Daqo New Energy Corp. Price & Performance (DQ)

A number of factors could cause actual results to differ materially from those in any forward looking statements Further information regarding the is included in the reports or documents we have filed with or furnished to the securities and its These statements only reflect our current and preliminary view as of today. And may be subject to change. Our goal is to achieve these projections and uncertainties All information provided in today's call is as of today. 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 this translation into U. S. Dollars solely for the convenience of the audience. Now I will turn the call to our Chairman and CEO, [indiscernible] [indiscernible] I don't have, Hissou. Okay. Hello, everyone. This is Xu Xiang, the CEO of Takeda Energy. We appreciate conference call today.

Anita, go ahead. Okay. Thank you, Mr. Xu.

Hello, everyone. This is Monita Xu. Thank you for joining our conference call today. I'll now deliver the management remarks on behalf of So in 2024, we faced a challenging market environment with excess capacity in the solar PV industry. Leading to short price declines across the entire value chain. We proactively managed these difficulties by curtailing polysilicon production to reduce cash burn. Particularly in the third and fourth quarters. Nevertheless, we reached an annual polysilicon productive volume of two zero five and sixty eight metric tons in 2024, meeting our guidance of 200,000 metric tons to 210,000 metric tons. Which represented an increase of 3.7% year over year compared to nine hundred one hundred and ninety seven-eight hundred-three-one metric tons in 2023. Our N type product mix increased significantly from approximately 40% of total production in 2023 to 70% in 2024. And we sold 181,352 metric tons in '20 ending the year at a reasonable inventory level. Despite solid roaming demand for solar PV products globally, a mismatch between demand and supply drove prices lower in 2024. Even below cash cost. Overall, our polysilicon ASPs decreased significantly from $11.00 $11.48 per kilogram in 2023 to $5.6 per kilogram in 2024.

And revenue came in at US1 billion dollars compared to US2.3 billion dollars in 2023 as a result of lower ASPs as well as lower sales volume [indiscernible] starting in the second quarter of twenty twenty four, We reported a non cash provision for inventory impairment is expected with a negative gross margin of 20.7% for 2024. Due to the continuous negative gross margin we recorded a non cash long lived assets impairment charge of $175,600,000 for the quarter related to our older polysilicon production line. Despite the losses Daoquhouniu Energy continues to maintain a strong balance sheet and ample cash reserves. At the end of twenty twenty four, the company had a cash balance of US1 billion dollars short term investments of US10 million dollars Bank notes receivable US55 million dollars and a fixed term bank deposit balance of US1.6 billion dollars Overall, the company maintains strong liquidity with a balance of quick assets of $2,200,000,000 which can be readily converted to cash if needed. This solid financial position ensures we're well equipped to navigate the market downturn. And remain strategically resilient. On the operational front, during the fourth quarter, the company continued to operate at a lower utilization rate of 40% to 50% of our nameplate capacity in light of weak market prices.

The total production volume at our two post silicon facilities for the quarter was 34,030 megabytes metric tons further decreasing from the third quarter by 9,366 tons. Meanwhile, we intensified our efforts to reduce inventory and our sales volume reached 42,191 metric ton in the fourth quarter, compared to 42,101 metric ton in the previous quarter. As a result of lower utilizations, idle facility related costs for the quarter was approximately US1.02 dollars per kilogram, which was primarily related to non cash depreciation expense [indiscernible] 3% sequentially to an average of US6.81 dollars per kilo. However, thanks to our relentless efforts to improve operational efficiency, our cash costs declined further to US5.04 dollars per kilogram. [indiscernible] quarter over quarter decline compared to five per kilogram in the third quarter Due to the current market pricing environment, we currently expect total household construction volume in the first quarter of twenty twenty five to be approximately 25,000 metric tons to 28,000 metric tons. We plan to maintain a relatively low utilization rate in 2025 until a turning point emerges in the sector. As a result, we currently anticipate full year production volume in 2025 to be approximately 110,000 metric tons to 140,000 metric tons.

Discussions on industry self regulation measures have been ongoing since the Meanwhile, the post telecom market remains sluggish heading into the quarter as Belgium customers continued drawing down accumulated inventory and coping with lower wafer capacity utilization rates, of approximately 50%.

Total income pricing remained stable within the cyclical bottom range of RMB 36 to 42 per kilogram In November and December, leading poly producers reduced production to offset the higher hydroelectricity cost during the winter season and to mitigate inventory risks. As such, industry production policy can continue to decline month over month. According to industry statistics, the total production volume in China descended to approximately 100,000 tons per month in December, the lowest level in the year.

On December 26, Altacao Futures Trading officially launched with the initial benchmark price RMB38.6 per kilogram. Although some prices were quoted higher at RMB42 to RMB43 per kilogram future trading volume remained small and had limited impact on [indiscernible] On a positive note, new solar PV capacity in China reached a record high of 68 gigawatts in December, which was beyond expectations and reinforced market confidence in the resilience of solar PV in the short run and market potential in the medium to long term. Despite the significant challenges resulting from overcapacity in have been proactive initiatives to restore the industry's healthy development. On 12/06/2024, led by the China Photo Boutique Industry Association, our company along with other major solar PV manufacturers have reached consensus that implementing self discipline would be fundamental to mitigating the irrational competition amid falling prices and heightened global trade pressures. Moreover, the solar PV industry continues to show strong demand prospects For the year 2024, China's newly installed solar PV capacity grew 28% year over year to two seventy seven gigawatts, which not only hit a record high, but also exceeded market expectations. We remain optimistic that as supply adjusts to more rational levels, we'll see a better balance between supply and demand this year.

In the long run, as a renewable energy source, and one of the lowest cost sources of electricity worldwide, solar power continued to be a key driver of the global energy transition and sustainable development Looking ahead, Daikou New Energy will capitalize on the long term growth in the global solar PV market and strengthening its competitive edge enhancing its higher efficiency [indiscernible] and optimizing its cost structure through digital transformation and AI adoption. As one of the world's lowest cost producers, with the highest quality intact products, a strong balance sheet and no financial debt, we believe we're well positioned to weather the current market downturn and emerge as one of the leaders in industry to capture future growth. So now I will turn the call to our CFO, Mr. Min Yay. Who will discuss the company's financial performance Min, please go ahead.

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 first go over the company's fourth quarter twenty twenty four financial performance then follow with our full year 2024 financial results. Revenues were RMB195.4 million compared to RMB198.5 million in the third quarter of twenty twenty four. And $476,300,000 in the fourth quarter of twenty twenty three. The decrease in revenue compared to the third quarter of twenty twenty four was primarily due to a decrease in ASP mitigated by an increasing sales volume. Gross loss was RMB65.3 million compared to RMB60.6 million in the third quarter of twenty twenty four and gross profit of $87,200,000 in the fourth quarter of twenty twenty three. Gross margin was negative 33% compared to negative 30.5% in the third quarter of twenty twenty four and eighteen point three percent in the fourth quarter of twenty twenty three, The decrease in gross margin compared to the third quarter of twenty twenty four was mainly due to the decrease in average selling prices. Selling, general and administrative [indiscernible] were $29,400,000 compared to $37,700,000 in the third quarter of twenty twenty four and $39,000,000 in the fourth quarter of twenty twenty SG and A expenses during the fourth quarter of twenty twenty four included $14,900,000 in non cash share based compensation expense compared to the company's share related to the company's share incentive plan.

Compared to 18,900,000.0 in the third twenty twenty four. The company recognized $18,100,000 in non later to allowance for expected loss of receivables in the fourth quarter mainly due to uncertainty on the recoverability of long aged receivables. The company recognized $175,600,000 in fixed asset impairment loss mainly related to its older polysilicon production lines in the fourth quarter of twenty twenty due to the continuous downtrend in the polysilicon selling prices that impaired the recoverability of current amounts of these assets. R and D expenses were 400,000.0 compared to 800,000.0 in the third quarter of twenty twenty four and three point twenty twenty three. R and D expenses reflect R and D activities that take place during the quarter and can vary from year to period. As a result of the above mentioned, loss from operations was RMB300.9 million compared to RMB98 million in the third quarter of twenty twenty four and income from operations of RMB83.3 million in the fourth quarter of twenty twenty three. Operating margin was negative 154% compared to negative 49% in the third quarter of twenty four and seventeen point five percent in the fourth twenty Net loss attributable to Dacomu NMC shareholders was 180,000,000 compared to RMB60 million in the third quarter twenty twenty four and net income of RMB53.3 million in the fourth quarter of twenty twenty three.

Loss per basic ADS was RMB0.71 compared to $0.92 in the third quarter of twenty twenty four, and income per ADS of $0.76 in the fourth quarter of twenty twenty three. Adjusted net loss at RMB2.2 shareholders including non cash share based compensation costs, was RMB170.6 million compared to RMB39.4 million in the third quarter of twenty twenty four and adjusted net income of RMB74 million in the fourth adjusted loss per basic ADS was $2.56 compared $0.59 in the third quarter of twenty twenty four, and adjusted earnings per basic ADS of $1.06 in the fourth quarter of twenty twenty three. EBITDA was negative $236,000,000 compared to negative $34,000,000 in the third quarter of twenty twenty four. And $128,200,000 in the fourth quarter of twenty twenty three. EBITDA margin was negative 121% compared to negative 17% in the third quarter of twenty twenty four, and 26.9% in the fourth Now I will go over Revenues were RMB1.03 billion, compared to RMB2.3 billion in 2023. The decrease was primarily due to lower polysilicon average selling price Gross loss was 212,900,000.0 compared to gross profit of 920,700,000.0 in 2020 Gross margin was negative 20.7% compared to 9.9% in 2023. The decrease in gross profit was primarily due to lower ASP and inventory impairment.

For the year of 2024, the company $81,400,000 in inventory impairment expenses compared to $500,000 in 2023. SG and A expenses were 143,100,000.0 compared to $213,200,000 in 2023. The decrease was primarily due to the reduction in non cash based compensation costs related to the company's share incentive which was 72,400,000.0 and one hundred and twenty one million in 2020 and 2023, which The company recognized RMB175.6 million in six asset impairment loss mainly related it's older processing facilities in '24. R and D expenses were RMB4.6 million compared to RMB10.1 million in 2023. And as a result, the foregoing loss from operations were RMB554 million compared to income from operations of RMB783.4 million in 2020. Operating margin was negative 54.8% compared to 33.9% in 2020 Net interest income was $29,400,000 compared to $52,300,000 in 2023. The decrease in interest income was primarily due to lower cash at bank balance as well as lower bank interest rate. Net loss attributable to DKKO NU R and G shareholders was RMB245 million compared to net income of hundred and 29,500,000.0 in 2023 Loss per basic ADS were 5.2¢. Compared to earnings per basic ideas of $5.75 in 2023. Adjusted net loss attributable to DKKOR NU Energy shareholders was 272,800,000.0 compared to RMB563 million in 2023.

Adjusted loss per basic ADS were four point compared to adjusted earnings per basic ADS of [indiscernible] EBITDA was negative RMB335 million dollars compared to $918,600,000 in 2020 EBITDA margin was native 32.9% compared to 39.8% in 2020 Now on the company's financial condition. As of 12/31/2024, the company had RMB1.0388 billion in cash, cash equivalents and restricted cash compared to $853,000,000 of September 3120. And RMB 3,050,000,000.00 as of 12/31/2023. And as of 12/31/2024, the no receivable balance was $55,200,000 compared to $84,500,000 as of 09/30/2024. And $116,400,000.0 as of 12/31/2023. Note receivable balance represent bank notes with maturity within six months. And as of December 31, the balance of fixed term deposits within one year was 1,087,000,000.000 compared to 1,150,000,000.00 as of 09/30/2024 and none as of 01/2023. Now on the company's cash flows. For the twelve months ended 12/31/2024, net cash used by operating activities was $437,700,000 compared to RMB1.6 billion provided by operating activities in the same period of 2023.

The decrease was primarily due to lower revenues than gross margin. For the twelve months ended 12/31/2024, net cash used in investing activities was 1,478,000,000.000 compared to RMB1.196 billion in the same period of 2023. The net cash used in this activities in 2024 was primarily related to CapEx on the company's 5A and 5B parcels and expansion projects, in Baixo City, Inner Mongolia, and purchases of short term investments and fixed term deposits. For the twelve months ended 12/31/2024, net cash used in financing activities was RMB47.4 million compared to RMB695 million in the same period of 2023. Net cash used in finance activities in RMB0.24 was primarily related to RMB35 800,000.0 in dividend payments made by the company's subsidiary, Xinyan Daqo to its minority shareholder. And that concludes our prepared remarks. We will now open the call to Q and A from the audience. Operator, please begin.

We will now begin the question and answer session. The first question today comes from Alan Hong with JPMorgan. Please go ahead.

Hi. Thanks for letting me ask a question.

I have like three questions here. The first question is, I would like to know the reason for the how is the cash spent in fourth quarter last year? On my tally, it seems like we have spent around RMB0.2 billion. Cash in the fourth quarter, we'd like to have a billing of the breakdown. My second question is, I would like to hear Manujang's thoughts on the pricing outlook in the next two quarters. And the number three question is, I mean like there's been like various news talking about our potential plus C intervention to suppress the industry capacity to have like a surprise type reform. I would like to hear management's thoughts on this. Thank you. So, I'll hold on. We're going to look at the numbers really quick. Thank you.

Alan, thank you for your questions. Maybe I'll talk about the pricing outlook first. Before Min answers your first question. So I think In the short run, we are likely to see poly prices to increase in the next couple of months. At least before the end of the second quarter twenty twenty five. Like I talked about in the commentary session, Starting the fourth quarter of twenty twenty four, the industry has initiated several discussions on self regulation [indiscernible] [indiscernible] overall production volume. So right now, the overall industry utilization rate is roughly around across all. And as a result, based on industry statistics, we have seen domestic poly supply to drop starting from December. So in December, the overall production volume is around 100 metric tons. And in January, it has even lowered to 97,000 tons. And while wafer supply in Jan is only about 45 gigawatts, roughly equivalent or I should say supply is slightly lower than [indiscernible] So we expect supply to be in the range of 90,000 to 100,000 at least until May. Primarily, driven by the seasonality effect of hydroelectricity power be relatively high during the low up until And as of last week, the domestic industry in the poly sector is around [indiscernible] also about 200,000 at the end get or wafer manufacturers left So we believe the poly inventory will remain high throughout 2025 was reduced gradually in the next few months, leading to a potential poly price Upside the second quarter.

And another catalyst to mention for price uptick is the new regulations that have been talked about the market reform. Which would lead to potential front loading So in the first quarter, the NDRC and also the national Energy Administration after we released new policies on discontinued [indiscernible] So we would see a distributed [indiscernible] regulation to take effect on May 1 and also the market base So we expect to see some potential front loading as [indiscernible] of new projects starting from So as we see higher therefore, we expect to see higher [indiscernible] Demand in the second half of twenty twenty five and onwards appears to be somewhat more challenging. There are not enough new application scenarios or alternative project return So in the midterm, Q2 will be more longer term. We think that the overall industry utilization would remain around [indiscernible] especially the corporates are confined to the self regulation mentioned. To maintain or to promote a more healthy development industry. So price would likely linger in the range of RMB40 to RMB45 burn type, and RMB37 million to more clear turning points So you say 45 to fifty for N type is your expectation?

For the more midterm, Yes. So up until say the end the second half or till the end of this year.

Got it. So the next question is on the supply side reform. And also like the cash consumption in fourth quarter. Okay. I think if you look at cash on consumption, right, so I think about roughly $80,000,000 is related to operations or spend on the operations And then roughly $40,000,000 is related to the CapEx And then the remaining is mainly related to changes in the balance sheet items, between operating assets and operating liability. So these are the main ones. Got it. Thank you. And the last question I have is, I would like to hear your thoughts on how the government may conduct a price action reform in our industry. Okay. I think from our understanding is right now the National Energy Administration and in partnership the ministry of industry and technology and the National Government Informed Commission, I think combined they're looking at how to stem the losses within the industry, right? I think previously they were looking at how would the self discipline of framework would work. And I believe Thus far, there are not too pleased with it in terms of the results. So it looks like might be likely that they might come forth with certain type of policy We don't know what that policy looks like yet.

I mean, it might be combination of capping production, some kind of production quota. And I think retiring inefficient capacity or older technology and things like that. So I think we are yet to what the policy looks like I believe that's still being discussed and being informed. But it might look like some of their former policies related to this, for example, have what had happened in aluminum. Got it. And thank you very much for answering my questions. And I'll pass it Very great. Thank you so much, Alan. The next question comes from Phil Shen with Roth Capital.

Please go ahead. There seems to be some issues with Phil's line. The next question comes from Meng Wan Wang with Goldman Sachs. Please go ahead. Yes. Hi. Thanks management for taking my question. So my first question is about the turning point you mentioned. So as Anita said that you expect poly price hike is likely to sustain until end of the second quarter. So what's the exact turning point we are looking for in order to raise our production also if it will be great if you can elaborate more on the basis that we come to our production [indiscernible] or it's simply because we are more bearish on the demand outlook?

Sure. Thank you, Mohan. So for your first question, it's very difficult for us to estimate the exact timing of the turning points because in 2024, if we look at the broader picture, the total polysilicon production volume actually reached just 1,820,000 metric tons and the nameplate capacity of every sector on the main value chain has reached on average over 1,200 gigawatts. So for poly, the nameplate production capacity of all completed projects regardless of whether it has [indiscernible] temporarily shut down or never started initial production after we exceeded 1,400 gigawatts, which is roughly 2,000,000 metric tons. That's more than double of demand. And if we look at the outlook for 2025 based on industry forecast we see that global demand would actually be in the range of to 600 gigawatts And from that, we China solids in the range of $250,000,000 to 300 which would be roughly equivalent to 1,400,000,000.0 yen to 1,000,000 metric tons of polys and So if we take these numbers into consideration, it's not difficult to see that. It will be somewhat more prolonged [indiscernible] To restalance the current overcapacity or oversupply in the entire industry. So we would either need to see a stronger [indiscernible] for the more rapid rebalancing term [indiscernible] [indiscernible] In terms of our production target, we have decided to maintain a relatively low utilization rate on the backdrop of abiding to the self regulation measures, That has been led by the CTIA as well.

As considering our own strategic strategy to tap our cash Yes, sure. Thanks for that. So just to follow-up, what's the current utilization rate in Aurangana in Mongolia capacity. And since we plan to maintain the utilization rate at a low level for the whole year, will we consider to shut down our income [indiscernible] base alone is more than enough right to meet the production target.

We have decided to open stores Xinjiang and our inner Mongolia based our own strategies, of course, because we also have to take in account our employees in both the as well as our obligation for order to fulfill our social responsibility to the community But I guess you're correct in terms of further lowering our utilization rate, but that will be contingent of [indiscernible] Demand is worse than we expected and we might consider but also considering we need to see the balance between fixed cost, variable cost and a number of before Yes, sure. That's very clear. That's all from The next question comes from Phil Shen with Roth Capital.

Hey, guys. Hopefully, this is better now. Can you hear me? Okay. Yes. Now it's great. Yes. Okay, great. Thanks, Ming.

So the audio was a little bit unclear for me earlier, so apologies if some of these questions have been asked. As a follow-up to the first questioner on the supply side reform. I heard your answer that there could be some kind of policy put in place but you don't know what it looks like yet. Do you have a sense of the timing of when the policy could be released? Is it soon or is it maybe much later in the year? Thanks.

Obviously, it's uncertain with regard to Timing of the policy, China will have its high level central government committee meeting coming up in early March. We We believe from what we heard, it could be around that time that because that's the time when the government announces a lot of their policy for example, economic policy. And government policy. So last one possible timeline. In early March or it could be later We don't know yet, yes. But we all we know is that they are in discussion and they are quarantined. Great. And so and they would release the supply side framework for not just Poly, right, but also every step in the supply chain? All the entire poly industry, yes.

Yes. Okay, great. Thanks. And then from a pricing standpoint, I may have missed this, but can you share what kind of pricing you expect for Q1 it be similar to Q4? And then do you expect poly pricing to [indiscernible] slightly higher as we get into the back half of 2025. What's the cadence of price for polysilicon Q1 through Q4? Thanks. Thank you, Bill. So like I mentioned about in the beginning, the Q and A session, we believe that in the near term, poly prices will [indiscernible] [indiscernible] more on the higher range of [indiscernible] [indiscernible] [indiscernible] going to the second half of the quarter because we're likely to see some front loading before June 1. Driven by the renewable Our campus Due to the uncertain yields, new projects, The only certainty is to to get installed before June 1.

We believe that we might the stronger demand the first half compared to the second half.

And hence, overall in the second half of the year, price [indiscernible] N type would be in the range and 37 to Okay. Anita, it's a little hard to hear you. Can you speak closer to the microphone? Did you say in the first half it's 40 to 45 and then the back half might be 37 to 30 Yes.

So I was saying the first half, it's more on the higher range of 45 but in the second half will be more on the lower range. Okay, got it. And you're much you're much clearer now.

Okay.

Yes.

Okay. And P type will be around 37 to 40.

But of course, that would also be contingent upon whether there will be additional supply coming out. After May.

Right. Meaning more production from other players?

Yes, especially because we're going to the rain season. So the hydro electricity power tariff would drop significantly compared to where it is right now.

Got it. Okay. Thank you. It's much clearer now. Thank you. You. So okay, so we have a sense for pricing now. We've talked about supply side reform. What about on the demand side? We've seen some changes [indiscernible] the feed in tariff outlook and that's going away. And with the load growth in China, There seems to be based on some of my industry sources there could be an upside surprise to demand Are you seeing that yet with the potential for that? And if so, how do you expect that to play out through the year? Thanks.

So I like I talked about previously, we think that based on industry forecast, we have also seen global demand to be in the range of five fifty to 600 gigawatts And from that, we expect China solar installation to be in the range of two fifty to 300 gigawatts.

And that would be relatively stable in terms of year over year growth compared to two seventy seven gigawatts in 2024. Primarily because we think the inflation of the utility scale has peaked in the short run. We will need to see a more structural reform either in the grid system or a frequency modulation control to optimize the as the development of energy storage before demand can further boost. And for distributed installations, we think that market oriented reform poses the biggest uncertainty to the yield of new projects and hence the pace of installation with some slowdown after June 4. Before we see more transparency on the regulation of course. Because although it has been released by NDRC and NEA, for the new regulation, they actually delegated the specific details to provincial levels. So we will need to see from that level what the local government what the specific plans will look like from the provincial levels. Before end of twenty twenty five? And we think that besides the Chinese market, international demand will primarily come from emerging markets. [indiscernible] like Latin America, Middle East, Africa, Qatar, Qatar, because they have the big potential for renewable energy due to the rapid growth in electricity demand.

So for instance, Saudi Arabia's goal is to have renewable account for 50% of energy composition by 02/1930 So they plan to have a newly installed [indiscernible] 20 gigawatts of solar from 2024 onwards. [indiscernible] Besides the emerging markets, we think that for The U. S, will be somewhat stagnant, primarily because after Trump has been elected, You have signed several executive orders. For instance, delaying or suspended the IRA subsidy and also halting the exiting the Paris agreement. So we think that in The U. S, the renewable energy would be pivoted towards supporting the fossil fuel.

Okay. Thank you for the color. And I'll pass it on. [indiscernible] The next question comes from Alan Long with Jefferies. Please go ahead.

Thanks a lot. So I would like to come to some of details in the financial So actually the cash cost of the production in 4Q has lower almost RMB35 per kilogram. Would like to know if there's any further room [indiscernible] the reason of that because is it because there was some impairment in costs which brings down the COGS or this RMB35 per kilogram actually fairly reflects the [indiscernible] Alan, this is Ming.

I would say that the current RMB35 per kilogram is reflective of the company's current cash cost Okay. I think cash cost deduction come from a number of points including a better manufacturing efficiency and then cost saving on materials procurement but in particular, right, by us reduced production I think now so productions are primarily focused in our most efficient manufacturing facility both in Xinjiang and in Mongolia. So these have lower electricity usage per unit production, for example. So I think that's why we saw other tax cost reduction I think right now our outlook for Q1 is cash costs should remain at the current level or maybe to just slightly lower, but not too much lower. That's our current expectation.

I see that's clear. And another question sorry, So, yes, I think similar to Q4, maybe just slightly lower than Q4. I see. Another question is in regards to FBR because one of the major peers has also got around 10,000 tons of kind of pilot lines got environmental approvals So would like to listen on your views on the technology and would you also certain lines for FPR what's your view on the air cash cost of RMB28?

So first of all, it's hard for us to comment on our competitors' cash cost, but I could give more color on our own strategy, of course. So I think that we definitely respect innovation industry.

But modified Siemens process has been refined over decades. And us delivered proven cost efficiency scalability and high quality high quality polysilicon which is critical to meeting our customer specifications. And we have also consistently worked toward further lower air costs through technology improvements such as lowering our energy consumption or powder consumption, etcetera. So we can position competitively in this cyclical market. And we definitely acknowledge the clear advantage of STR which would be lower energy consumption And I guess hence lower cost which makes it easier to get relevant carbon footprint certifications But we still believe that FBR has its inherent risks such as It's security challenges. It's still not possible to use 100% FPR and downstream production. There is a maximum blend percentage when you are trying to produce and the downstream There's also challenge associated with hydrogen displacement during the deposition process, And also hydrogen retention leading to potential defects. Or degraded risks And also the process and stability caused by things like the reactor clogging maybe the uneven silicon deposition can also lead to increased [indiscernible] But that being said, we're not complacent. So our R and D team and I would like to highlight that we also established our research center in Inner Mongolia last quarter in 2024. [indiscernible] will continue to evaluate all innovations and maybe more on the [indiscernible] [indiscernible] that could potentially be transformative in the future?

Including the [indiscernible] in order to assess the long term viability of different technologies. And I think I believe that should there be other technologies OFER that demonstrates clear sustainable advantages without compromising the product quality, we We will consider the different process as well.

But for now, our strategy remains centered on leveraging our existing strengths So our operational excellence, our customer trust and also our financial strength. To navigate this market dynamics Amid this market Understood. Thanks a lot for the detail, Basia. So basically there's no concrete plans in pursuing FBR for now, right?

There's no concrete plans, but we are also doing our research, of course. We are keeping an eye on all sorts of technologies. That could be potential trends potentially transformative in the future.

Understood. So another question is, I recall there was $100,000,000 buyback announced last year. When the company thinks it would be appropriate to start the buyback and Is there any consideration in selling down your A share platform as well in order to fund the buyback in The U. S. Platform?

So I think for the $100,000,000 share buyback, we are still keeping an eye and closely monitoring the market dynamics think like we mentioned we were more conservative and waiting to see when a turning point would emerge. But I think based on the recent news and our assessment, of the market environment We would like to we are still closely monitoring when would be a good timing to start repurchasing. But for selling down our A shares, and potentially buying back on the U. S. ADRs to close down this GAAP in terms of the [indiscernible] differences in valuation. It's We have doubly considered such plans However, after the new regulation rolled out on selling down on A shares which was announced in May. Should your share price be trading below your issue which would be 21.49 plus It's somewhat more [indiscernible] to pursue such plan which is why we announced to extend our [indiscernible] down back Our lockups, yes, in January.

I see. So But I think from an industry perspective, you would still like to see there is a turning point before you commit for the buyback, right?

Yes.

Yes.

Because we think this cycle will somewhat be prolonged as our competitors are also have strength in terms of stronger, I guess, shareholder background and also we haven't heard things like recalling back the loans. So I think it's still early stage right now, but we're definitely keeping an eye and monitoring the market dynamics. And decide when would be the good timing to start with interest rate.

And my last question is about the 2025 it appears to be less than 50% of utilization rate if you think about capacity of the company is close to 300,000. And seems slightly lower than the numbers out in the after the December [indiscernible] So we'd like to know if it is coherent with the supply side self discipline [indiscernible] lower estimated demand in 1Q. So So the proposed provision is lower in 1Q, but [indiscernible] is this basically the number you have in the self discipline agreement?

I think from the self discipline measures, they basically overall they would have a quota for company based on your past shipping volume as well as your nameplate capacity. As of now. And that's more like maximum cap of the level of production that you can produce for the entire year. We haven't heard anything such as punishment associated with producing lower than the quota. And we have actually made our target for 2025 based on our own company strategy, while complying to the self regulation measures. I think our primary goal in 2025 is to maintain a level that would meet our customer demand while capping or reducing our cash burn. In the entire year.

I see. So I see. So basically, it's like [indiscernible] There's a possibility to further increase a bit The production if the demand really beats expectation.

Yes, yes. That's the guidance as we assess the market conditions right now. But there is a possibility of potentially increasing our utilization rates should the market demand to come stronger than we I see. That's very clear. Thanks a lot for taking my question. Okay. Thanks, Alan. Thank you. The next question comes from Zhi Hui Hu with CICC. Please go ahead. Thanks, management. This is Suh Hui from Citi.

My first question is whether we participate in polyfutures [indiscernible] And my second question is, what's the current inventory level of company? [indiscernible] Thank you, Suhui. I'll answer the first question and Ming can answer the second So in terms of the futures market, in the fourth quarter, last year, we've already registered a label for the future for market and obtained relevant approvals. So we are among the first batch of manufacturers to be able to participate in the future's market. But after the futures market comes online December, the registered brands generally quoted above RMB45.

The listing price was relatively low at RMB38 when it just opened. So I would say it's more of a capital gain right now and the main contract with is the June 25, [indiscernible] daily trading volume of about 10,000 lots. Which is not a lot. So the overall market pool is still relatively small right now. And as it's trading at around 43% to 44.5%, I believe, it has not yet met our expectations.

And I would say the willingness for us to participate is still relatively weak at the moment. And in fact, I believe for other players, I think right now, it's more preferable to [indiscernible] directly exploit the hedging opportunities. But that being said, we're definitely monitoring the progress of the market. And waiting to see a more detailed guidelines on how to participate and see whether it would be a good strategy that fits our overall company strategy to take advantage of the future hedging. [indiscernible] So the current sellable inventory for processing for the company is less than 20,000 metric tons. Per month and there is a decline of close to 10,000 metric ton compared to the end of last quarter. So improving rapidly, I would say.

Yes, and it's continuing to come down Sure. That's all my questions. Thanks.

Great. Thank you.

This concludes our question and answer session.

I'd like to turn the conference back over to management for any closing remarks.

Thank you, everyone, again for participating Should you have any further questions, please don't hesitate to contact us Thank you and have an awesome day. Goodbye. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.