Daqo New Energy Corp. (DQ) stock prices were by a concerning 7.99% shortly after the trading day commenced on April 27th, 2021, bringing the price per share down to USD$84.64.
Increases in Revenue for Q4 2020
Higher polysilicon sales volumes and higher ASPs are primarily responsible for the significant growth reflected by reports of significant increases in revenue for the fourth quarter of 2020. The reported revenue was compared to the USD$125.5 million in Q3 2020 and the USD$118.9 million reported in the fourth quarter of 2019.
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Rising Gross Profits and Margins in Q4 2020
Gross profits for Q4 2020 were reported at USD$109.5, million representing a gross margin of 44.2%. Gross profits and margins for Q3 2020 were USD$45.3 million with a 36% margin, whereas Q4 2019 showed USD$35.1 million in gross profits with a gross margin of 29.5%. This increase is largely due to higher ASPs.
DQ’s Solid Liquidity Position
The company reported USD$118.4 million in cash, cash equivalents, and restricted cash as of December 31st, 2020. This is an increase over the USD$109.8 million reported as of September 30th, 2020 and USD$115.3 million as of December 31st, 2019. As of December 31st 2020, the company had USD$193.7 million, with USD$123.2 comprising long-term borrowings. September 30th, 2020 had seen total borrowings of USD$271 million, of which USD$140 million were long-term.
Green Future for the U.S.
DQ investors are buoyed by the recent announcement by U.S. President Biden that saw him pledge to cut United States greenhouse gas emissions in half by 2030. Should this pledge become more concretized and affect changes in state and federal policies, DQ will be exposed to a scope hitherto unprecedented for the company.
Supply Agreement with Gaojing
Currently, the company is experienced increasing demand for its polysilicon products, as indicated by its recent announcement that DQ had signed a three-year supply agreement with Gaojing Solar Energy Technology for the provision of high-purity polysilicon. The agreement sees DW providing Gaojing with 45,900 MT of high-purity mono-grade polysilicon in the period between June 2021 and May 2024. The pricing will be determined and updated monthly based on market conditions at the time.
Future Outlook for DQ
With a solid recent financial track record, indications of steadily increasing demand, and a president that is keen to stimulate the alternative energy sector, DQ is poised to leverage its resources for further growth. Investors hope the company will continue to push to expand its footprint in the alternative energy sector in the interest of increasing shareholder value.