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Edited Transcript of DQ earnings conference call or presentation 13-Mar-19 12:00pm GMT

Q4 2018 Daqo New Energy Corp Earnings Call

Wanzhou, Chongqing Mar 19, 2019 (Thomson StreetEvents) -- Edited Transcript of Daqo New Energy Corp earnings conference call or presentation Wednesday, March 13, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Kevin He

* Longgen Zhang

Daqo New Energy Corp. - CEO & Director

* Ming Yang

Daqo New Energy Corp. - CFO

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Conference Call Participants

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* Gary Zhou

Crédit Suisse AG, Research Division - Research Analyst

* Philip Shen

Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Daqo New Energy Fourth Quarter and Fiscal Year 2018 Results Conference Call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Kevin He, Investor Relations. Please go ahead.

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Kevin He, [2]

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Hello, everyone. I'm Kevin He, the Investor Relations of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the fourth quarter and fiscal year of 2018, which can be found on our website at www.dqsolar.com.

To facilitate today's conference call, we have also prepared a PPT presentation for your reference. Today, attending the conference call we have Mr. Longgen Zhang, our Chief Executive Officer; and Mr. Ming Yang, our Chief Financial Officer. The call today will feature an update from Mr. Zhang on market and operations, and then Mr. Yang will discuss the company's financial performance for the fourth quarter and the fiscal year of 2018. 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 of 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 containing any forward-looking statements. Further information regarding these and other risks is included in the reports to -- or documents we have filed with or furnished to the Securities and Exchange Commission. These statements only reflect our current and the preliminary view as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today's call is as of today, and we undertake no duty to update such information, except as required under applicable law. Also during the call, we will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into U.S. dollars solely for the convenience of the audience.

Without further ado, I now turn the call over to Mr. Zhang, our CEO.

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Longgen Zhang, Daqo New Energy Corp. - CEO & Director [3]

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Hello, everyone, and thank you for joining us today for our earnings call. I would like to thank our entire team for their hard work and dedication for delivering another outstanding quarter in which we successfully completed the Phase 3B project and ramped production up to full capacity by the end of November 2018, 3 months ahead of schedule.

During the quarter, we achieved a new record both in production volume and sales volume, which were 7,301 metric tons and 7,030 metric tons, respectively. With the successful ramp up of our new Phase 3B facility and efforts of our operating team, both production volume and cost reduction targets were achieved with excellent results. During the fourth quarter of 2018, we successfully reduced our total production cost to $7.94 per kg, and our cash cost was lowered to $6.64 per kg, representing our lowest cost structure in history. With our Xinjiang production facilities now running at full capacity, we expect to produce approximately 8,500 to 8,700 metric tons of polysilicon during the first quarter of 2019. Furthermore, with reduction in unit utility usage, operating leverage and other cost savings, we expect to further reduce our total production cost approximately $7.50 per kg. In addition, we plan to contact -- conduct capacity debottlenecking project to gradually upgrade several old CVD furnaces with improved technology, allowing us to increase production capacity by additional 5,000 metric tons. We plan to start this project in the mid-March and complete it by the end of June. The debottlenecking project will have limited impact on production volume; therefore, we expect to produce 7,600 to 7,800 metric tons of polysilicon during the second quarter of this year. Subsequent to completion of the debottlenecking project, we anticipate the company will reach total annual production capacity of 35,000 metric tons. The Phase 3A (sic) [4A] capacity expansion project is progressing smoothly and will increase our production capacity to 70,000 metric tons by the end of the first quarter of 2020, with an even lower cost structure once fully ramped up. In February 2019, we received approval from Bank of China for a CNY 400 million 5-year fixed asset capital project loan and a CNY 50 million working capital loan.

The company has obtained a total of CNY 830 million additional bank loans, including the loans from the Bank of China and the credit facilities from other domestic Chinese banks to support of -- to support our capacity expansion and working capital needs. These loans will support capital expenditure for our Phase 3 -- Phase 4A project and enable us to complete it on schedule.

2018 was a challenging but also promising year for solar PV industry. The policies issued by the Chinese government on March -- on May 31, 2018, immediately impacted the market and resulted in a significant price decline across the entire value chain. However, this fall in price significantly stimulated demands from markets outside of China, especially where grid parity has already been reached. The global solar PV market recovered rapidly in the following months and has since achieved equilibrium again, even with very limited contribution from China, the world's largest individual solar PV market. A draft of China's solar policy for 2019 has already been released, with the final version yet to be confirmed. The draft indicates a new incentive program based on a fixed subsidy amount rather than a fixed quota system as was previously done. The fixed subsidy amount is expected to be in the range of approximately CNY 3 billion and could cover approximately 30 to 35 gigawatts of installations. Poverty alleviation projects will be subsidized and funded separately. In addition, the market anticipates some grid-parity projects which will not require central government subsidies. Based on industry research, China's installation target for 2019 is anticipated to be approximately 40 to 45 gigawatts, but there could be some variations in the final version of China's policy in 2019. Grid parity and cost reduction will continue to play a key role in driving global demand from developed markets, such as Europe and the U.S, to developing markets like India, South Asia, Africa, South America. We expect global solar installations in 2019 to be approximately 120 to 140 gigawatts. We believe demand for polysilicon, which is the key ultra-pure raw material for crystalline-silicon solar PV module, will keep growing as solar PV becomes more and more competitive compared to other energy sources. We believe the current market challenges are temporary and could -- should be resolved during the second half of 2019, especially when demand and installation from China recovers. Looking forward, we believe the solar PV industry has become much stronger and increasingly independent of policies and is expected to grow sustainably over the long term with better stability. The pace of new capacity expansion within the polysilicon industry will smooth out going forward. As a leading polysilicon manufacturer, we believe Daqo New Energy is ideally positioned to be -- to benefit from this fast-growing market and will continue to outperform its peers with lower cost and better quality. Outlook and guidance for this year. The company expects to produce approximately 8,500 metric tons to 8,700 metric tons of polysilicon and sell approximately 8,400 metric tons to 8,600 metric tons of polysilicon to external customers during the first quarter of 2019.

For the full year of 2019, the company expects to produce approximately 37,000 tons to 40,000 metric tons of polysilicon, inclusive of the impact of the company's annual facility maintenance. This outlook reflects Daqo New Energy's current and the preliminary view as of the day of this press release and may be subject to change. The company's ability to achieve these projections is subject to risks and uncertainties.

With that, I will turn the call over to Ming, our CFO, who will go over our financials for the quarter. Ming, please go ahead.

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Ming Yang, Daqo New Energy Corp. - CFO [4]

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Thank you, Longgen. And good day, everyone. Thank you for joining our call today. Before I begin, I'd like to remind everyone that since the company discontinued its Chongqing business subsidiary in the third quarter of 2018 the operational results of the Chongqing business have been excluded from the company's financial results from continuing operations and have been separately presented under discontinued operations.

Retrospective adjustments to the historical statements have also been made to provide a consistent basis of comparison for the financial results. Going forward, the company will focus all of its resources and expertise on its core polysilicon manufacturing business.

For the fourth quarter of 2018, revenues from continuing operations were $75.6 million compared to $67.4 million in the third quarter of 2018. The sequential increase in revenue was primarily due to higher polysilicon sales volume, partially offset by lower ASPs. Gross profit was $16.9 million compared to $12.8 million in the third quarter of 2018. Gross margin was 22.4% compared to 19.1% in the third quarter of 2018. The sequential increase was primarily due to lower average polysilicon production cost, partially offset by lower ASP.

Selling, general and administrative expenses were $8.2 million for the quarter compared to $7.6 million in the third quarter of 2018.

R&D expenses were approximately $1 million for the quarter compared to $1.4 million in the third quarter of 2018. R&D expenses could vary from period to period and reflect R&D activities that took place during the quarter.

Other operating income was $12.5 million for the quarter compared to $0.1 million in the third quarter of 2018. Other operating income was mainly composed of unrestricted cash incentives that the company received from local government authorities, the amount of which vary from period to period. During the fourth quarter of 2018, the company received national innovation and technology development brands related to PV silicon materials as well as other government's subsidiaries and incentives.

Income from operations was $20.3 million compared to $4 million in the third quarter of 2018. Operating margin was 26.8% compared to 5.9% in the third quarter of 2018. Interest expense was $1.9 million compared to $2.1 million in the third quarter of 2018.

EBITDA from continuing operations for the quarter was $29.5 million compared to $14.8 million in the third quarter of 2018. EBITDA margin was 39.1% compared to 22% in the third quarter of 2018. During the third quarter of 2018, the company decided to discontinue its solar wafer manufacturing operation. Results of discontinued operation of the previous quarter and comparative quarters were presented accordingly.

Loss on discontinued operations was $5.7 million in the fourth quarter of 2018 compared to $22.4 million in the third quarter of 2018. Net income attributable to Daqo New Energy shareholders was $11.4 million in the fourth quarter of 2018 compared to net loss attributable to Daqo New Energy shareholders of $18.3 million in the third quarter of 2018. Earnings per basic ADS was $0.86 in the fourth quarter of 2018 compared to loss per basic ADS of $1.39 in the third quarter of 2018.

Now I will discuss the balance sheet. For the -- at the -- as of December 31, 2018, the company had $94 million in cash and cash equivalents and restricted cash compared to $113.2 million as of September 30, 2018.

As of December 31, 2018, the accounts receivable balance was $1.2 million compared to $1,000 as of September 30, 2018. Most of our polysilicon sales were made with customer payments prior to product delivery and without payment. We continue to manage our accounts receivables prudently.

As of December 31, 2018, the note receivables balance was $8.1 million compared to $22.5 million as of September 30, 2018. As of December 31, 2018, total bank borrowings were $171.5 million, of which $133.3 million were long-term borrowings compared to total borrowings of $165.3 million, including $119.4 million of long-term borrowings as of September 30, 2018.

Our bank loan to asset ratios stood at a low of 0.20. For the 12 months ended December 31, 2018, net cash provided by operating activities was $95.6 million compared to $142.7 million in the same period of 2017. For the 12 months ended December 31, 2018, net cash used in investing activities was $164.7 million compared to $67.9 million in the same period of 2017. The net cash used in investing activities in 2018 and 2017 was primarily related to the capital expenditure on our Xinjiang's Phase 3B and Phase 4A polysilicon expansion projects. For the 12 months ended December 31, 2018, net cash provided by financing activities was $86.7 million compared to net cash used by financing activities of $37.4 million in the same period of 2017. The company completed a follow-on offerings of $110 million in April of 2018.

Now I will discuss full year 2018 results. For the year of 2018, revenue from continuing operations was $301.6 million compared to $323.2 million in 2017. The decrease in revenue was primarily due to lower average selling prices, partially offset by higher polysilicon sales volume.

Gross profit for the full year of 2018 was $98.1 million compared to $144 million in 2017. Gross margin was 32.5% in 2018 compared to 44.6% in 2017. The decrease in gross profit and gross margin was primarily due to lower polysilicon ASPs.

SG&A expenses were $27.1 million in 2018 compared to $60 million in 2017. The increase in SG&A expenses was primarily due to an increase of noncash share-based compensation costs related to the company's 2018 share incentive plan.

R&D expenses were $2.7 million in 2018 compared to $0.7 million in 2017. R&D expenses vary from period to period to reflect the R&D activities that took place during such period. Operating income was $13.2 million in 2018 compared to $3.8 million in 2017, which mainly consisted of unrestricted cash incentives that the company received from local government authorities, which vary from period to period at the discretion of the government.

Income from operations was $81.5 million in 2018 compared to $131.1 million in 2017. Operating margin was 27% in 2018 compared to 40.6% in 2017. Interest expense was $10.8 million in 2018 compared with $16.3 million in 2017.

Net income attributable to Daqo New Energy shareholders was $31.1 million in 2018 compared to $92.8 million in 2017. Earnings per basic ADS was $3.06 in 2018 compared to $8.76 in 2017.

Adjusted net income non-GAAP attributable to Daqo New Energy shareholders was $71.6 million in 2018 compared to $99.5 million in 2017. Adjusted earnings per basic ADS non-GAAP were $5.74 in 2018 compared to $9.38 in 2017. This concludes our prepared remarks.

We will now like to turn the call over to the operator to begin the Q&A session. Operator, please begin.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Philip Shen of Roth Capital.

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Philip Shen, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [2]

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The first one I'd like to explore is, for Q4 you reported $75.6 million of revenue. But if you take the volume of shipments times the average ASP for the quarter, I think we get to $68 million. So can you help us understand the difference in that revenue? Because I think wafer, you guys recognized with no -- as discontinued operation now. So the wafer revenue, I'm guessing is not a part of that revenue number?

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Ming Yang, Daqo New Energy Corp. - CFO [3]

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So good to hear from you, and thanks for joining our call. So as we said before, so in the third quarter, we discontinued our Xinjiang business subsidiary, and then the operational results of Chongqing is now excluded. And so some of the revenue that we recognized in Q4 has to do with revenue and financial adjustments related to the continuing and discontinuing operations and including some of the project revenue recognition and property allocation. So for example, when we shut down our Chongqing subsidiary, it still had, for example, polysilicon ingots and polysilicon blocks. Now these were -- so in terms of internal transfer but without revenue recognized. But most of the profit and revenue should have gone to Xinjiang. Now after the wind down then we sold some of these ingots and blocks, then the revenue and the profitability would go to the Xinjiang, and that happened in the fourth quarter. So that's why you're still seeing the difference between the sales volume and the ASP, primarily.

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Longgen Zhang, Daqo New Energy Corp. - CEO & Director [4]

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Yes, the difference around is $7 million?

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Ming Yang, Daqo New Energy Corp. - CFO [5]

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Yes, right.

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Philip Shen, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [6]

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Okay. That's helpful. So on a go-forward basis, we probably will not see that. Is that a fair thing to say? I'm guessing you guys still got that inventory?

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Ming Yang, Daqo New Energy Corp. - CFO [7]

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Yes. We would not expect that starting in 2019.

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Philip Shen, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [8]

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Okay. And what kind of margin did you get on the ingots and blocks?

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Ming Yang, Daqo New Energy Corp. - CFO [9]

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I don't have the...

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Longgen Zhang, Daqo New Energy Corp. - CEO & Director [10]

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If we exclude that $7 million, you can use it to calculate; and the gross margin is around like 17%, right, our actual gross margin 18%.

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Philip Shen, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [11]

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Yes. We can calculate using your numbers. And then also on Q4, you guys had other income of about $12.5 million, which is bigger than I think you guys have had in the past. So can you talk just about what -- how did you guys get that for the quarter? And then I know you said in your prepared remarks that, that can vary. But you expect to get that kind of benefit in -- any time in 2019? Is that something we should actually factor into our models? Or was this more of a one-time $12.5 million benefit for Q4?

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Longgen Zhang, Daqo New Energy Corp. - CEO & Director [12]

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Philip, let me answer that question. Basically, if you look at the history, every -- I think, Q4 we've got some -- the subsidy -- I think pay back -- the government pay back some tax refund, okay. Basically, in October, we received around USD 11 million from local governments, which is we paid the tax -- income tax, value-add tax in 2017. That tax belongs to local governments and is supposed to back to us. That's we have contract signed with the local government in 2015. So basically that would occur every year until 2020. Is that clear?

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Philip Shen, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [13]

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Okay. I think, yes -- I think this is the biggest -- I'm looking through the Q4 past -- since 2015. It definitely the biggest one.

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Longgen Zhang, Daqo New Energy Corp. - CEO & Director [14]

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Yes, 2017, we paid, I think, big amount of tax, value -- VAT and all those, so refund in 2018. Then this year, we got refund from 2018 figure. The figure is not decided.

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Ming Yang, Daqo New Energy Corp. - CFO [15]

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And let me follow up on what Longgen said. Because of the local government budget and fiscal year and planning, so most likely -- most of the government incentives that we received from government will generally occur in Q4 -- would generally occur in Q4. And then we also apply for, for example, technology grants and technology incentives. For example, this time we happened to receive a pretty significant amount related to R&D for PV silicon materials from a national technology innovation grant. So we continue to apply for these projects from time to time. And when these awards are given to us, then we will recognize those as well.

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Philip Shen, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [16]

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Okay, great. Both of those responses are very helpful. Shifting gears to kind of some more big picture perspective. Can you talk about how you guys see the polysilicon capacity ramping up on a -- from -- for the industry and competitors in Q1, Q2? We believe that it could be -- capacity in Q1 or production in Q1 could be up 40% year-over-year relative to last year given all the expansions that we're seeing. Can you comment on kind of that expansion that you see ahead? And then also how much at this current pricing level capacity could possibly exit the landscape? And then we'll -- after that maybe we'll shift to demand.

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Longgen Zhang, Daqo New Energy Corp. - CEO & Director [17]

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Okay. Philip, I think it's a good question. Basically, I think it's a lot of information data you see slides. And if you look the new capacity, I think we are the first one -- I think the 3B ramp up of the production -- full production. Then other people most, I think, are starting production, like Tongwei. I'm not going to answer specific, okay. They're going to ramping up maybe on the Q2 of this year. Then other may be ramping up in Q3. So basically, first of all, it's not all capacity were fully expected running this year. But definitely, I think for next year, yes, a lot of new capacity will be coming. But total added together, if you can see that, I think even this year I think the good quality -- better quality and lower cost may be is around like 270,000 tons for this year. So basically, I'm not saying demand side, just say production side, I think, the domestic high -- good-quality product is not too much there. For example -- I can [say] an example. In Q4, our monosilicon supply is around 61%. So if you look our gross margin, our monosilicon price ASP is around like $10, and the multi is around $6.30 or whatever. Our ASP is around like -- renminbi is around like -- U.S. dollar may be around like $9.50. So we see Q1 we will get more improved on gross margin. The reason is because, first of all, the monosilicon percentage will increase to around 70% -- 78%. Then we don't see the monosilicon price go down because we think it's already lower, right now $10, because a lot of people -- actually, the cost is probably about that, even the foreign producer. So then on that side, yes, I think on the multi-silicon side, all the supply situation is coming, okay. We got the pressure. But we still can -- because of the quality, today we're still selling about $9 per kg. So basically from our side, we still very optimistic. The reason is because we see the Chinese, I think, new policy is going to installation in more detail. And in the second half of this year, we see the good picture there. Secondly is the gold market is there. And right now, the downstream, if you look at the module price for now, renminbi, the foreign currency may be around like U.S. dollar $0.25 -- $0.26 on the module. It's very lower. Actually, grid parity is there. So basically I'm not worried about that because basically right now the ASP is already a lot of producing China is consolidation. Even in foreign producer, as that [surprise] -- so they [surprised]. We may be making gross margin 20%. Our competitors, right now, I think, is bleeding.

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Philip Shen, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [18]

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Yes. On that point, Longgen, how many -- how much capacity do you think could go off line current pricing in the industry?

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Longgen Zhang, Daqo New Energy Corp. - CEO & Director [19]

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Already I told you that. Maybe around 20 -- in China, maybe around 250,000 tons -- 270,000 tons.

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Philip Shen, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [20]

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Okay. I just want to clarify. So you think 250,000 tons could go away. Okay. Great. And then in terms of ASPs, looking ahead, our checks suggest that there could be some upside to pricing near term, let's say, by 5% to 10%. Do you think that could be true? And if so, why, I mean -- how do you expect poly ASPs to trend by quarter and through 2019?

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Longgen Zhang, Daqo New Energy Corp. - CEO & Director [21]

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Okay. Basically, we right now is 2 forecasts. One is for the monosilicon to focus on the quality to increase the monosilicon percentage go up. So Q1, we are around 77% to 78%. So we see right now, the monosilicon price is around renminbi is around like CNY 81 to CNY 83. In March, it already increased 1 gram per kg. Okay. Then for the multi-silicon right now, we're selling around CNY 70 to CNY 72. But yes, we got pressure because too much we supply, especially some new capacity right now, the majority of the new products, the [entire] products is multi-silicon, okay. So in Q2, we don't think the price will go up dramatically. Maybe, monosilicon will go up a little slightly. But not like you said 10% or 5%, I don't think so. And we hope Q2 can continue to keep the price stable, and then all percentage continue -- monosilicon percentage continue to go up, so we can keep the ASP stable or slightly go up. But definitely, we think the second half of this year the ASP will go up. I'm not sure because I cannot project whether it's 5% or 10%. It all depends on the amount of supply.

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Philip Shen, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [22]

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Okay. So -- and a lot of that I think is -- the demand part of the picture is something, I think, is not well understood. You mentioned in your prepared remarks that global demand is very strong and that a number of countries are seeing that grid parity and that China demand should support that. Can you talk to us about which specific countries perhaps your customers are highlighting as sources of strength, certain countries in Europe or Latin America, Southeast Asia? Which countries in particular are you guys seeing as places of surprise, if you will, of that upside of demand?

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Longgen Zhang, Daqo New Energy Corp. - CEO & Director [23]

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Okay. First of all, Philip, I'm not selling module, okay. I'm selling silicon. So only I can tell you is very strong demand from all our clients downstream. Today is every -- I think, as you see that, LONGi, Chongqing, Jinko, Canadian Solar, all these companies right now. But to answer your question, I think in the script I already said right now global, almost everywhere, you see from developed countries to developing countries, especially developing country, like India, South Africa, I think even South America, we see that. Then the developed country, especially in Europe, we see strong demand is there. I think even we can see Canadian Solar, I think, in Jinko Solar, they are [earning] release. I think they may be running it later. I think the market is there. So the only thing I can tell you right now is LONGi, Jinko, as I know, I think Canadian Solar is there right now, all full capacity running right now.

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Operator [24]

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The next question comes from Gary Zhou of Crédit Suisse.

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Gary Zhou, Crédit Suisse AG, Research Division - Research Analyst [25]

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This is Gary from Crédit Suisse. So firstly, on the -- I have 3 questions. So firstly on the policy side, so the management mentioned that you expect around 40 to 45 gigawatts China solar demand this year. So does management has a rough estimate? So how much of this demand may come out in this first half and how much in the second half? And secondly, so given the likely stronger demand into the second half of this year, so does management can give us some color around what kind of polysilicon price can shoot up into the second half of this year? And lastly, so just of the company's electricity tariff cut at the end of last year, so what is your company's latest cash cost currently?

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Longgen Zhang, Daqo New Energy Corp. - CEO & Director [26]

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Okay. Gary, I think, first of all, to answer your question, I think China right now we estimated around 40 to 45. Basically, the new policy is fixed to the subsidiaries amount. I think CNY 3 billion. You know that, right? Used to -- the old system is fixed quarter. So we believe that will support around 30 gigawatts, I think, pioneer project or whatever. I think of that -- those I think the majority were due second half of this year. Then plus, I think the poverty alleviation we believe should be around like 5 to 8 gigawatts. Then plus, grid parity I think around maybe, I think, another 5 to 8 gigawatts. So basically to answer your question, we are based that, I think we're projecting that. Then to answer your question, I think first of the year may be around 10 to 15 gigawatts. The majority I think was second half overall of this year. So I think the second half may be go to 30 to 35, even 40 because first half this year it's not too much there; only the last year's projects going to finish. That's your first question. To answer your second question is how about the polysilicon price? As I just said, you see because as far as the -- I think the monosilicon, especially I think of the mono module took -- high-efficiency module demand is hot. We believe this year the mono module will account for around 60% to 70% even. So the monosilicon demand is hot. So basically in the history, is not too much. Chinese producer can provide the monosilicon. The majority is import, as you can see that. Last year, the total consumption in polysilicon is around 41 metric tons of which 140,000 tons is imported. Last year, it was 400,000 tons, okay. So this year, I think the import should be below 100,000 tons. So -- but to monosilicon total demand, I think it should be around like 250,000 tons to 200 -- 300,000 tons. So basically, I think monosilicon price should go up. I think right now kind of is around 80 to 82, but I think reasonable second half of this year maybe going to about 85 to 90. But I don't think go beyond too much because it's not good for the whole industry. And for the multi-silicon, because of the supply and demand situation and still a lot of small producers in China, especially state-owned company, they're still running. Even if they're bleeding, they're still running; the money from the government. So I think they are suffered right now from last year Q4, Q1, Q2. Hopefully, some company should have stopped, should have shut down. So hopefully, we've can synergy there. So I don't think the monosilicon price will improve in Q2. But maybe in second half of this year, the price maybe will come back. I think back to 75 -- around 75. So I think to answer your second question. The third question, I only can answer is Daqo. Last year, we successfully ramping up the 3B projects. So our electricity costs right now -- last year -- since November 20th, our all electricity cost is around $0.24 per kWH. And -- so right now, Q1 we think our cost will continue to go down because of the, I think, the electricity cost continue to cut down. So the cash cost per kg we will control maybe below CNY 41 per kg. And by October 15, if the 4A we're starting production, if we can ramp up, then we can enjoy electricity cost around $0.20 per kWH. So I think by the end of this year, if we can successfully reach or even ramping up for the first quarter of next year 70,000 capacity, so all the cost will dramatically go down. So you can see our cash cost is around like $6.50, even $6. Did I answer your question, Gary?

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Gary Zhou, Crédit Suisse AG, Research Division - Research Analyst [27]

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Yes. Just a very quick follow-on question. So can management show us the latest progress of your Phase 4A expansion. And so -- and also is there any kind of a guidance on when we can have an estimate on when the Phase 4B -- the possible Phase 4B expansion will start?

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Longgen Zhang, Daqo New Energy Corp. - CEO & Director [28]

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For Phase A, I think basically right now -- because Xinjiang right now is in battle with us. So our construction right now almost finished 18%. And for all the designs, approvals, license fee, all finished. I think for the equipments, I think, procurement, the contracts that we signed -- total today, we signed around 20 -- CNY 2.6 billion. The total project cost -- total cost is around below CNY 2.9 billion. So basically, our schedule starting to try production is October 15. Up to today, we're still thinking we are on schedule and ramping production in the Q1 2020. And for the 4B, we need to depend on the market, see what's going on and also to see our future cash flow. So basically, we're not determined when or whether we'll go to starting like 4B.

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Operator [29]

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This concludes our question-and-answer session. I would like to turn the conference back over to Kevin He for any closing remarks.

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Kevin He, [30]

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Thank you, everyone, again for participating in today's conference call. Should you have any query, please don't hesitate to contact us. Thank you very much. Bye-bye.

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Operator [31]

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The conference is not concluded. Thank you for attending today's presentation. You may now disconnect.