Q1 2026 Daqo New Energy Corp Earnings Call

April 29, 2026

Operator: Good day, welcome to the Daqo New Energy Q1 2026 Results Conference Call. All 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. To ask a question, you may press star then one on a touch-tone 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 Jessie Zhao, Director of Investor Relations. Please go ahead.

Operator: Good day, Welcome to the Daqo New Energy Q1 2026 Results Conference Call. All 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. To ask a question, you may press star then one on a touch-tone 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 Jessie Zhao, Director of Investor Relations. Please go ahead.

Speaker #2: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touchtone phone.

Speaker #2: To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Jessie Zhao, Director of Investor Relations.

Speaker #2: Please go ahead. Hello, everyone. I'm Jessie Zhao, the Investor Relations Director of DACO NEW ENERGY. Thank you for joining our conference call today. DACO NEW ENERGY just issued its financial results for the first quarter of 2026, which can be found on our website at www.dqsolar.com.

Jessie Zhao: Hello, everyone. I'm Jessie Zhao, the Investor Relations Director of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for Q1 2026, which can be found on our website at www.dqsolar.com. Today, attending the conference call, we have our Deputy CEO, Miss Anita Zhu, our CFO, Mr. Ming Yang, and myself. Our Chairman and CEO, Mr. Xiang Xu, is on a business trip now. Miss Anita Zhu will deliver our management remarks on behalf of Mr. Xiang Xu. Today's call will begin with an update from Miss Zhu on market conditions and company operations. 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.

Speaker #2: Today, attending the conference call, we have our Deputy CEO, Ms. Anita Zhu, our CFO, Mr. Ming Yang, and myself. Our chairman and CEO, Mr. Xiang Xu, is on a business trip now, so Ms. Anita Zhu will deliver our management remarks on behalf of Mr. Xiang Xu.

Jessie Zhao: Today's call will begin with an update from Miss Zhu on market conditions and company operations. 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.

Speaker #2: Today's call will begin with an update from Ms. Zhu. Our market conditions and company operations. And then Mr. Yang will discuss the company's financial performance for the quarter.

Speaker #2: 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 US Private Securities Litigation Reform Act of 1995.

Jessie Zhao: Before we begin the formal remarks, I want 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 materially from those contained in any forward-looking statement. Further information regarding this 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.

Speaker #2: These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement.

Speaker #2: Further information regarding this and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission.

Speaker #2: 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.

Jessie Zhao: 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 is the Chinese RMB. We offer these translations into US dollars solely for the convenience of the audience. Now, I will turn the call to our Deputy CEO, Miss Anita Zhu. Miss Zhu, please go ahead.

Speaker #2: 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.

Speaker #2: Also, during the call, we will occasionally reference monetary amounts in US dollar terms. Please keep in mind that our five-functional currency is the Chinese RMB, we offer this translation into US dollars, solely for the convenience of the audience.

Speaker #2: Now, I will turn the call to our Deputy CEO, Ms. Anita Zhu. Ms. Zhu, please go ahead.

Anita Zhu: Thank you, Jesse. Hello, everyone. This is Anita. I'll now deliver our management remarks on behalf of our CEO, Mr. Xu. In Q1 2026, market sentiment across the solar PV industry remained cautious amid seasonal softness and elevated inventory levels. It was further exacerbated by rising module prices driven by higher silver, aluminum, and glass costs, which led to a market slowdown in China. Geopolitical tensions in the Middle East also weighed on end market demand in the region. Against this backdrop, persistent industry overcapacity continued to exert downward pressure on polysilicon prices, resulting in quarterly operating and net losses. Notwithstanding these headwinds, we continue to maintain a robust and healthy balance sheet with zero debt.

Anita Zhu: Thank you, Jessie. Hello, everyone. This is Anita. I'll now deliver our management remarks on behalf of our CEO, Mr. Xu. In Q1 2026, market sentiment across the solar PV industry remained cautious amid seasonal softness and elevated inventory levels. It was further exacerbated by rising module prices driven by higher silver, aluminum, and glass costs, which led to a market slowdown in China. Geopolitical tensions in the Middle East also weighed on end market demand in the region. Against this backdrop, persistent industry overcapacity continued to exert downward pressure on polysilicon prices, resulting in quarterly operating and net losses. Notwithstanding these headwinds, we continue to maintain a robust and healthy balance sheet with zero debt.

Speaker #3: Thank you, Jessie. Hello, everyone. This is Anita. I'll now deliver our management remarks on behalf of our CEO, Mr. Zhu. In the first quarter of 2026, market sentiment across the solar PV industry remained cautious amidst seasonal softness and elevated inventory levels.

Speaker #3: It was further exacerbated by rising module prices driven by higher silver, aluminum, and glass costs, which led to market slowdown in China. Geopolitical tensions in the Middle East also weighed on market demand in the region.

Speaker #3: Against this backdrop, persistent industry overcapacity continued to exert downward pressure on policy prices. Resulting in quarterly off-grading and net losses. Notwithstanding these headwinds, we continue to maintain a robust and healthy balance sheet with zero debt, as of March 31, 2026, we held a cash balance of 559.4 million US dollars, short-term investments of 288.3 million US dollars, bank notes receivable of 20.8 million, out-of-maturity investment of 50.3 million, and a fixed-term bank deposit balance of 1.1 billion US dollars.

Anita Zhu: As of 31 March 2026, we held a cash balance of $559.4 million. Short-term investments of $288.3 million, bank notes receivable of $20.8 million, ultra-maturity investment of $50.3 million, and a fixed term bank deposit balance of $1.1 billion. In total, these assets that can be converted into cash stood at $2 billion, providing us with ample liquidity. This solid financial position gives us the confidence and strategic flexibility to navigate the current market downturn. On the operational front, we continue to take proactive measures to navigate challenging market conditions and weak selling prices. With main plate capacity utilization rate operating at approximately 57%.

Anita Zhu: As of 31st March 2026, we held a cash balance of $559.4 million. Short-term investments of $288.3 million, bank notes receivable of $20.8 million, ultra-maturity investment of $50.3 million, and a fixed term bank deposit balance of $1.1 billion. In total, these assets that can be converted into cash stood at $2 billion, providing us with ample liquidity. This solid financial position gives us the confidence and strategic flexibility to navigate the current market downturn. On the operational front, we continue to take proactive measures to navigate challenging market conditions and weak selling prices. With main plate capacity utilization rate operating at approximately 57%.

Speaker #3: In total, these assets that can be converted into cash stood at 2 billion US dollars, providing us with ample liquidity. This solid financial position gives us the confidence and strategic flexibility to navigate the current market downturn.

Speaker #3: On the operational front, we continue to take proactive measures to navigate challenging market conditions and weak selling prices. With main plate capacity utilization rate operating at approximately 57%, total production volume at our two policy facilities was 43,402 metric tons for the quarter, exceeding our guidance range of 35,000 metric tons to 40,000 metric tons.

Anita Zhu: Total production volume at our two polysilicon facilities was 43,402 metric tons for the quarter, exceeding our guidance range of 35,000 metric tons to 40,000 metric tons. With market prices for polysilicon experiencing a notable decline to be below production cost during the quarter, we adhere to the Chinese authorities' self-regulation guidelines by declining to engage in below-cost sales. We adopted a disciplined wait-and-see approach pending further implementation of the national anti-involution policies we highlighted last quarter. As a result, our sales volume dropped to 4,482 metric tons, while our average selling price increased 2.3% sequentially to $5.96 per kilogram. On the cost side, total production and cash costs increased marginally by 2% and 3% respectively on a sequential basis, primarily driven by exchange rate movements.

Speaker #3: With market prices for policy experiencing a notable decline, to be below production costs during the quarter, we adhered to the Chinese authority's self-regulation guidelines by declining to engage in below-cost sales.

Speaker #3: We adopted a disciplined weight and fee approach pending further implementation of the national anti-inflation policies we highlighted last quarter. As a result, our sales volume dropped to 4,482 metric tons, while our average selling price increased 2.3% sequentially to 5.96 US dollars per kilogram.

Speaker #3: On the cost side, total production and cash costs increased marginally by 2% and 3%, respectively, on a sequential basis, primarily driven by exchange rate movements.

Anita Zhu: However, despite higher silicon metal costs, manufacturing costs in RMB terms actually declined slightly on a sequential basis, reflecting our continued improvements in manufacturing efficiency. In light of the current market dynamics, we expect total polysilicon production volume in Q2 2026 to be approximately 35,000 metric tons to 40,000 metric tons. For the full year of 2026, we expect production volume to remain in the range of 140,000 to 170,000 metric tons. With the solar market impacted by seasonality surrounding the Chinese New Year holidays and the absence of concrete updates, capacity rationalization policies, polysilicon transactions and shipment volumes remained low during the quarter. In turn, polysilicon prices dropped from RMB 48 to 55 per kilogram at the end of 2025 to RMB 35 to 37 per kilogram by the end of Q1.

Speaker #3: However, despite higher silicon metal costs, manufacturing costs in RMB terms actually declined slightly on a sequential basis reflecting our continued improvements in manufacturing efficiency.

Speaker #3: In light of the current market dynamics, we expect total policy production volume the second quarter of 2026 to be approximately 35,000 metric tons to 40,000 metric tons.

Speaker #3: For the full year of 2026, we expect production volume to remain in the range of 140,000 to 170,000 metric tons. With the solar market impacted by seasonality surrounding the Chinese New Year holiday, and the absence of concrete updates on capacity rationalization policies, policy transactions and shipment volumes remain low during the quarter.

Speaker #3: Intact policy prices dropped from 48 to 55 RMB per kilogram at the end of 2025 to 35 to 37 RMB per kilogram by the end of the first quarter.

Anita Zhu: Polysilicon prices heading into Q2 are showing signs of bottoming out, with weekly declines gradually easing. While producers awaited clear guidance, guidelines from authorities to tackle overcapacity, a weak demand outlook, industry inventory build-up, and financial pressure forced several peers to adjust their production pricing strategy toward a more market-oriented approach. Industry-level polysilicon monthly supply fell to approximately 93,000 metric ton during the quarter, representing an industry average utilization rate of just 39%. Looking ahead, we expect government authorities to strengthen the anti-involution policies necessary to address these industry-wide overcapacity issues.

Speaker #3: However, policy prices heading into the second quarter are showing signs of bottoming out, with weekly declines gradually easing. While producers await a clear guidance guidelines from authorities to tackle overcapacity, a weak demand outlook, industry inventory buildup, and financial pressure forced several peers to adjust their production pricing strategies toward a more market-oriented approach.

Speaker #3: As a result, industry-level policy monthly supply fell to approximately 93,000 metric tons during the quarter. Representing an industry average utilization rate of just 39%.

Speaker #3: Looking ahead, we expect government authorities to strengthen the anti-inflation policies necessary to address these industry-wide overcapacity issues. As an encouraging move, on April 17, the Ministry of Industry and Information Technology, the National Development and Reform Commission, the State Administration for Market Regulation, the National Energy Administration, and other key national departments jointly held a symposium on regulating market competition within the solar PV sector.

Anita Zhu: As an encouraging move, on 17 April, the Ministry of Industry and Information Technology, the National Development and Reform Commission, the State Administration for Market Regulation, the National Energy Administration, and other key national departments jointly held a symposium on regulating market competition within the solar PV sector, reinforcing the urgent need to address irrational competition and curb anti-involution. Additionally, all relevant authorities are now required to deploy concerted measures to strengthen industry governance and promote the high-quality development of the solar PV industry, including in respect of capacity regulation, standards guidelines.

Speaker #3: Reinforcing the urgent need to address irrational competition and curb destructive evolution, additionally, all relevant authorities are now required to deploy concerted measures to strengthen industry governance and promote the high-quality development of the solar PV industry, including in respect of capacity regulation, standards guidelines, pardon me, ladies and gentlemen, it's appeared we've lost connection to our speakers.

Operator: Pardon me, ladies and gentlemen. It appears we've lost connection to our speakers. Please stand by while we reconnect. Pardon me. This is the operator. We have reconnected the speakers and will continue. Please proceed.

Speaker #3: Please stand by while we reconnect. Pardon me, this is the operator. We have reconnected the speakers, and we'll continue. Please proceed.

Anita Zhu: Okay. Okay. Thank you. Sorry. Apologies. My line got disconnected. Continuing with the 17 April symposium. All relevant authorities are now required to deploy concerted measures to strengthen industry governance and promote the high-quality development of the solar PV industry, including in respect of capacity regulations, standards, guidance, innovation-driven development, Price Law enforcement, quality supervision, mergers and acquisitions, and intellectual property rights protection. More broadly, the solar PV industry continues to exhibit compelling long-term growth prospects. Growing vulnerabilities in global energy markets have sparked widespread concerns about national energy security, in which the solar PV and renewable energy sectors can play a crucial role.

Speaker #2: Okay. Okay, thank you. Sorry, apologies. My line got disconnected. So continuing with the April 17th symposium, all relevant authorities are now required to deploy a concerted measures to strengthen industry governance and promote the high-quality development of the solar PV industry, including in respect of capacity regulation, standards guidance, and addition-driven development, price law enforcement, quality supervision, mergers and acquisitions, and intellectual property rights protection.

Speaker #2: More broadly, the solar PV industry continues to exhibit compelling long-term growth prospects, growing vulnerabilities in global energy markets have sparked widespread concerns about national energy security.

Speaker #2: In which the solar PV and renewable energy sectors can play a crucial role. As one of the world's lowest cost producers of the highest quality intact policy backed by a robust balance sheet and zero debt, we remain optimistic about the sector and are well positioned to capitalize on the anticipated market recovery and long-term growth opportunities.

Anita Zhu: As one of the world's lowest cost producers of the highest quality N-type polysilicon, backed by a robust balance sheet and zero debt, we remain optimistic about the sector and are well positioned to capitalize on the anticipated market recovery and long-term growth opportunities. We'll continue to strengthen our competitive edge through advancements in high efficiency N-type technologies and cost optimization via digital transformation and AI adoption. As the world accelerates its transition to clean energy, we are confident in our ability to play a leading role in shaping that future. Now I'll turn the call to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter. Ming, please go ahead.

Speaker #2: We'll continue to strengthen our competitive edge through advancements in high-efficiency intact technologies and cost optimization via digital transformation and AI adoption, as the world accelerates its transition to clean energy.

Speaker #2: We are confident in our ability to play a leading role in shaping that future. So now I'll turn the call to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter.

Speaker #2: Ming, please go ahead.

Ming Yang: Thank you, Anita. Hello, everyone. This is Ming Yang, CFO of Daqo New Energy. We appreciate you joining our earnings conference call today. I will now go over the company's Q1 2026 financial performance. Revenues were CNY 26.7 million, compared to CNY 221.7 million in Q4 2025 and CNY 124 million in Q1 2025. The decrease in revenue compared to Q4 2025 was primarily due to a decrease in sales volume as the company reduced sales in light of the relatively low selling prices. Gross loss was CNY 139.4 million, compared to a gross profit of CNY 15.4 million in Q4 2025, and gross loss of CNY 81.5 million in Q1 2025.

Speaker #3: Thank you, Anita and hello, everyone. This is Ming Yang, CFO of DAQO NEW ENERGY. We appreciate you joining our earnings conference call today. I will now go over the company's first quarter 2026 financial performance.

Speaker #3: Revenues were $26.7 million, compared to $221.7 million in the fourth quarter of 2025 and $124 million in the first quarter of 2025. The decreasing revenue compared to the fourth quarter of 2025 was primarily due to a decrease in sales volume, as the company reduced sales in light of the relatively low selling prices.

Speaker #3: Gross loss was 139.4 million, compared to a gross profit of 15.4 million in the fourth quarter of 2025, and gross loss of 81.5 million in the first quarter of 2025.

Ming Yang: Gross margin was -521%, compared to 7% in Q4 2025, and -65.8% in Q1 2025. The decrease in gross margin compared to Q4 2025 was primarily due to an increase in provision for inventory impairment. Cost of revenue for Q1 2026 includes CNY 98.4 million of provisions for inventory impairment due to end of quarter market polysilicon pricing that is below production cost. Selling, general, and administrative expenses were CNY 12.2 million, compared to CNY 18.7 million in Q4 2025 and CNY 35 million in Q1 2025. The sequential decrease of SGA was primarily due to lower sales volume in Q1 2026.

Speaker #3: Gross margin was -521%, compared to 7% in the fourth quarter of 2025 and -65.8% in the first quarter of 2025. The decrease in gross margin compared to the fourth quarter of 2025 was primarily due to an increase in provision.

Speaker #3: For inventory, impairment. Cost of revenue for the first quarter of 2026 includes 98.4 million of provisions for inventory impairment due to end-of-quarter market polysilicon pricing that is below production cost.

Speaker #3: Selling general and administrative expenses were 12.2 million, compared to 18.7 million in the fourth quarter of 2025 and 35 million in the first quarter of 2025.

Speaker #3: Sequential decrease of HCNA expenses was primarily due to lower sales volume in the first quarter of 2026. The year-over-year decrease was also due to the company recognizing 18.6 million in non-cash share-based compensation costs related to the company's share incentive plan in the first quarter of 2025.

Ming Yang: The year-over-year decrease was also due to the company recognizing CNY 18.6 million in non-cash share-based compensation costs related to the company's share incentive plan in Q1 2025. R&D expenses were CNY 0.8 million, compared to CNY 0.7 million in Q4 2025 and CNY 0.5 million in Q1 2025. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter. Loss from operations was CNY 150.8 million, compared to CNY 20.9 million in Q4 2025 and CNY 114 million in Q1 2025. Operating margin was -564%, compared to -9.4% in Q4 2025 and -92% in Q1 2025.

Speaker #3: R&D expenses were $0.8 million, compared to $0.7 million in the fourth quarter of 2025 and $0.5 million in the first quarter of 2025. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter.

Speaker #3: Loss from operations was 150.8 million, compared to 20.9 million in the fourth quarter of 2025 and 114 million in the first quarter of 2025.

Speaker #3: Operating margin was -564%, compared to -9.4% in the fourth quarter of 2025 and -92% in the first quarter of 2025. Net loss attributable to DAQO NEW ENERGY shareholders was 88.4 million, compared to 7.3 million in the fourth quarter of 2025 and 71.8 million in the first quarter of 2025.

Ming Yang: Net loss attributable to Daqo New Energy shareholders was $88.4 million, compared to $7.3 million in Q4 2025 and $71.8 million in Q1 2025. Loss per basic ADS was $1.31 compared to $0.11 in Q4 2025 and $1.07 in Q1 2025. Adjusted net loss attributable to Daqo New Energy shareholders, excluding non-cash share-based compensation costs, was $88.4 million, compared to $7.3 million in Q4 2025 and $53.2 million in Q1 2025.

Speaker #3: Loss per basic ADS was $1.31, compared to $11 in the fourth quarter of 2025 and $1.07 in the first quarter of 2025. Adjusted net loss attributable to DAQO NEW ENERGY shareholders, excluding non-cash share-based compensation costs, was 88.4 million, compared to 7.3 million in the fourth quarter of 2025 and 53.2 million in the first quarter of 2025.

Ming Yang: Adjusted loss per basic ADS was $1.31, compared to $0.11 in Q4 2025 and $0.80 in Q1 2025. EBITDA was -$83 million compared to $62.5 million in Q4 2025 and -$48 million in Q1 2025. EBITDA margin was -311% compared to 23.7% in Q4 2025 and -39% in Q1 2025. Now on the company's financial condition. As of 31 March 2026, the company had $559.4 million in cash equivalent, and restricted cash compared to $980 million as of 31 December 2025, and $792 million as of 31 March 2025.

Speaker #3: Adjusted loss per basic ADS was $1.31, compared to $0.11 in the fourth quarter of 2025 and $0.80 in the first quarter of 2025. EBITDA was -83 million, compared to 52.5 million in the fourth quarter of 2025 and -48 million in the first quarter of 2025.

Speaker #3: EBITDA margin was -311%, compared to 23.7% in the fourth quarter of 2025 and -39% in the first quarter of 2025. And now the company's financial condition.

Speaker #3: As of March 31, 2026, the company had $559.4 million in cash, cash equivalent restricted cash, compared to $980 million as of December 31, 2025.

Speaker #3: And $792 million as of March 31, 2025. And as of March 31, 2026, short-term investments were $288 million, compared to $114 million as of December 31, 2025, and $168 million as of March 31, 2025.

Ming Yang: As of 31 March 2026, short-term investments was CNY 288 million compared to CNY 114 million as of 31 December 2025, and CNY 168 million as of 31 March 2025. As of 31 March 2026, the note receivable balance was CNY 20.8 million compared to CNY 135.5 million as of 31 December 2025, and CNY 62.7 million as of 31 March 2025. Note receivables represent bank notes with maturity within 6 months. As of 31 March 2026, held-to-maturity investment was CNY 50.3 million compared to nil as of 31 December 2025, and nil as of 31 March 2025.

Speaker #3: As of March 31, 2026, the net receivable balance was $20.8 million, compared to $135.5 million as of December 31, 2025, and $62.7 million as of March 31, 2025.

Speaker #3: No receivables represent bank notes with maturity within six months. And as of March 31, 2026, held-to-maturity investment was $50.3 million, compared to nil as of December 31, 2025 and nil as of March 31, 2025.

Ming Yang: As of 31 March 2026, the balance of fixed term deposit within one year was $1 billion, compared to $972 million as of 31 December 2025, but $1.1 billion as of 31 March 2025. Now the company's cash flow. For the three months ended 31 March 2026, net cash used in operating activities was $147.5 million compared to $38.9 million in the same period of 2025. For the three months ended 31 March 2026, net cash used in investing activities was $275.8 million compared to $211 million in the same period of 2025. Net cash used in investing activities in 2026 was primarily due to the purchase of short-term investments and fixed term deposits.

Speaker #3: And as of March 31, 2026, the balance of fixed term deposit within one year was $1 million, compared to $972 million as of December 31, 2025, and $1.1 billion as of March 31, 2025.

Speaker #3: Now the company's cash flow. For three months, ended March 31, 2026, net cash used in operating activities was $147.5 million, compared to $38.9 million in the same period of 2025.

Speaker #3: And for the three months ended March 31, 2026, net cash used in investing activities was $275.8 million, compared to $211.0 million in the same period of 2025.

Speaker #3: Net cash used in investing activities in 2026 was primarily due to the purchase of short-term investments and fixed term deposits. And for the three-month ended March 31, 2026, net cash used in financing activities was $7.8 million, compared to nil in the same period of 2025.

Ming Yang: For the three months ended 31 March 2026, net cash used in financing activities was CNY 7.8 million compared to nil in the same period of 2025. Net cash used in financing activities in 2026 was primarily re-to $7.8 million of stock, share purchases made by the company's subsidiary, Xinjiang Daqo, from its minority shareholders. That concludes our prepared remarks. We will now open the call to Q&A from the audience. Operator, please begin.

Speaker #3: Net cash used in financing activities in 2026 was primarily due to $7.8 million of stock share purchases made by the company's subsidiary Xinjiang DAQO from its minority shareholders.

Speaker #3: And that concludes our prepared remarks. We will now open the call to Q&A from the audience. Operator, please begin.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone 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 the 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.

Speaker #1: 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 were using a speakerphone, please pick up your handset before pressing the keys.

Speaker #1: If at any time your question has been addressed and you would like to withdraw the question, please press star, then two. At this time, we will pause momentarily to assemble our roster.

Speaker #1: Our first question comes from Philip Shen with Roth Capital Partners. Please go ahead.

Philip Shen: Thanks for taking my questions. Hey, guys. Thanks for taking my questions. First one is on the State Administration for Market Regulation. You know, tier one manufacturers submitted formal correction proposals. Can you walk us through how these specific proposals are practically shifting or may practically shift competitive dynamics on the ground today? Ultimately, do these commitments accelerate or delay the necessary industry consolidation needed to stabilize ASPs? Thanks, guys.

Speaker #2: Hey, guys. Thanks for taking my questions. First one is on the state administration for market regulation. Tier one manufacturers submitted formal correction proposals. Can you walk us through how these specific proposals are practically shifting or may practically shift competitive dynamics on the ground today?

Speaker #2: Ultimately, do these commitments accelerate or delay the necessary industry consolidation needed to stabilize ASPs? Thanks, guys.

Ming Yang: I figure you're kind of breaking up on our end. Can you repeat your question?

Speaker #3: So you're kind of breaking up on our end. Can you repeat your question?

Philip Shen: Yeah, sure. Hey, Ming. Just wanted to.

Ming Yang: Okay.

Philip Shen: understand what the submissions to the State Administration for Market Regulation, those, you know, those proposals, how could they practically improve the competitive dynamics to accelerate or delay, you know, the, you know, necessary industry consolidation needed to stabilize ASPs?

Speaker #2: Yeah, sure. Hey, Ming. So just wanted to understand what the submissions to the state administration for market regulation those proposals, how could they practically improve the competitive dynamics to accelerate or delay the necessary industry consolidation needed to stabilize ASPs?

Ming Yang: Anita, do you want to start first, and I can add to that? Okay. Let me just start by what our understanding is. I think that the government, especially at the most recent industry meeting with the Ministry of Industry and Information Technology, NDRC, NEA, and the market regulation agency. Basically, there is a consensus from the government that at the minimum, while maintaining some market competition, there is a need to enforce the Price Law. Now, there is some details to be determined in terms of, for example, how to measure cost for all the different manufacturers. Our understanding is they're doing a new round of price determination.

Speaker #3: Anita, do you want to start first, and I can add to that? Okay. Or let me just start. Well, our understanding is I think that the government, especially at the most recent industry, meeting with the Ministry of Industry and Information Technology and NDRC and NEA, and then the market regulation agency, so basically, there is a consensus from the government that at the minimum, while maintaining some market competition, there's a need to enforce the price law, and now there is some details to be determined in terms of, for example, how to measure cost for all the different manufacturers.

Speaker #3: And our understanding is they're doing a new round of price determination. So this should come out, say, in the next two months or so, our understanding is around mid-year.

Ming Yang: This should come out, let's say, in the next 2 months or so. Our understanding is around mid-year. Once that new cost determination is being done, there will be a renewed guidance on where the minimum price would be. At the same time, we're still monitoring in terms of how the enforcement can be done. There may be some enforcement actions that's being discussed, that hasn't taken place yet. At least for us, right, we're in a observation mode in terms of how whether enforcement happens. I mean, if there's no enforcement, we maybe need to, you know, sell at wherever the market is, right?

Speaker #3: So once that new cost determination is being done and then there will be a renewed guidance on where the minimum price would be. And then at the same time, we're still monitoring in terms of how the enforcement can be done.

Speaker #3: There may be some enforcement actions that's being discussed but that hasn't taken place yet. So at least for us, right, so we're in an observation mode in terms of how whether enforcement happens.

Speaker #3: I mean, if there's no enforcement, then we may be need to sell wherever the market is, right? I mean, at least right now, we're enforcing the price only in our sales efforts, right?

Ming Yang: I mean, at least right now we're enforcing the price on this in our sales efforts, right. Obviously that's having a negative impact on our sales volume, right. We're waiting for that to happen. Our expectation is that once the new cost determination comes out and manufacturers are now required to sell above production costs, then the market price should recover.

Speaker #3: But obviously, that's having a negative impact on our sales volume. Right? So we're waiting for that to happen. But our expectation is that once the new cost determination comes out and manufacturers are now required to sell above production costs, then the market price should recover.

Philip Shen: Okay.

Ming Yang: Yeah.

Speaker #3: So that's at least our yeah.

Philip Shen: Okay, thanks, Ming. You know, in terms of enforcement actions, you know, what could that look like? What kind of timing could that be? Do you think the probability of enforcement action is higher or lower or like greater than 50% or less than 50%? Thanks.

Speaker #2: Okay. Thanks, Ming. In terms of enforcement actions, what could that look like? And what kind of timing could that be do you think the probability of enforcement action is higher or lower?

Speaker #2: Or greater than 50% or less than 50%? Thanks.

Ming Yang: Okay. Our understanding is, rather than depending on the company's own reported cost, right? The government is just trying to have a cost model that is consistent across all the manufacturers, right, where, you know, in terms of like material cost, depreciation, labor, and things like that, right? Once that is done, then we don't know if it's gonna be one general price or there could be different price for manufacturers. That has to be determined. Once that is done, then I think there will be enforcement, or at least they will communicate how enforcement will be done.

Speaker #3: Okay. Our understanding is rather than depending on the company's own reported cost, right? So the government is trying to have a cost model that is consistent across all the manufacturers.

Speaker #3: In terms of material cost, appreciation, labor, and things like that, right? So once that is done, then we don't know if it's going to be one general price or there could be different price for manufacturers.

Speaker #3: So that's to be determined. And then once that is done, then I think there will be enforcement or at least it will communicate how enforcement would be done.

Ming Yang: Previously, right, this would be in the form of a fairly significant penalty or, in terms of, in the worst case scenario, they could revoke your manufacturing license, or shut down your electricity. There are many ways that the government could enforce, but we're yet to see that right now.

Speaker #3: Previously, right, this would be in the form of a fairly significant penalty or in terms of in the worst-case scenario, they could revoke your manufacturing license or shut down your electricity.

Speaker #3: So there are many ways that the government could enforce but we're yet to see that right now.

Philip Shen: Okay. Got it. Final question from me. Given all that, and with, you know, the reality is you guys still need to operate and participate in the market. What do you think is a practical outlook for ASPs, for, you know, Q2, Q3? What do you think your utilization rate might be in those quarters?

Speaker #2: Okay. Got it. And then final question for me. So given all that and with the reality is you guys still need to operate in and participate in the market.

Speaker #2: And so what do you think is a practical outlook for ASPs for Q2, Q3, and what do you think your utilization rate might be in those quarters?

Ming Yang: Okay. I mean, for Q2, then it will be optimistic, right? I mean, cash price is kind of in the RMB 35 to 37 range. I think some producers, if they're, they have cash issues, they might sell a little bit discount to that. There are opportunities in the futures market, for example, where you might be able to sell a little bit higher, maybe in the RMB 38 to 41 per range, depending on the contract period. We're looking at that as well. Let's say if there's no price guidance enforcement action, I think then the price range is maybe RMB 35 to 40.

Speaker #3: Okay. I mean, for Q2, then it will be optimistic, right? So, I mean, cash price is kind of in the $35 to $37 range.

Speaker #3: I think some producers if they're cash issues, they might sell a little bit discount. To that. And then there are opportunities in the futures market, for example, where you might be able to sell a little bit higher, maybe in the 38 to 41 R&B.

Speaker #3: For range, depending on the contractual period. So we're looking at that as well. So let's say if there's no price guidance and enforcement action, I think then the price range is maybe 35 to 40.

Ming Yang: If understanding if price guidance does come out, it should be in the range of 40 to 45 or maybe even higher. These are inclusive of VATs. Okay.

Speaker #3: If our understanding is if price guidance does come out, it should be in the range of 40 to 45 or maybe even higher. And these are inclusive of VATs.

Philip Shen: Okay.

Ming Yang: Yeah.

Philip Shen: Great.

Ming Yang: Yeah. Okay. Thank you.

Speaker #3: Okay.

Speaker #2: Okay.

Speaker #3: Yeah. So yeah. Okay. Thank you.

Philip Shen: Then the utilization rate, do you have a sense for Q2 and Q3 yet? Thanks.

Speaker #2: And then the utilization rate, do you have a sense for Q2 and Q3 yet? Thanks.

Ming Yang: For us or for the industry?

Speaker #3: Well, for us or for the industry?

Philip Shen: For you.

Ming Yang: Okay. For us, it will be at roughly 50% to 55%. We're maintaining utilization for now because we're kind of at a fairly optimal operating condition in terms of both quality and cost and production volume. Adjustments will generally, our experience is we'll bring short-term volatility to both quality and cost. At least we're in the short term, and we're maintaining the current production level. Obviously if the new either new price guidance or production or enforcement, if it stays below expectations, below what we would expect and price remain low, we would make further adjustments in the H2, and they're subject to demand environment as well. Q1, which is really fairly negative demand environment overall, I would say.

Speaker #2: For both.

Speaker #3: For us. It will be at roughly 50 to 55 percent. Yeah. We're maintaining utilization for now because we're kind of at a fairly optimal operating condition in terms of both quality and cost and production volume.

Speaker #3: And adjustments will generally our experience is we'll bring short-term volatility to both quality and cost. So at least we're in the short term and then we're maintaining the current production level.

Speaker #3: And obviously, if the new either the new price guidance or production or enforcement, if it stays below expectation, below what we would expect, and price remain low, then we would make further adjustments in the second half.

Speaker #3: And the subject-to-demand environment as well. And Q1 was a really fairly negative demand environment overall, I would say.

Philip Shen: Okay, Ming. Thanks very much. I'll pass it on.

Speaker #2: Okay, Ming. Thanks very much. I'll pass it on.

Ming Yang: Great. Thank you.

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

Speaker #3: Great. Thank you.

Speaker #1: Our next question comes from Alan Lau with Jefferies. Please go ahead.

Alan Lau: Yeah, thanks for taking my question. I think in terms of the sales volume and the revenue in Q1 is a bit of a surprise. Would like to know if I do the math and back the ASP in Q1 seems to be at around CNY 41 or CNY 42, ex VAT. Does it mean that the company didn't sell anything maybe after February?

Speaker #2: Yeah, thanks for taking my question. I think in terms of the sales volume and the revenue in the first quarter, it's a bit of a surprise.

Speaker #2: We'd like to know if I do the math and back the ASP in first quarter, it seems to be at around 41 or 42.

Speaker #2: So ex VAT. So does it mean that the company didn't sell anything maybe after February?

Ming Yang: I think that is the right way to look at this in terms of, yeah, we did sell a volume in January, you know, at the, you know, the high 40s inclusive VAT, right. I think it's actually our Q1 recognized ASP is higher than Q4, while if you look at market ASP is actually on average is much lower than Q4.

Speaker #3: I think that is the right the way to look at this. In terms of yeah, we did sell a volume in January. At the high 40s, inclusive VAT, right?

Speaker #3: I think you could see actually our Q1 recognized ASPs higher than Q4 while you look at market ASP is actually on average is much lower.

Ming Yang: I think the big change is really around Chinese New Year, especially after Chinese New Year, where with you know, the new policy from the State Administration for Market Regulation was that, you know, the anti-involution policy that was counted on previously, you know, to reduce capacity and enforce price was kind of disrupted. That's when we started to see price to come down fairly quickly and significantly. Once price fell below production cost, then we stopped selling to the market. The market generally in Q1 was really, you can characterize it by fairly high uncertainty. You have a number of things happening, the war in the Middle East, you know, high silver prices.

Speaker #3: And then Q4. And I think the big change is really around Chinese New Year, especially after Chinese New Year where with the new policy from the state administration of market regulators was that the anti-evolution policy that was counted on previously to reduce capacity and enforce price was kind of disrupted, right?

Speaker #3: So that's when we saw start to see price to come down fairly quickly and significantly, right? So once price fell below production cost, then we stopped selling to the market.

Speaker #3: Yeah. And the market generally in the first quarter was really—you can characterize it by fairly high uncertainty, right? You have a number of things happening.

Speaker #3: The war in the Middle East, high silver prices, right? That led to a lot of uncertainty for the downstream. Actually, where they were seeing fairly significant increase in their production costs at the same time with difficult for them to pass through all that increase while that's having a fairly negative impact to the Chinese yen market.

Ming Yang: That led to a lot of uncertainty for the downstream. Actually, you know, they're, they were seeing fairly significant increase in their production costs. At the same time, it was difficult for them to pass through all that increase. Well, that's having a fairly negative impact to the Chinese end market as well. These combined, they really led to a fairly low industry transaction volume for polysilicon in Q1.

Speaker #3: As well. So these combined really led to a fairly low industry transaction volume for polysilicon in the first quarter.

Alan Lau: Understood. I recall before March-

Speaker #2: Understood. But I recall before March.

Anita Zhu: Let me just add a little.

Alan Lau: Sorry.

Ming Yang: Okay, Anita, go ahead.

Speaker #3: I think it's probably out of.

Speaker #2: Sorry. Yeah.

Speaker #3: Okay. Anita, go ahead.

Anita Zhu: Oh, no. I was just gonna say, let me add a little bit more to that. In terms of the industry level inventory, it has accumulated to a relatively high level. I would say, in the Q1 has been above 500,000 metric tons, and it's now nearly 600,000 metric tons. I would say tier one manufacturers held roughly at least 3 months of stock. That's why that led to a wait-and-see attitude from the downstream buyers. For us especially, we wanted to adhere to the Chinese authority self-regulation guidelines. We were relatively reluctant to engage in below-cost sales. We took the wait-and-see approach to see further implementation from the national policies level.

Speaker #4: Oh, no, no, no. I was just going to say, let me add a little bit more to that. So, in terms of the industry-level inventory, it has accumulated to a relatively high level.

Speaker #4: So, I would say in the first quarter, it has been above 500,000 metric tons, and it's now nearly 600,000 metric tons. So, I would say Tier 1 manufacturers held roughly at least three months of stock.

Speaker #4: So that's why that led to wait-and-see attitude from the downstream buyers. And for us especially, we wanted to adhere to the Chinese authority self-regulation guidelines.

Speaker #4: So we were relatively reluctant to engage in below-cost sales. So we took the wait-and-see approach to see for the implementation from the national policies level.

Alan Lau: Understood. Sorry, how much did the tier one producers are holding in terms of inventory? Is it 500,000?

Speaker #2: Understood. So sorry. How much are the Tier 1 producers holding in terms of inventory? Is it 500,000?

Anita Zhu: Like in total?

Alan Lau: Total is CNY 500,000.

Speaker #4: Like in total? Yeah. Around that.

Anita Zhu: Yeah, around that.

Alan Lau: How much is in tier one inventory?

Anita Zhu: Yeah, including the downstreams as well.

Speaker #2: So, how much is in Tier 1?

Speaker #4: Yeah. Including the downstreams as well.

Alan Lau: Oh, including wafer players. Okay.

Speaker #2: Oh, including wafer-based. Okay. So.

Ming Yang: Including wafer.

Speaker #3: Including inventory.

Alan Lau: I recall actually in January and February, actually demand was quite good because downstream players are having a rush export because to catch the VAT deadline. I wonder if why the company didn't sell more in January or February, maybe, right. 4,000 tons seems to be just 10% of the production, right?

Speaker #2: So I recall, actually, in January and February, demand was quite good because downstream players were having a rush export to catch the VAT deadline.

Speaker #2: So wonder if why the company didn't sell more in January or February, maybe. Because 4,000 tons seems to be just 10% of the production, right?

Ming Yang: Okay. I think let me add more color and then maybe Anita can feel free to add more. I think what happened was that there's fairly strong demand for the modules, especially for the European market. What happened was these integrated manufacturers especially were selling mostly their existing inventory of modules. They were also producing, but primarily I would call it using their own inventory, right? They had some inventory of poly and materials. I think the uncertainty in cost actually, especially after Chinese New Year led them to really hold off or delay their procurement of polysilicon. I think because of especially uncertainty related to demand after 1 April, right?

Speaker #3: Okay. I think let me add more color and then maybe Anita can feel free to add more. So I think what happened was that there's fairly strong demand for the modules, especially for the European market.

Speaker #3: But what happened was these integrated manufacturers, especially were selling mostly their existing inventory of modules. And then they were also producing, but primarily I would call it using their own inventory, right?

Speaker #3: They had some inventory of poly and materials, and I think the uncertainty in cost, actually especially after Chinese New Year, led them to really hold off or delay their procurement of polysilicon.

Speaker #3: I think because of especially uncertainty related to demand after April 1st. Right? And then with the war, that made the even a little bit worse.

Ming Yang: Then with the war that made the even a little bit worse. Yeah. I would say the market probably had reasonable amount of transactions in January, but really February and March it was lower. Then you have, you know, this expectation of falling prices, especially for polysilicon because of the points and inventory issues. That made it even, probably even worse or a little bit worse in terms of, you know, the customers, right, they buy when prices are rising, but they purchase when prices are falling.

Speaker #3: Yeah. So I would say the market probably had reasonable amount of transactions in January, but really February and March was lower. And then you have this expectation of falling prices, especially for polysilicon because of the polysilicon inventory.

Speaker #3: Issues. So that made it even you call it even worse. So a little bit worse in terms of the customers, right? They buy when prices are rising, but they late purchase when prices are falling.

Alan Lau: Understood. In terms of the price outlook, I think I just wanna have a follow-up on Philip's question. Like approximately when you think there will be a guideline coming from the authority? Like when you think or like is it within a month or a quarter that price will start to rebound or like what is the timeline there? Is there regular meetings with the authority to discuss the details on the enforcement? Or like what is the status now?

Speaker #2: Understood. So in terms of the price outlook, I think I just want to have a follow-up on Phil's question. So approximately when do you think there will be a guideline coming from the authority?

Speaker #2: When do you think, is it within a month or a quarter, that price will start to rebound, or what is the timeline there? And is there a regular meeting with the authority to discuss the details on the enforcement, or what is the status now?

Ming Yang: Our understanding, it should be around June. Right now they're redoing their the cost model for all the different producers, and then trying to make an alignment. Once that cost determine is done and then the next step will be updated price guidance.

Speaker #3: Our standing understanding it should be around June. And then right now, they're redoing their cost model for all the different producers. And then trying to make an alignment.

Speaker #3: So once that cost determination is done, then the next step would be an updated price guidance.

Alan Lau: Understood. To my understanding that will be more like an enforcement of the Price Law.

Speaker #2: Understood. So to my understanding, that will be more like an enforcement of the price law, which means everyone should sell above their cost. But the previous acquisition incentives are is it basically rejected or it's still yeah.

Ming Yang: Yeah

Alan Lau: everyone should sell above their cost. The previous acquisition incentives, is it basically rejected or it's still, yeah, or it's still alive? Like any update on that?

Speaker #2: Or it's still alive for? What's the any update on that?

Ming Yang: There's no update to that as of now. There's no new guidance from the government.

Speaker #3: There's no update to that. That's something else. There's no new guidance from the government. Yeah. So I mean, they don't say you can't do anything.

Alan Lau: Okay.

Alan Lau: Yeah.

Alan Lau: Okay.

Alan Lau: Yeah.

Alan Lau: They don't say you can do or you can't do.

Jessie Zhao: I think we're open to different.

Speaker #4: I think we're open to different, yeah. I would say we're open to different kinds of proposals, but we're not 100% sure how that might unfold.

Ming Yang: Yeah.

Jessie Zhao: Yeah. I would say we're open to different kinds of proposals, but we're not 100% sure how that might unfold. We're engaging in conversations now to discover or to test different sorts of solutions. Anything that would benefit the industry as a whole and for manufacturers as well, we're willing to try it out or at least try to come to a solution. Like concerted efforts toward that.

Speaker #4: But we're engaging in a conversation now to discover or to test different sorts of solutions. So anything that would benefit the industry as a whole and for manufacturers as well, we're willing to try it out or at least try to come to a solution.

Speaker #4: But considered efforts toward that.

Ming Yang: I would say that the general policy is the government is positive and promoting mergers and acquisition to call it for more consolidation, right? In terms of how that might lead to actual policies or actions, that's still yet to be seen.

Speaker #3: I would say that the general policy is the government is positive and promoting mergers and acquisitions to call it for more consolidation. Right? But in terms of how that might lead to actual policies or actions, that's still yet to be seen.

Alan Lau: Understood. Wonder if you are seeing any uptick of demand recently because demand I think was quite poor in past couple of months. Wonder if you are seeing any recovery in demand?

Speaker #2: Understood. So, I wonder if you are seeing any uptake in demand recently, because demand, I think, was quite poor in the past couple of months.

Speaker #2: But I wonder if you are seeing any recovery in demand?

Ming Yang: I would say on the module side, the end markets certainly right now Q2 is actually trending to look better than Q1. We shall see. Then definitely I think downstream inventory is coming down. That's also a good sign.

Speaker #3: I would say on the module side and market, certainly right now Q2 is actually trending. To look better than Q1. So we shall see.

Speaker #3: And then definitely, I think downstream inventory is coming down. So that's also a good sign.

Alan Lau: Understood. Yeah. Poly prices are also bottoming too. Would like to know if the company. Because the sales was very low at Q1. Not sure if the strategy is the same in Q2. If that's the case, would like to know if Has the company considered maintaining a even lower utilization rate? Because the company was also running at more than 50%. I recall company used to be running at 30%. Any consideration behind that, running the utilization rate at a relatively high level?

Speaker #2: Understood. Yeah. Poly prices are also bottoming too. And so we would like to know if the company because the sales was very low at first quarter, not sure if the strategy is the same in the second quarter.

Speaker #2: If that's the case, then we'd like to know if has the company considered maintaining an even lower utilization rate because the company was also running at more than 50%.

Speaker #2: But I recall the company used to be running at 30%. So any consideration behind that, running the utilization rate at a relatively high level?

Ming Yang: I would say that the general framework for the company is, we're monitoring the developments of the Price Law especially. If the companies do follow the Price Law and all are required to sell above production cost, we're fairly confident on where we are in terms of industry positioning, right? We should regain market share. It'll be a function of demand as well. If that's the case, we might maintain the current utilization level. Let's say if it turns out to be more negative in terms of, especially if prices remain where it is right now, right? We will consider a lower utilization rate.

Speaker #3: I would say that the general framework for the company is we're monitoring the developments of the price law, especially. So, if the company is due to follow the price law, all are required to sell above production cost.

Speaker #3: And we're fairly confident on where we are in terms of industry positioning. Right? And then we should regain market share. So and it will be a function of demand as well.

Speaker #3: So if that's the case, then we might maintain the current utilization level. But let's say if it turns out to be more negative in terms of especially if prices remain where it is right now.

Speaker #3: Right? Then we would consider a lower utilization rate.

Alan Lau: Okay, understood. Yeah, I'll stop and pass back. Thank you. Thank you for taking my question.

Speaker #2: Okay. Understood. So yeah, I'll stop and pass on. Thank you. Thank you for taking my question. I need to make.

Ming Yang: Okay, okay. Okay. Thanks, Alan.

Speaker #3: Okay. Okay. Okay. Thanks, Alan.

Operator: Our next question comes from Mengwan Wang with Goldman Sachs. Please go ahead.

Speaker #1: Our next question comes from Meng Wen Wang with Goldman Sachs. Please go ahead.

Mengwan Wang: Yeah, hello. Thanks for taking my question. My question is about utilization as well. My understanding now is that our current strategy is to maintain over 50% utilization and stop selling to external customer sets below cost pricing, right? This is based on the assumption of potential further regulation to drive poly price higher to RMB 40 per kilo and above. Is that correct?

[Analyst] (Goldman Sachs): Yeah, hello. Thanks for taking my question. My question is about utilization as well. My understanding now is that our current strategy is to maintain over 50% utilization and stop selling to external customer sets below cost pricing, right? This is based on the assumption of potential further regulation to drive poly price higher to RMB 40 per kilo and above. Is that correct?

Speaker #4: Yeah. Hello. Thanks for taking my question. My question is about utilization as well. So my understanding now is that our current strategy is to maintain over 50% utilization and stop selling to external customers that's below cost pricing.

Speaker #4: Right? So this is based on the assumption of potential for the regulation to drive poly price higher to 40 renminbi per kilo and above.

Speaker #4: Is that correct?

Ming Yang: That's the generally the right thinking. Yeah, it's kind of a scenario, right? There are two major scenarios where if the government does what it says, right, enforce Price Law, right, penalties and all that, and then have the manufacturers sell above cost, then we would maintain at the current utilization. On the other hand, if unfortunately, Price Law isn't being enforced for whatever reason, right, and the manufacturers continue to sell below cost, then we will lower our utilization.

Speaker #3: That's the generally the right thinking. So it's kind of a scenario. Right? So the two major scenarios where if the government does what it says, right, enforce price law, right, penalties, and all that, and then have the manufacturer sell above cost, then we would maintain at the current utilization.

Speaker #3: On the other hand, if unfortunately, price law hasn't been enforced for whatever reason, right, and the manufacturers continue to sell below cost, then we will lower our utilization.

Mengwan Wang: So if we assume a scenario like no policy kicking and the pricing is likely to stay at current level, then what's our sales strategy and production strategy in Q2 and in H2? Say, is there any guidance on the utilization rate in this scenario? On top of the utilization guidance, will we follow the rest of the industry to sell product at below cost pricing, or we will continue to stop selling at the lower pricing level and continue to pile up the inventory and then wait for the sector to turn around?

[Analyst] (Goldman Sachs): So if we assume a scenario like no policy kicking and the pricing is likely to stay at current level, then what's our sales strategy and production strategy in Q2 and in H2? Say, is there any guidance on the utilization rate in this scenario? On top of the utilization guidance, will we follow the rest of the industry to sell product at below cost pricing, or we will continue to stop selling at the lower pricing level and continue to pile up the inventory and then wait for the sector to turn around?

Speaker #4: So if we assume a scenario like no policy kicking and a pricing is way to stay at the current level, then what's our sales strategy and production strategy in Q2 and in the second half?

Speaker #4: Say what's is there any guidance on the utilization rate in this scenario? And on top of the utilization guidance, will we follow the rest of the industry to sell product at below cost pricing, or we will continue to stop selling at the lower pricing level and continue to pile up the inventory and then wait for the sector turnaround?

Ming Yang: Okay. Right. I mean, if we assume, right, the government, despite all their rhetoric, nothing happens, right? I think that's unlikely because, I mean, there's a lot of pressure on MIIT right now as well. Anyway, let's assume that happens. Obviously we would lower our utilization and then start to sell at close to market pricing, right? Whatever it takes to move volume. Yeah. I mean, then we would, you know, compete with our peers, right? Obviously, we have a strong balance sheet, so I mean, we expect we would be one of the last survivors, if not the last survivor, right?

Speaker #3: Okay. So right. So I mean, if we assume, right, the government, despite all their rhetoric, nothing happens. Right? And I think that's unlikely because I mean, there's a lot of pressure on MIIT right now as well.

Speaker #3: But anyway, let's assume that happens. And then obviously, we would lower our utilization and then start to sell at close to market pricing. Right?

Speaker #3: Whatever it takes to move on. Yeah. So I mean, then we would compete with our peers. Right? And then obviously, we have a strong balance sheet.

Speaker #3: So I mean, we expect we would be one of the last survivors if not the last survivor. Right? And then we would actually in, say, two or three years, we will see fairly significant exit.

Ming Yang: We would actually in, say, two or three years, we will see fairly significant exits of the industry, where then we have a market-based, you can call it capacity exit or consolidation right then. The company will do fairly well after that. Yeah. So it's a trade-off. Yeah.

Speaker #3: Of the industry where then we have a market-based you can call it a capacity exit or consolidation. Right? And then the company will do fairly well after that.

Speaker #3: Yeah. So it's a trade-off. Yeah.

Mengwan Wang: That's clear. I recall you just mentioned like you expect the policy will kick in in June, and that's the month where we would expect a potential price hike. If to reconcile your expectations, can we assume like we will keep utilization at 50% above till June and then start selling at close to market pricing if no policy kick in?

[Analyst] (Goldman Sachs): That's clear. I recall you just mentioned like you expect the policy will kick in in June, and that's the month where we would expect a potential price hike. If to reconcile your expectations, can we assume like we will keep utilization at 50% above till June and then start selling at close to market pricing if no policy kick in?

Speaker #4: That's clear. So I recall you just mentioned you expect the policy will kick in in June and that's the month where we would expect a potential price hike.

Speaker #4: So if to reconcile your expectations, can we assume we will keep utilization at 50% above till June and then start selling at close to market pricing if no policy kicking?

Ming Yang: Exactly. I think that's the right assumption, yes. If there's no policy, right, if prices remain low, then we would be at a reduced utilization. If the government does enforce, Price Law, right, and then we would maintain at least the current utilization.

Speaker #3: Exactly. I think that's the right assumption. Yes. So if there's no policy, right, if price remains low, then we would be able to reduce utilization.

Speaker #3: And if the government does enforce price law, right, and then we would maintain at least the current utilization.

Mengwan Wang: June is the month we are waiting for any policy to kick in, right?

[Analyst] (Goldman Sachs): June is the month we are waiting for any policy to kick in, right?

Speaker #4: So June is the month we are waiting for any policy to kick in. Right? And if no, we will switch our strategy.

Ming Yang: Uh-

Mengwan Wang: And if not-

[Analyst] (Goldman Sachs): And if not-

Ming Yang: I think-

Mengwan Wang: We will switch our strategy.

[Analyst] (Goldman Sachs): We will switch our strategy.

Ming Yang: In terms of communication-

Mengwan Wang: I mean, in terms of, yeah.

[Analyst] (Goldman Sachs): I mean, in terms of, yeah.

Speaker #3: I think in terms of communication. With the government. Yeah. Go ahead, Anita.

Ming Yang: With the government. Yeah. Go ahead, Nina.

Mengwan Wang: Oh, no worries. No, no, it's fine.

Anita Zhu: Oh, no worries. No, no, it's fine.

Speaker #4: Oh, no worries. No, no. It's fine.

Ming Yang: Yeah. I understand June is the timeline of the new government policy.

Speaker #3: Yeah. I understand June is the timeline. Of the new government policy.

Mengwan Wang: Sure. That's clear. My final question is about cash costs. Are there any guidance about our cash costs in Q2 and in the H2 of 2026?

[Analyst] (Goldman Sachs): Sure. That's clear. My final question is about cash costs. Are there any guidance about our cash costs in Q2 and in the H2 of 2026?

Speaker #4: Sure. That's clear. And my final question is about cash costs. Are there any guidance about our cash costs in the second quarter and in the second half of 2026?

Ming Yang: I think based on our current, call it utilization, production level and the current silicon metal cost and material cost, for example, we're expecting our cash cost to be in line with Q2 in terms of RMB terms and trending slightly lower over the next quarters. A fairly steady cost structure.

Speaker #3: I think based on our current, you call it, utilization, production level, and the current silicon metal costs and material costs, for example, we're expecting our cash costs to be in line with Q2 in terms of R&B terms and trending slightly lower over the next quarters.

Speaker #3: So a fairly steady cost structure.

Mengwan Wang: Yeah, sure. Thanks. That's all from me. I will pass it on. Thank you.

[Analyst] (Goldman Sachs): Yeah, sure. Thanks. That's all from me. I will pass it on. Thank you.

Speaker #4: Yeah. Sure. Thanks. That's all from me. I will pass it on. Thank you.

Ming Yang: Okay. Thank you.

Speaker #3: Okay. Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Jessie Zhao for any closing remarks.

Speaker #1: This concludes our question and answer session. I would like to turn the conference back over to Jessie Zhao for any closing remarks.

Jessie Zhao: 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 have a awesome day. Goodbye.

Speaker #5: 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 have an awesome day.

Speaker #5: Goodbye.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Q1 2026 Daqo New Energy Corp Earnings Call

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