Text: Huaxia Energy Network

Polysilicon giant Daqo Energy (SH:688303), which is mired in the industry cycle, has recently experienced personnel turmoil.

Huaxia Energy Network & Huaxia Photovoltaic learned that on the evening of October 31, Daqo Energy announced that Cao Wei applied for resignation from the position of deputy general manager of the company due to personal reasons. After his resignation, Cao Wei will no longer hold any position in the company.

It is worth noting that the day before, Daqo Energy just announced that Mr. Wang Xiyu resigned as the company's director, general manager and member of the special committee due to job adjustment. After his resignation, Mr. Wang Xiyu still holds other positions in the company and is still a core technical personnel of the company.

Looking back on the past month, Huaxia PV found that on October 15, Hu Ping, another executive of Daqo Energy, had also resigned and stepped down as the company's deputy general manager and core technical personnel.

The departure of three senior executives in a month may make the road ahead for Daqo Energy, which is in the midst of a performance loss, even more bumpy.

The former patriarchs have resigned one after another

In the polysilicon industry, Daqo Energy, Tongwei (SH:600438), GCL Technology (HK:3800), and Xinte Energy (HK:1799) are known as the "Four Heavenly Kings". Daqo Energy was born from an important strategic transformation in the history of its subordinate company "Daqo Group".

Daqo Group, a leading enterprise in the electrical industry, was founded by 82-year-old Xu Guangfu. In 2006, under the impetus of Xu Xiang, the son of Xu Guangfu, Daqo Group began to transform to new energy. In 2007, Daqo Group invested 4 billion yuan to establish a polysilicon production base in Wanzhou, Chongqing, and began to put into production the following year.

With the strong momentum of development, in 2010, Cayman Daqo (also known as "Daqo New Energy"), a subsidiary of Daqo Group, was successfully listed on the New York Stock Exchange in the United States.

In February 2011, Cayman Daqo established a holding subsidiary, Xinjiang Daqo New Energy Co., Ltd., in Shihezi, Xinjiang, which mainly carries out the research and development, production and sales of high-purity polysilicon. The company was listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange on July 22, 2021, and the stock is referred to as "Daqo Energy".

According to the announcement, as of September 30, 2024, Cayman Daqo held more than 72% of Daqo Energy's shares. The total direct and indirect shareholding of the Xu father and son is 21.12% of the shares of Cayman Daqo. Xu Guangfu is currently the chairman of Daqo Energy and a director of Cayman Daqo, while Xu Xiang is the chairman and CEO of Caqo Daqo and the vice chairman of Daqo Energy. In October 2024, Xu's father and son ranked 618th in the "2024 Hurun Report" with a wealth of 8.5 billion yuan.

In more than 10 years of development history, Daqo Energy's personnel fluctuations are less. Previously, Daqo Energy insiders told the media that as of 2023, Daqo Energy's senior management team has basically not changed.

However, since last year, a number of senior managers of Daqo Energy have left one after another. Including Deputy General Manager Tan Zhongfang, Director and General Manager Zhou Qiangmin, Director Zhang Longgen, and Technical Manager Zhao Yunsong. Among them, Tan Zhongfang and Zhao Yunsong, as well as Hu Ping and Wang Xiyu, who recently left the company, are all core technical personnel of Daqo Energy, and are considered to have made important contributions to the technological progress of Daqo Energy's silicon production.

In addition, the board of supervisors of Daqo Energy has also recently "changed blood". The board of supervisors of the company is composed of the chairman of the board of supervisors and employee representative supervisors. In May and June this year, the two positions were changed one after another, and Xia Jun, the former chairman of the board of supervisors, and Guan Shihong, the former employee representative supervisor, both resigned.

It is worth noting that most of the people who left the company have served in the department for many years.

Take, for example, the two people who recently resigned. According to public information, Cao Wei, deputy general manager, joined Changjiang Electric Company, a subsidiary of Daqo Group, in 2003. In 2006, when Daqo Group decided to set foot in the field of new energy, Cao Wei was transferred to the "front line" and worked for Chongqing Daqo New Energy Co., Ltd. In 2011, Cao Wei was sent to Shihezi as an assistant to the general manager, responsible for the preparation of Xinjiang Daqo (i.e., Daqo Energy). Since then, Cao Wei has been working for Daqo Energy and has also served as the general manager of Daqo Energy.

Wang Xiyu also joined Daqo in 2007 at the beginning of the company's involvement in new energy, and was later promoted to the positions of assistant general manager, chief technology officer, and deputy general manager. In August 2023, after the resignation of the former general manager Zhou Qiangmin, Wang Xiyu took over as general manager, and it has only been more than a year.

Regarding the reasons for Daqo Energy's personnel turmoil, when Hu Ping resigned half a month ago, there were many speculations in the industry, including "fraud" and insufficient equity incentives, but none of them could be confirmed.

Among the people who left Daqo, the whereabouts of them were not publicly disclosed.

However, at the beginning of 2024, Zhang Longgen's whereabouts were dug up by the media. It is reported that Zhang Longgen was a senior executive of JinkoSolar before joining Daqo Energy.

Regarding its whereabouts after leaving Daqo Energy, industry insiders have noticed that in the news of investment projects related to the Oman region of the Middle East, it is indicated that he may be the head of a company called United Solar (Zhang Longgen). In other words, Zhang Longgen may be in Oman's Sohar Free Trade Zone, "operating" a project with an annual output of 100,000 tons of high-purity silicon-based materials.

In any case, the departure of a large number of senior managers in the short term is not a happy thing for Daqo Energy, which has just issued three quarterly reports.

What do you rely on to get out of the loss?

After years of development, Daqo Energy has become one of the "Four Heavenly Kings" of polysilicon.

Since its establishment in 2011, Daqo Energy has successively built a production capacity of 305,000 tons/year of high-purity polysilicon, 1,000 tons/year of semiconductor polysilicon, and 150,000 tons/year of high-purity industrial silicon finishing and grinding lines in Xinjiang and Inner Mongolia. In terms of output, in the first half of this year, Daqo Energy's polysilicon output was 127,200 tons, accounting for 12.00% of domestic polysilicon production.

In the two years since its listing, the polysilicon market has continued to rise, making Daqo Energy a lot of money. Especially in 2022. This year, Daqo Energy achieved operating income of 30.940 billion yuan, a year-on-year increase of 185.64%; The net profit attributable to the parent company was 19.121 billion yuan, a year-on-year increase of 234.06%. The gross profit margin of Daqo Energy's main business was once close to 75%.

However, from the second half of 2023, the entire photovoltaic industry chain will move towards overcapacity, and product prices will continue to fall. By this year, most product prices have fallen below the cost of cash.

The same is true for Daqo Energy. According to the announcement, in the second and third quarters of this year, the sales price of Daqo Energy's polysilicon products was 37.09 yuan/kg and 33.62 yuan/kg, respectively, but the cash cost was 40.16 yuan/kg and 38.93 yuan/kg, respectively, which were higher than the sales price.

The fall in prices has led to a sharp drop in the company's profits, and Daqo Energy, like other PV companies, has fallen into losses this year. In the first half of this year, Daqo Energy's net profit attributable to the parent company lost 670 million yuan. By the third quarter, although the loss narrowed, it still lost 430 million yuan.

In order to cope with the continuous cold winter, in the second half of this year, the industrial chain of the photovoltaic industry began a "self-help movement". Rumor has it that polysilicon companies, including Tongwei and GCL, recently held an "anti-involution" meeting, demanding that they reduce their operating rates to 50%. Although it is not clear whether Daqo Energy is involved, it can also be glimpsed from the production and sales rate of its announcement that it is carrying out "self-help".

In the semi-annual report, Daqo Energy said that "the company has adjusted the time window of the annual routine maintenance plan" and will "adjust the production load of the device in stages from the third quarter".

By the third quarter, Daqo Energy had reduced polysilicon production to 44,000 tons from 65,200 tons in the second quarter. In addition, the sales volume in the third quarter reached 42,000 tons, and the production and sales ratio reached 96.6%. In the second quarter, Daqo Energy's production and sales ratio was only 66.3%.

In addition, Daqo Energy expects polysilicon production in the fourth quarter to be in the range of 31,000 tons ~ 34,000 tons. At the beginning of this year, Daqo Energy expected annual production of 300,000 tons, and today, that number has become about 200,000 tons.

In addition to the adjustment of polysilicon production, Daqo Energy is also seeking the next profit growth point.

Semiconductor-grade silicon materials are one of them. In 2021, Daqo Energy plans to build a 21,000-ton semiconductor-grade silicon-based material project in Baotou City, Inner Mongolia. Among them, the first phase plans to have an annual production capacity of 1,000 tons of semiconductor-grade polysilicon. In May this year, the first batch of products of the first phase of the project was released.

However, compared with solar-grade polysilicon, semiconductor-grade polysilicon requires high purity and is technically difficult to produce. Under the continuous loss of performance, Daqo Energy has entered a field that has never been set foot in, and it may be quite difficult to achieve the expected returns.

The main business is at a loss, the new business is not yet on the right track, and the personnel turmoil is superimposed, and the road to "self-help" of Daqo Energy is quite uneven.