daquan energy performance on the "roller coaster", Wuhan daquan become a new hope?

Author Liu Qinwen

Edit Li Baiyu

SOURCE Mustang Finance

How big is the "avalanche" of polysilicon prices?

the third quarter report of Xinjiang daquan new energy co., ltd (hereinafter referred to as daquan energy, code: 688303.SH) gives intuitive figures: achieved revenue of 3.553 billion yuan in the first three quarters, down 57.38 percent from the same period last year, and net profit of 0.689 billion yuan, down 87.61 percent from the same period last year. So far this year, Daquan energy has been three consecutive quarters of revenue, net profit decline.

in the three years before this, with the soaring price of silicon materials, the company's revenue and net profit soared like a "rocket". between 2019 and 2022, revenue jumped from 2.426 billion yuan to 30.94 billion yuan, up 12.75 times. Net profit soared 77.4 times from 0.247 billion yuan to 19.12 billion yuan.

But when the silicon price "avalanche" comes, these glories will go.

at this time, the actual controller of daquan energy is a father and son, "Jiangsu Xu Xiang" with the same name and surname as Xu Xiang, the chief rudder of "Ningbo trading board death squad", and his father Xu guangfu. On the one hand, Xu Xiang and his son pushed Daquan Energy to continue to expand its production and refused to budge in the increasingly fierce price war; on the other hand, they have begun to promote another subsidiary, Wuhan Daquan IPO.

Can Daquan Energy and the Xu Xiang family reap another listed company?

8.8 billion the dividend after two years of listing, the actual controller cashed out about 1.8 billion

Daqo Energy was established in 2011 as a professional manufacturer of polysilicon. Its main products are polysilicon, which are mainly used to process solar photovoltaic products such as silicon ingots, silicon wafers, cells and battery modules.

Daquan Energy is split from Daquan New Energy (D Q.N), a U.S. listed company. Daquan New Energy was listed on the U.S. stock market in 2010 and successfully raised 76 million U.S. dollars (about RMB 0.5 billion). In the event of an oversupply in the entire new energy photovoltaic industry, it suffered continuous losses in 2012 and 2013, and its stock price was once 30 consecutive trading days. Below US $1, received a delisting warning from the New York Stock Exchange.

Source: Oriental Fortune

since then, it has been trading sideways for a long time until 2020, when it will usher in a wave of market conditions, turning into a "super bull stock" and taking the opportunity to push Xinjiang Daquan back to A for listing. on July 22, 2021, daquan energy was successfully listed on the science and technology board, with an issue price of 21.49 yuan and an actual fund-raising of 6.447 billion yuan, exceeding the fund-raising of nearly 1.5 billion yuan.

This was followed by a sustained surge in silicon prices, with polysilicon climbing from 80000 yuan/ton in early 2021 to a maximum of 330000 yuan/ton in the second half of 2022, a 10-year high.

This also makes Daquan Energy, as the absolute upstream enterprise of the photovoltaic industry chain, experienced a "rich period".

in the past three years from 2020 to 2022, daquan energy revenue increased by 92.25, 132.23 and 185.64 year on year to 4.664 billion yuan, 10.832 billion yuan and 30.94 billion yuan respectively. net profit soared at the speed of getting on the rocket, up 322.28, 448.6 and 234.09 respectively from 0.247 billion yuan to 19.12 billion yuan.

in the secondary market, Daquan energy went up all the way after its listing in July 2021, rising to 91.8 yuan/share in September 2021, with a market value of more than 180 billion yuan.

taking advantage of the soaring performance and strong market value, the company has made large-scale dividends, with dividends of 1.155 billion yuan and 7.695 billion yuan respectively in 2021 and 2022, with a cumulative cash distribution of 8.85 billion yuan. "Prospectus" shows that the actual controller Xu Guangfu, Xu Xiang father and son's total shareholding ratio is 11.51, 9.25, based on this calculation, the two points close to 1.8 billion yuan.

the price fell as soon as the capital was raised to expand production, and the net profit has been halved

Daquan Energy took advantage of the skyrocketing silicon price to go public and make a lot of money in the bull market. There are also many large orders.

in 2022, daquan energy won a total of nine silicon long-term association orders, with customers including longji green energy (601012.SH), TCL central (002129.SZ), shuangliang energy saving (600481.SH), etc. According to the statistics of "Interface News", the total order amount of is as high as 384.726 billion yuan according to the average price of polycrystalline silicon dense materials announced by PV InfoLink at that time.

In response to high orders, Daqo Energy continues to expand its production. On January 24, 2022, Daquan Energy announced that it intends to raise no more than 11 billion yuan through a fixed increase in capital for the construction of a project with an annual output of 100000 tons of high-purity silicon-based materials. Based on this calculation, Daquan Energy has raised a total of 18 billion yuan in the capital market.

Source: Can Gallery

In addition to expanding production, Daqo Energy is also more "optimistic" about silicon prices ". Daquan Energy has a little story with its customers about the prediction of silicon price trends.

on October 25, 2022, daquan energy signed an agreement with TCL central, from which TCL central purchased 432000 tons of polysilicon.

Daquan Energy stated that according to the latest PVInfoLink (October 20, 2022) announced average price of polysilicon dense materials of 303000 yuan/ton (including tax), estimated purchase amount is about 130.896 billion yuan.

TCL Central believes that the total contract transaction amount is subject to the final transaction amount. According to the price forecast released by PV InfoLink in October, the price of polysilicon compact material is expected to be 2022-2027, and the average price is calculated to be 146000 yuan/ton (including tax). the estimated purchase amount is about 63.072 billion yuan.

finally verified by the market, or TCL's prediction is more realistic. Since 2023, silicon prices have fluctuated and fallen, nearly halving. the average transaction price of polysilicon dropped from about 170000 yuan/ton in January to about 70000 yuan/ton today, a drop of more than 58%.

on October 27, the silicon branch of the nonferrous metals industry association even stopped releasing polysilicon prices once a week. The association said that prices have shown a downward trend, but there are differences between buyers and sellers regarding the specific transaction price, and there are basically no new orders.

Subsequently, the Daquan Energy Expansion Project announced an extension. On October 30, 2023, Daquan Energy announced that the second phase of the Inner Mongolia project was postponed to the second quarter of 2024. According to the plan, the project should be completed and put into operation by the end of 2023. " affected by objective factors such as the market environment, the relationship between supply and demand, and the actual construction progress of the company , the overall implementation cycle of the second phase of the 100000-ton high-purity polysilicon project has slowed down, resulting in the implementation progress lagging behind the original plan."

In the end, the "rocket" growth of Daquan Energy has come to an abrupt end this year. In the first three quarters of 2023, Daqo Energy's revenue fell 40.26 percent, 42.93 percent and 47.81 percent year-on-year, respectively, and net profit fell 32.49 percent, 53.53 percent and 66.09 percent year-on-year.

The era of "silicon is king" is over, can it last until the next cycle?

Time has changed. Now the silicon price is "avalanche" and the story of "making wealth" of Daqo Energy has also been suspended.

Specifically, in the first three quarters, Daquan Energy "rose in volume and fell in price". Polysilicon production was 136800 tons, up 36.67 percent year-on-year. Polysilicon sales were 140100 tons, up 27.93 percent year-on-year. the average unit sales price was 91.26 yuan/kg, down 59.26 ; The unit production cost was 49.74 yuan/kg, down 15.09 from the same period last year.

it is worth noting that in the third quarter of 2023, the average selling price of Daquan energy polysilicon was 55.63 yuan/kg, and the unit cost was 47.77 yuan/kg. It is close to the break-even point. in the first three quarters, the company's gross sales margin and net sales margin were 45.88 and 39.72, down 28.1 and 21.41 respectively.

"In the past two years, the silicon chip, battery chip, component link and the long expansion cycle of silicon material link formed a mismatch between supply and demand, silicon material prices continue to rise, and gradually occupy most of the profits in the industrial chain. In the early stage of the rise in silicon prices, due to inventory and order locking, the silicon chip link became the beneficiary of the industrial chain, but with the passage of time silicon all the way up, the time difference dividend gradually disappeared, the gross margin of silicon chips then lower. Under the expectation of future silicon material price reduction, the silicon wafer link has become a breakthrough in the industrial chain bidding decline due to overcapacity, poor shipments, large inventory and other factors. "Senior Australian Certified Public Accountant Xie Zongbo said.

Daquan Energy's share price also continued to fall, with its total market capitalization falling from a maximum of $180 billion to $72.26 billion today, closing at $33.69 per share as of November 19, 2023.

Source: Oriental Fortune

When the "silicon is king" period ended, the price war between enterprises became more and more direct.

2021, the three leading silicon industry Tongwei shares, GCL Technology, Daquan Energy market share of 29%, 22%, 17%.

according to the 2023 semi-annual report of tongwei co., ltd., its crystalline silicon production cost has dropped to less than 40000 yuan/ton and its production capacity will reach 80-1 million tons next year. xiexin technology's third quarterly report shows that the company's production cost per ton of silicon is expected to drop to 4.1-42000 yuan in the fourth quarter of 23 from 43000 yuan in the third quarter.

Having lower costs also means having more advantages. Judging from the situation in the third quarter, Daquan Energy is the most expensive enterprise among the three giants.

"In response to the industry cycle downturn, overall production capacity oversupply, and price decline, Daquan Energy mainly has the following countermeasures: 1. Improve the cost-effectiveness of existing products in the short term, mainly including through specialization, digitization, upstream integration, Large-scale and healthy asset and liability management, etc. reduce product costs and improve product quality; 2. The production experience and skills of the medium and long-term integration team, continuously develop low-cost, high-quality new products that meet market needs, such as N-type products and semiconductor-grade silicon materials." Daquan Energy said in the face of investor questions.

Source: Panorama

"from 2021 to 2022, the shortage of silicon materials and the soaring price have attracted a large amount of capital to enter the silicon material link. by the end of 2023, the silicon material production capacity will be twice the demand. by 2024, the silicon material production capacity will probably exceed the demand by 3 times. the huge overcapacity of will cause fierce price war and elimination competition of silicon materials. it is expected that the silicon material price will continue to decline and remain above and above and below the cost line for a long time, until more than half of the enterprises are eliminated, silicon enterprises are likely to usher in profit growth. " said Liu Jimao, founder of Hongyang Solar.

When the era of "silicon is king" comes to an end, the era of "leftovers are king" will also come.

However, Daqo Energy, which has raised a total of 18 billion from the capital markets and has just experienced a wave of "wealth", now has ample cash flow. As of September 30, 2023, Daqo Energy had $20.654 billion in cash and cash equivalents on its books.

Xu guangfu, Xu Xiang and his son's wealth rises and falls with the price of silicon, and they want to push another company IPO

Behind Daquan Energy is "Jiangsu Xu Xiang", who has the same name and surname as Xu Xiang, the chief rudder of "Ningbo Trading Board Expendable Team", and his father Xu Guangfu.

Xu Guangfu was born in 1942 in Xinba Town, Yangzhong County, Zhenjiang City, Jiangsu Province. At the age of 18, he worked as an agricultural technician at Xinba Agricultural Technology Station, and later entered Xinba Comprehensive Factory, which produces grinding wheels, bakelite and other products. The factory was renamed Zhenjiang Electrical Equipment Factory in 1987 and began to develop, produce and sell electrical products such as refrigeration compressors and cable trays. Xu Guangfu stayed in the factory for 31 years and worked all the way to the post of chairman.

his working experience in the factory undoubtedly paved the way for his start-up. in 1992, Xu guangfu established Jiangsu changjiang electric appliance group co., ltd. in 2004, the company changed its name to daquan group co., ltd.

son Xu Xiang was born in 1971. he entered Changjiang electric appliance in 1993 as an accountant and manager. then he entered moeller electric appliance and daquan group. has been the company's second-in-command.

In 2005, Xu Guangfu and his son entered the field of polysilicon production. Chongqing Daquan was established in 2008, and the first 1500 tons of polysilicon project was successfully put into operation in July of the same year. Daquan New Energy landed on the New York Stock Exchange in 2010. At this time, Xu Guangfu was 68 years old.

Silicon production as a "money like water" heavy asset industry, Xu Guangfu, Xu Xiang and his son thought of the capital market this big cake. In 2021, Xinjiang Daquan successfully listed on the board, which not only solved the financial problem, but also became a new springboard for the company to expand production and scale.

After the listing, Xu Guangfu and Xu Xiang also appeared on the "Hurun Report". ranked 241 in terms of 26 billion wealth, up 787 places from the previous year.

Source: Hurun

Capital markets are changing rapidly. With the sharp decline in silicon prices, the future of Daqo Energy is uncertain.

Liu Jimao, founder of Hongyang Solar, mentioned that in the past few years, due to the huge profits of silicon materials, a large number of capital has been attracted. At present, the production capacity of silicon materials is more than twice the demand. Moreover, silicon materials are a large chemical industry, and once they are started, they cannot stop work casually. It is expected that the price of silicon materials will continue to decline, and it may hover below the cost line for a long time. It will not return to normal profit until most factories can be eliminated and the supply and demand relationship is balanced.

With the decline in silicon prices, the wealth of Xu Guangfu and Xu Xiang and their sons has also fallen all the way to 13.5 billion yuan in 2023, which has halved in only two years.

Source: Hurun

Seeing the silicon material enter the downward period, Xu Guangfu, Xu Xiang and his son also have a new capital layout, intended to push a son to A shares. On August 30, 2023, Wuhan Daquan Energy Technology Co., Ltd. (hereinafter referred to as "Wuhan Daquan"), a subsidiary of Daquan Group, went through the registration of counseling in Hubei Securities Regulatory Bureau, and planned to issue shares for the first time and list on A shares. The counseling organization is CICC.

Wuhan Daquan was established in July 2010. is mainly engaged in the research and development, manufacturing, system set and test, technical support and services of new energy access equipment, electromagnetic energy storage and release and control equipment , ship integrated power, ship electric propulsion system, power electronic converter equipment, intelligent power generation and distribution, medium voltage DC circuit breaker, special components, transportation traction equipment and other systems and equipment.

According to the latest report on the progress of counseling work, the main problems of Wuhan Daquan are: to clarify the investment direction of raised funds, and to continuously improve the internal control system and other related systems.

Source: Tutorial Report

If Wuhan Daquan is successfully listed, the capital map of Xu Guangfu and Xu Xiang will be expanded by another city. What do you know about the story of Xu's father and son? Welcome to leave a comment below.