Daqo New Energy Corp. :DQ-US: Earnings Analysis: Q4, 2015 By the Numbers

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

Highlights

  • Summary numbers: Revenues of USD 58.18 million, Net Earnings of USD 9.44 million.
  • Gross margins widened from 25.39% to 28.54% compared to the same period last year, operating (EBITDA) margins now 39.25% from 29.75%.
  • Change in operating cash flow of 18.76% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

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

2014-12-31 2015-03-31 2015-06-30 2015-09-30 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 49.41 41.57 34.26 45.89 58.18
Revenue Growth (%YOY) 31.94 -1.06 -20.28 -2.73 17.75
Earnings (mil) 3.6 1.17 -0.92 3.04 9.44
Earnings Growth (%YOY) 144.46 -55.46 -120.8 -48.31 162.14
Net Margin (%) 7.29 2.81 -2.7 6.62 16.23
EPS 0.5 0.12 -0.09 0.29 0.98
Return on Equity (%) 7.02 2.11 -1.55 5.12 15.76
Return on Assets (%) 2.12 0.66 -0.49 1.63 5.48

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, DQ-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if DQ-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 26.78% and earnings by 210.72% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 25.39% to 28.54% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 29.75% to 39.25% compared to the same period last year. For comparison, gross margins were 18.41% and EBITDA margins were 29.73% in the last reporting period.

Cash Versus Earnings – Sustainable Performance?

DQ-US‘s year-on-year change in operating cash flow of 18.76% 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

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 15.50% to 23.85% and (2) one-time items. The company’s pretax margins are now 17.30% compared to 7.29% for the same period last year.

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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