[Management View]
Daqo New Energy reported a significant turnaround in Q3 2025, achieving $244.6 million in revenue, a sequential increase from $75.2 million in Q2. Gross margin improved to 3.9%, reversing from negative 108% in Q2, driven by higher polysilicon prices, cost reductions, and inventory impairment write-offs. Operational efficiency was enhanced, with production costs declining to $6.38/kg and cash costs reaching a historical low of $4.54/kg. Management emphasized strategic flexibility supported by robust liquidity of $2.21 billion in cash and bank-convertible assets.

[Outlook]
The company provided Q1 2025 production guidance of 39,500–42,500 metric tons and a full-year target of 121,000–124,000 metric tons. Management expects polysilicon prices to stabilize near RMB 49–55/kg in Q4, with potential upside to RMB 60–80/kg post-industry consolidation. Regulatory measures, including China's new energy consumption standards, are anticipated to drive industry consolidation, tightening supply and supporting price recovery.

[Financial Performance]
Revenue increased 225% QoQ and 23% YoY, driven by higher sales volume and average selling prices. Adjusted net income swung to $3.7 million from a $57.9 million loss in Q2. EBITDA improved to $45.8 million, with an EBITDA margin of 18.7%, compared to negative margins in prior quarters. Cash and bank deposit assets rose by $148 million sequentially.

[Q&A Highlights]
Question 1: Could you elaborate on gross margin trends for Q3, Q4, and 2026?
Answer: Gross margins turned positive in Q3 due to higher selling prices, cost reductions, and inventory write-offs. Management expects Q4 margins to remain positive, supported by stable ASPs and continued cost optimization. For 2026, gross margins are anticipated to remain positive, contingent on market conditions and industry consolidation.

Question 2: How does the industry address overcapacity despite consolidation efforts?
Answer: While overcapacity persists, companies are expected to operate below full utilization rates to balance supply with demand. Industry-wide consolidation and anti-involution initiatives aim to foster a healthier market environment.

Question 3: What mechanisms ensure compliance with consolidation agreements?
Answer: Discussions on consolidation are ongoing, involving government entities and industry players. Mechanisms to enforce compliance, such as quotas or performance bonds, are under consideration. Management expects consolidation to further stabilize prices.

Question 4: What drives Daqo's higher ASPs and cost reductions?
Answer: ASPs benefited from favorable pricing conditions and industry consolidation. Cost reductions were achieved through energy efficiency improvements, process optimization, and lower silicon metal prices. Q4 costs are expected to decline further in the low single-digit range.

Question 5: What is the status of the share buyback program?
Answer: The program remains paused pending clarity on capital requirements for consolidation investments. Management anticipates resuming buybacks once consolidation details are finalized, potentially in Q4 or Q1 2026.

Question 6: What is the current unit electricity consumption per kilogram of polysilicon?
Answer: Unit electricity consumption ranges from 52–55 kilowatt-hours per kilogram, depending on the facility.

Question 7: Why is Daqo increasing production in Q4 despite weak seasonal demand?
Answer: Management is confident in future demand due to consolidation and regulatory measures. Higher production reduces per-unit costs and positions the company to capitalize on market recovery.

Question 8: What are the expectations for solar installations in China for 2026?
Answer: Installations are projected to grow modestly, reaching 270–280 GW, compared to 220–250 GW in 2025.

[Sentiment Analysis]
Analysts expressed cautious optimism regarding Daqo's profitability and industry consolidation efforts. Management maintained a confident tone, emphasizing strategic flexibility, cost leadership, and long-term growth prospects.

[Quarterly Comparison]
| Metric | Q3 2025 | Q2 2025 | Q3 2024 |
|----------------------------|---------------|---------------|---------------|
| Revenue ($M) | 244.6 | 75.2 | 198.5 |
| Gross Margin (%) | 3.9 | -108 | -30 |
| EBITDA ($M) | 45.8 | -48 | -34 |
| Adjusted Net Income ($M) | 3.7 | -57.9 | -39.4 |
| Cash & Bank Assets ($B) | 2.21 | 2.06 | 2.38 |

[Risks and Concerns]
1. Overcapacity in the polysilicon industry remains a challenge despite consolidation efforts.
2. Regulatory compliance with China's new energy standards may require significant capital investments.
3. Seasonal demand fluctuations and geopolitical risks could impact pricing and production plans.
4. Uncertainty around consolidation timing and associated costs may delay strategic initiatives.

[Final Takeaway]
Daqo New Energy's Q3 2025 results mark a pivotal recovery, driven by higher polysilicon prices, cost optimization, and industry consolidation efforts. The company is well-positioned to leverage regulatory catalysts and long-term solar PV growth. However, risks related to overcapacity and consolidation timing warrant close monitoring. Investors should view Daqo as a strong contender in the evolving polysilicon market, with strategic flexibility and operational efficiency as key differentiators.