Daqo New Energy Corp. :DQ-US: Earnings Analysis: 2015 By the Numbers

Daqo New Energy Corp. reports financial results for the year ended December 31, 2015.

Highlights

  • Gross margins narrowed from 23.70% to 20.63% compared to the same period last year, operating (EBITDA) margins now 30.42% from 32.58%.
  • Change in operating cash flow of 78.49% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2011 2012 2013 2014 2015
Relevant Numbers (Annual)
Revenues 255.79 86.85 109.12 181.86 181.93
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 33.32 -109.53 -71.02 16.58 12.95
Earnings Growth (YOY) -50.61 -428.72 35.15 123.35 -21.93
Net Margin 13.03 -126.11 -65.09 9.12 7.12
EPS 4.75 -15.75 -10.26 1.99 1.25
Return on Equity 7.85 -27.63 -29.7 9.69 5.8
Return on Assets 4.35 -12.93 -9.96 2.52 1.9

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Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 23.70% to 20.63%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 32.58% to 30.42% in this time frame. For comparison, gross margins were 23.70% and EBITDA margins were 32.58% in the previous period.

Cash Versus Earnings – Sustainable Performance?

DQ-US‘s year-on-year change in operating cash flow of 78.49% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin History
PreTax Margin History

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Company Profile

Daqo New Energy Corp. is engaged in the manufacture and sale of polysilicon and silicon wafer. Its products include polysilicon, silicon wafers, and solar modules. The company was founded on November 22, 2007 and is headquartered in Wanzhou, China.

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