DAQO New Energy Corp. reports 123% CAPEX growth in 2018 while 6.7% Revenue decline
03/13/2019 • About DAQO New Energy Corp. (
$DQ) • By InTwits
DAQO New Energy Corp. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- DAQO New Energy Corp. has high CAPEX intensity: 5 year average CAPEX/Revenue was 36.7%. At the same time it's a lot of higher than industry average of 8.7%.
- CAPEX is quite volatile: $143m in 2018, $64m in 2017, $67m in 2016, $81m in 2015, $77m in 2014
- The company has highly profitable business model: ROIC is 12.2%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.2x while industry average is -1.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
DAQO New Energy Corp.'s Revenue decreased on 6.7%. Revenue decline showed acceleration in 18Q4 - it was 36.4% YoY. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin dropped on 13.0 pp from 49.1% to 36.1% in 2018.
Gross Margin dropped on 12.0 pp from 44.6% to 32.5% in 2018. SG&A as a % of Revenue increased on 4.0 pp from 5.0% to 9.0% in 2018.
Net Income margin dropped on 16.1 pp from 28.7% to 12.6% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 DAQO New Energy Corp. had CAPEX/Revenue of 47.4%. The company showed CAPEX/Revenue growth of 2.7 pp from 44.7% in 2015 to 47.4% in 2018. It's average CAPEX/Revenue for the last three years was 32.2%. Battling declining revenue DAQO New Energy Corp. made large investments to CAPEX (131% of EBITDA) but that didn't help at least in this year.
Return on investment
The company operates at good ROIC (12.2%) while ROE is low (8.3%). ROIC dropped on 11.1 pp from 23.2% to 12.2% in 2018. ROE dropped on 19.7 pp from 28.1% to 8.3% in 2018.
Leverage (Debt)
Debt level is 1.2x Net Debt / EBITDA and 1.8x Debt / EBITDA. Net Debt / EBITDA surged on 0.3x from 0.9x to 1.2x in 2018. Debt showed almost no change in 2018 while cash surged on 21.6%. Net Debt/EBITDA declined at -1.0x per annum in the last 5 years.
DAQO New Energy Corp. has short term refinancing risk: cash is only 97.0% of short term debt.
Valuation and dividends
The company's trades at EV/EBITDA 5.2x and P/E 11.2x.
Management team
DAQO New Energy Corp.'s CEO is Longgen Zhang. Longgen Zhang is a founder and has 1 year tenure with the company. The company's CFO is Ming Yang. Ming Yang has 4 years tenure at the company.
Financial and operational results
FY ended 12/31/2018
DAQO New Energy Corp. ($DQ) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 182.6 | 182.0 | 229.1 | 323.2 | 301.6 | -6.7% |
| Gross Profit | 43.3 | 37.5 | 80.4 | 144.0 | 98.1 | -31.9% |
| SG&A | 10.3 | 12.6 | 16.1 | 16.0 | 27.1 | 68.8% |
| EBITDA | 60.0 | 57.6 | 99.3 | 158.7 | 109.0 | -31.3% |
| Net Income | 16.6 | 13.0 | 43.5 | 92.8 | 38.1 | -58.9% |
Balance Sheet
|
|---|
| Cash | 7.1 | 14.5 | 16.0 | 53.8 | 65.4 | 21.6% |
| Short Term Debt | 208.7 | 144.1 | 131.7 | 88.6 | 67.4 | -23.9% |
| Long Term Debt | 77.3 | 118.5 | 111.9 | 111.4 | 133.3 | 19.6% |
Cash flow
|
|---|
| Capex | 77.0 | 81.4 | 67.5 | 64.1 | 143.1 | 123.2% |
Ratios
|
|---|
| Revenue growth | 67.5% | -0.3% | 25.9% | 41.1% | -6.7% | |
| EBITDA growth | 497.8% | -4.1% | 72.4% | 59.8% | -31.3% | |
|
|---|
| Gross Margin | 23.7% | 20.6% | 35.1% | 44.6% | 32.5% | -12.0% |
| EBITDA Margin | 32.9% | 31.6% | 43.3% | 49.1% | 36.1% | -13.0% |
| SG&A, % of revenue | 5.6% | 6.9% | 7.0% | 5.0% | 9.0% | 4.0% |
| Net Income Margin | 9.1% | 7.1% | 19.0% | 28.7% | 12.6% | -16.1% |
| CAPEX, % of revenue | 42.2% | 44.7% | 29.5% | 19.8% | 47.4% | 27.6% |
|
|---|
| ROIC | 7.2% | 5.2% | 12.7% | 23.2% | 12.2% | -11.1% |
| ROE | 9.7% | 5.8% | 17.0% | 28.1% | 8.3% | -19.7% |
| Net Debt/EBITDA | 4.6x | 4.3x | 2.3x | 0.9x | 1.2x | 0.3x |
DAQO New Energy Corp. ($DQ) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 103 | 67 | 67 | 76 | | 23.2% | -11.9% | -24.6% | -36.4% |
| EBITDA | 52 | 31 | 5 | 27 | | 23.4% | 3.5% | -88.9% | -63.0% |
| Net Income | 32 | 13 | -18 | 11 | | 38.2% | 10.6% | -175.9% | -66.2% |
Balance Sheet
|
|---|
| Cash | 62 | 160 | 110 | 65 | | 39.7% | 426.6% | 169.7% | 21.6% |
| Short Term Debt | 141 | 130 | 51 | 67 | | 8.2% | 6.1% | -59.8% | -23.9% |
| Long Term Debt | 108 | 93 | 119 | 133 | | -16.1% | -24.5% | 0.1% | 19.6% |
Ratios
|
|---|
| Gross Margin | 44.8% | 40.6% | 19.1% | 22.4% | | 1.9% | 8.7% | -21.7% | -34.9% |
| EBITDA Margin | 49.9% | 46.1% | 7.0% | 36.2% | | 0.1% | 6.9% | -40.4% | -26.0% |
| Net Income Margin | 30.6% | 20.0% | -27.1% | 15.1% | | 3.3% | 4.1% | -54.1% | -13.3% |
Peers in Semiconductor Equipment
Below you can find DAQO New Energy Corp. benchmarking vs. other companies in Semiconductor Equipment industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Atomera Incorporated ($ATOM) | | | | | 123.6% |
| ACM Research, Inc. ($ACMR) | | | -12.3% | 33.4% | 104.5% |
| SCI Engineered Materials Inc ($SCIA) | | -13.0% | -32.1% | 24.4% | 67.0% |
| Aehr Test Systems ($AEHR) | | -49.1% | 44.7% | 30.3% | 56.4% |
| SolarEdge Technologies, Inc. ($SEDG) | | 144.0% | 50.7% | 23.9% | 54.4% |
| |
|---|
| Median (37 companies) | | -2.0% | 6.5% | 24.2% | 15.5% |
|---|
| DAQO New Energy Corp. ($DQ) | | -0.3% | 25.9% | 41.1% | -6.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Xperi Corporation ($XPER) | 99.5% | 99.8% | 99.8% | 98.3% | 96.7% |
| KLA-Tencor Corporation ($KLAC) | 57.9% | 56.8% | 61.0% | 63.0% | 64.1% |
| Teradyne, Inc. ($TER) | 53.3% | 55.8% | 54.7% | 57.2% | 58.1% |
| Nova Measuring Instruments Ltd. ($NVMI) | 52.7% | 51.9% | 45.9% | 59.1% | 57.8% |
| Nanometrics Incorporated ($NANO) | 47.2% | 47.9% | 51.6% | 52.9% | 56.7% |
| |
|---|
| Median (38 companies) | 34.6% | 38.9% | 40.0% | 43.2% | 41.2% |
|---|
| DAQO New Energy Corp. ($DQ) | 23.7% | 20.6% | 35.1% | 44.6% | 32.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| KLA-Tencor Corporation ($KLAC) | 29.2% | 26.4% | 34.4% | 38.3% | 39.6% |
| Xperi Corporation ($XPER) | 66.7% | 67.5% | 47.6% | 23.4% | 34.3% |
| Lam Research Corporation ($LRCX) | 21.1% | 20.3% | 23.2% | 27.6% | 32.0% |
| Cabot Microelectronics Corporation ($CCMP) | 21.6% | 22.6% | 23.4% | 27.2% | 31.5% |
| Versum Materials, Inc. ($VSM) | 23.4% | 27.6% | 33.3% | 30.8% | 31.0% |
| |
|---|
| Median (37 companies) | 6.8% | 9.8% | 11.4% | 16.0% | 16.2% |
|---|
| DAQO New Energy Corp. ($DQ) | 32.9% | 31.6% | 43.3% | 49.1% | 36.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Rubicon Technology, Inc. ($RBCN) | 15.0% | 4.0% | 3.6% | 0.0% | 58.8% |
| AXT Inc ($AXTI) | 2.4% | 5.4% | 3.4% | 21.6% | 39.6% |
| STR Holdings Inc ($STRI) | 7.9% | 8.1% | 1.6% | 9.0% | 36.6% |
| Photronics, Inc. ($PLAB) | 20.0% | 19.8% | 10.4% | 20.4% | 17.3% |
| PDF Solutions, Inc. ($PDFS) | 4.0% | 4.9% | 10.5% | 10.1% | 15.3% |
| |
|---|
| Median (37 companies) | 2.2% | 2.7% | 2.2% | 2.8% | 2.9% |
|---|
| DAQO New Energy Corp. ($DQ) | 42.2% | 44.7% | 29.5% | 19.8% | 47.4% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| KLA-Tencor Corporation ($KLAC) | 17.9% | 16.5% | 27.2% | 34.0% | 39.9% |
| Lam Research Corporation ($LRCX) | 10.7% | 10.9% | 11.8% | 18.7% | 33.9% |
| Versum Materials, Inc. ($VSM) | | 26.2% | 32.4% | 30.0% | 32.1% |
| Advanced Energy Industries, Inc. ($AEIS) | 8.8% | 30.2% | 41.2% | 45.7% | 31.3% |
| SolarEdge Technologies, Inc. ($SEDG) | -815.6% | 33.6% | 31.2% | 26.5% | 28.6% |
| |
|---|
| Median (39 companies) | 3.4% | 6.0% | 6.9% | 12.2% | 11.2% |
|---|
| DAQO New Energy Corp. ($DQ) | 7.2% | 5.2% | 12.7% | 23.2% | 12.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Xperi Corporation ($XPER) | -0.3x | -0.1x | 4.2x | 5.0x | 2.6x |
| Ultra Clean Holdings, Inc. ($UCTT) | -1.2x | 1.5x | 0.4x | -0.2x | 2.4x |
| Ichor Holdings ($ICHR) | 3.1x | 1.7x | -0.4x | 2.0x | 1.8x |
| Versum Materials, Inc. ($VSM) | -0.2x | -0.1x | 2.7x | 2.1x | 1.4x |
| Entegris, Inc. ($ENTG) | 3.6x | 1.4x | 0.7x | 0.1x | 1.1x |
| |
|---|
| Median (31 companies) | -1.2x | -1.3x | -1.3x | -0.7x | -1.0x |
|---|
| DAQO New Energy Corp. ($DQ) | 4.6x | 4.3x | 2.3x | 0.9x | 1.2x |
