe they get involved in the industry because the poly pricing is so high. What are your thoughts as to what they could do? Do you think that's actually possible? And what do you think happens next? Thanks.
spk04: I think the Chinese government is encouraging a free market. Even last year, I think the price also has changed. But the government never say, you know, come here, say, hey, you have to, you know, selling the product at a certain price. I think in whole solar industry, you know, the value chain, I don't think the government will do anything on the price side. You know, it only depends on the market, you know, how much the module price you can sell, right? Then the installation, even the state-owned company right now is a step in the solar, I think, power plant, the field plant or the distributed plant. So I don't think the governments put their nose, I think, on the private sector, even the free market. I don't believe. Even though some use there, I think all those use either. Some is faked. Some is, you know, I don't know. Some people may be intending to do that.
spk00: Got it. Okay. Thank you for taking all my questions. I'll pass it on. Thanks.
spk01: The next question comes from Gary Joe with Credit Suisse. Please go ahead.
spk07: Thank you for taking my questions and congratulations on the very strong second quarter results. So I have three questions. So firstly, I want to ask, so recently we have seen some of our polycyclic peers have signed long-term polycyclic and supply contracts with some newcomers in the wafer industry. Just wondering if DACO is also in negotiation with some other wafer companies in terms of our political contracts.
spk04: Okay. The first question is about the long-term contract with our downstream clients, the wafer producer. We're starting actually, I think, the year 2020. Basically, we see the price, quality and price will go up. So that's why, you know, we sign those long-term contracts. But that is differentiated from our peers. Basically, we sign the long-term contract in the cover, the year, it's three years to five years long-term contracts. And we lock the quantity. But we also, not lock the price, but we also collect the deposits, high deposits. So starting year 2020, we collect all. starting from 3.6 RMB per kg to right now is 7.2 kg per RMB. So if the waiver producer is not paid the down payments, we don't think the contracts have strong legal combination. So that's why our policy, we stick on that. Today we have, I think, nine long-term contracts, I think, with our strategic, I think, clients. We will continue to sign. I think we will pronounce another, you know, bigger one. But we're different from other people. You see, if you see the market right now, we need a lot of, you know, our peers. But those contracts, I'm not going to comment, okay, they may be not receive any even lower deposits. We still keep our principle. We have to collect, you know, certain amount of deposits. to keep the contract, the long-term contract, you know, effective. Gary.
spk07: Thank you. Thank you. This is very helpful. And my second question is also on the kind of newcomers. So I think recently there's news that There's one company in Qinghai province announced that they have kind of a commission that they are based on kind of a political project. So just wondering, so can Benjamin maybe share more on whether you believe those newcomers are there kind of a product can lead to the industry standard, and also second question, Usually, I think, for us, it usually only takes around two to three months to ramp up our capacity. How long do you think it may take newcomers to ramp up their capacity to fully have full utilization?
spk04: In other comments, our downstream clients, basically, what you said, one of the clients is our clients. their business is focused on even partial capacity on the sale. They announced big, I think, investments in Xining, Qinghai. So we're not going to comment on whether they're going to real invest or not, whether they have the technology or not. But anyway, today, a lot of people announced they want to jump into the polycythium, I think, production. But just like I said, because of policy and production, long-term investment, construction period, and either design and the equipment are made. And also I think, you know, a lot of capital investments. So technology, with technology and people, it's not that easy to, you know, to jump into them to immediately, I think, ramp up the product. So we're not, you know, to do any comments on that. But, yes, I think today polycythic production right now expansion have a lot of products right now there. If you account right now, maybe more than 10, I think, you know, the size of 50,000 natural tens production line is working on that. We don't know really how much, you know, we come out to real production capacity. But as we know, like Dachuan, like Tongwei, like Tebin, I think those three players, if they declare, I think, you know, expansion, the schedule, I think because they already proved, I think, their production, their quality, and their scale, I think maybe that will be true and believable. Then other, we're not going to do any comments because really a lot of uncertainty there. So that's why I think today the political price, a lot of people, you know, projection, political price, you know, change, maybe turn around, you know, in the year term. But we consider it different, just like I mentioned that. We think, you know, the political price is positively related to the module price. And within, I think, one year or more, I don't think the price will go down. So we think the price maybe will slightly go down is the Q4 2023, then really back to maybe normal around 120 in 2024. Thank you, Gary.
spk07: Thank you. So quickly, my last question is on the share repurchase. So I just want to ask if the company has any kind of guidance on what kind of share price range that we would consider to do more share repurchase. And also, when I look at the company's number of shares in this first half, I saw that the number of shares actually increased a little bit, so just wondering why is that, why are we currently doing repurchase? Thank you.
spk08: Okay. Thank you, Gary. So we have started our share repurchase program, and we have been repurchasing in the month of June and July, and through the 10B-5 program, for example. And so far, I think as of today, we've repurchased approximately $50 million or so, and we will continue to repurchase in the coming months, especially during the open window period that's coming up. And definitely, we think the current share price level certainly is extremely attractive. You can see the company has almost $4.6 billion in capital and generating very healthy returns. take cash flow and you have, our market cap is effectively the same as how much the company has in terms of cash on hand. And so definitely, we will continue to purchase at the current price level, even higher than the current level.
spk04: And also, Gary, just like you know that, because we are now, I think, you know, the Xinjiang Daquan is in the A-share listing. So we will continue to declare the dividend policy. So in the future, especially this year, high profit will distribute high, I think, quantity of capital of dividends. So we will continue to keep the repurchase program. In order to protect the U.S. shareholders, and we're also considering, because of Foreign Accounting Reporting Act, a possible delisting in China concept, the stock, we're considering As a due primary listing in Hong Kong Stock Exchange, we are considering that also. Thank you.
spk07: Thank you, Changzhu and Yangzong. I'll pass out. Thank you. Okay. Thank you.
spk01: Our next question comes from Chao Ji with Goldman Sachs. Please go ahead.
spk02: Hi. Thank you for taking my question. Can you please share your view for the cost trend for the coming third and fourth quarter, and also when we ramp up our 5A project, what kind of production cost or cost level that we could be looking for? Thank you.
spk08: Okay. Hello, Chaoqi. Thank you for your question about our cost. So I think quarter over quarter, for Q2 compared to Q1, you did see a 28% reduction in cost. Our current cost structure is about $7.26 per kilogram. And the previous quarter in Q1 was about $10 per kilogram. And I think a lot of this reduction is coming from a reduction in, for example, energy usage. in terms of utility, electricity, and steam. Also reduction in both our usage of silicon powder on a per unit basis, as well as a reduction in silicon powder pricing. And we continue to see, I think based on our cost trends in June and July, for example, we continue to see our costs to decline. So for example, our June cost was below May and then July cost is below June, as an example, and benefiting both from economies of scale and manufacturing efficiencies, as well as continued reduction in silicon metal costs in the market and of procurement. And actually, we've taken the opportunity to purchase some additional silicon metal supply in the current low pricing. So we would expect our Q3 cost to be lower than our Q2 cost in a beneficial trend. And Q4, those are looking very positive. And now for our Inner Mongolia cost, we would think that because of the scale of Inner Mongolia in terms of manufacturing efficiency, it's a single... 100,000 metrics on site and with a lower number of employees, as an example, compared to our Xinjiang site. So it has a very competitive cost structure. So we would think Inner Mongolia, at the minimum, would be about the same cost as our Phase IV B, I think, which generally is about 3% to 5% lower than our overall average cost. So we would think that in Mongolia, we'll have even better costs than our Xinjiang.
spk04: By the way, in Mongolia, we will produce our own silicon metal. I think we were starting projects this afternoon, the border, I think Mongolia border, and we think, you know, our own silicon metal will produce maybe the first half of next year. So if we use our own silicon metal, I think the cash cost will be below $30. Let me be here. I'm for KG.
spk02: Oh, great. Thank you so much.
spk08: Thank you, Chief Hart.
spk01: Our next question comes from Alan Lau with Jefferies. Please go ahead.
spk05: To my question, and congratulations to management on the record-breaking results again. So my first question is in regards to, it's a quick one, and it's in regards to what is the target dividend payout ratio? Because last year we had around 20%. So what do you expect to be a reasonable payout ratio for this year?
spk04: Okay, first of all, I think, you know, I cannot give you exactly, I think, the target ratio. But basically, the solar industry right now in Asia, I think the ratio is around 20% to, you know, even 50%. So I think this year, 25%, because we also doing the offering. So we believe, I think, you know, the ratio in the future will be between, I think, 20% to 30%, even 40%. So it's based on the border, I think, makes the difference.
spk05: Understood. So thanks a lot. And would you mind to share the progress on the plans in, first of all, the Phase 5A and also the project in Xinjiang Zhendong? Sorry, the Phase 5B project. Is there any approval or is the progress on the way?
spk07: Oh, you mean the Phase 5A?
spk04: The phase 5A right now, I think, yeah, I think we're starting the design last year, October. I think really the field, I think, started because of land issues. We started in the, I think, June, July. Right now, I think all the equipment we design and order, we deliver to the sites during the August to the September, before the winter. So basically, we make a decision, I think, you know, We were starting, I think, the primary production in Q1, you know, make it F to Q1. So ramp up in the Q2 of next year. So everything we're now in schedule. Then the phase two, you mean the 5B, we're possible, I think we're starting, I think, this year, maybe Q4 we're starting. We're already starting all the design, already starting. last week, then also all the improvements, you know, application, we're already starting, I think, through the governments. So basically, we believe, I think, we can start in, I think, Q4 this year. So hopefully, we can start in production by the end of next year or even early 2024. Okay. Thank you.
spk05: So my last question here is about in view of the N-type transition trend, and I also heard just now the management has mentioned there's some R&D costs in relation to N-type. So can you share with us what is the development as to now, and what is the percentage of N-type product can the company offer in its existing plant and new plant? Thank you.
spk04: I think any type, I think, you know, silicon for 5A, we can 100% manufacturing, I think, you know, annually 100,000 tons. If we produce manufacturing P-type, well, maybe the capacity more than that. Maybe you can reach to, I think, 110,000, even 120,000 tons. So today in Xinjiang, right now, I think if we... manufacturing n-type we can making basically no consider the equivalent status and didn't do any improvement I think a technology improvement we can produce 75 percent n-type polysilicon the problem is right now the entire part of the market is not that bigger we're now only I think of one company right now put to actually n-type production I think 16 gigawatts right now starting 8 gigawatts I think last week and last month this month another 8 gigawatts starting production so the demand is not too much every month right now we're selling around I think 800 to 1000 metric tons so the price only $3 plus compared to a P-type polysilicon price. So I don't think this year N-type will account too much, maybe around 5% to 10% this year. Next year, maybe around 15% to 25%. Really, I think transfer P to N, the technology still, I think, potentially still take time, at least take, I think, one year and one half a year. to reach the cost-effective end-type sales production line, you know.
spk05: Understood. Thanks a lot. Once again, thank you for taking my questions, and congratulations.
spk08: Great. Thank you, Alan.
spk01: Our next question comes from Rajiv Chowdhury with Suncera Capital. Please go ahead.
spk03: Congratulations, Longin, on a great operational performance and great financial performance in the last quarter. I have a couple of questions. The first one is, what is the interest rate that you are getting on the cash that you have on the balance sheet? And what do you expect it to be over time? Because obviously, you will have a lot more cash accumulating in the next several quarters.
spk08: Okay, I think because we're also an A-share listed company here in China, I think there's more restrictions on the type of bank deposits we could do or higher yield investment products, which generally need to be what's considered principle protected or guaranteed by the issuing bank. So I would say generally that the current deposit rate is somewhere between 1.3% to about 2%. So that's the current average interest rate we're seeing right now.
spk03: Okay. And secondly, on the share buyback, And should we expect that next year as well, when you announce the dividends and the dividend payout ratio may be higher than the 20% that we had this year, that the share buyback will be the primary way that you will return cash to shareholders who are listed in the United States? and it will not be a dividend in other words?
spk04: I think, Rajeev, I think it depends on, first of all, I think we will, you know, consistently do the, I think, the dividend policy because based on the A-share company, they will do that. I think the dividend, I think, declared percentage just, you know, targeted. Basically on the industry, basically on the, you know, I think, you know, the, I think we're between the net profit, attributed net profit, 20% to 50%, you know, the range is there. Whether we continue going to do repurchase program or dividend to the U.S. shareholders, it depends on the U.S. capital market, right? If, let's say, the market value is higher, for example, is like, let's say, is 20 or whatever, you know, 100 billion or 200 billion, then we maybe declare dividends for the board, you know, considering. If the DACU price, you know, the valuation is under, like today's situation, definitely we'll do the repurchase program. So it all depends on market situation going, the valuation we consider.
spk03: Right, right. Thank you. That's very helpful. Finally, you mentioned the possibility of a Hong Kong listing. Is that a decision that has already been made? Are you thinking about it? And can you tell us more about what the timeline might be for such an action?
spk04: We are considering that. The reason is because, you know, it's possible, I think, a U.S. foreign company reporting after, it's possible, you know, the the agreements which to reach agreement in time between the u.s and china governments so in order to protect the u.s shareholders yes the board is already considering discuss this issue so we already do some study i think we got the uh the the banker the invest banking proposal uh yes we consider, we'll consider, very seriously considering the due primary listings in Hong Kong Stock Exchange. If we're going to take, the foresaving will take quickly. I think maybe around, I think six months we were down there. So basically, yes, in the near future we'll announce that. Okay.
spk03: Thank you very much.
spk08: Thank you, Rajiv.
spk01: This concludes the question and answer session. I would like to turn the conference back over to Kevin for any closing remarks.
spk06: Thank you again, everyone, for attending 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 is now concluded. Thank you for attending today's presentation. You may now disconnect.
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