DAQO New Energy Corp. CAPEX surged on 95.0% and Revenue jumped on 16.0%
03/11/2020 • About DAQO New Energy Corp. (
$DQ) • By InTwits
DAQO New Energy Corp. reported 2019 financial results today. Here are the key drivers of the company's long term financial model:
- DAQO New Energy Corp. is a growth stock: 2019 revenue growth was 16.0%, 5 year revenue CAGR was 13.9% at 2019 ROIC 5.6%
- DAQO New Energy Corp. has high CAPEX intensity: 5 year average CAPEX/Revenue was 44.2%. At the same time it's a lot of higher than industry average of 9.5%.
- CAPEX is quite volatile: $279m in 2019, $143m in 2018, $64m in 2017, $67m in 2016, $81m in 2015
- The company has potentially unprofitable business model: ROIC is 5.6%
- It operates with medium-size leverage: Net Debt/EBITDA is 3.5x while industry average is -1.4x
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 surged on 16.0%. Revenue growth showed acceleration in 19Q4 - it increased 57.4% YoY. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 9.0 pp from 36.1% to 27.1% in 2019. During the last 5 years EBITDA Margin topped in 2017 at 49.1% and was declining since that time.
Gross Margin decreased on 9.6 pp from 32.5% to 22.9% in 2019. During the last 5 years Gross Margin topped in 2017 at 44.6% and was declining since that time. SG&A as a % of Revenue showed almost no change in 2019.
Net Income margin decreased on 4.2 pp from 12.6% to 8.4% in 2019. During 2015-2019 Net Income margin topped in 2017 at 28.7% and was declining since that time.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 79.7% in 2019. DAQO New Energy Corp. showed fast CAPEX/Revenue growth of 50.3 pp from 29.5% in 2016 to 79.7% in 2019. For the last three years the average CAPEX/Revenue was 49.0%. The company has spent a lot to CAPEX (294% of EBITDA) to fuel its growth. During the last 5 years CAPEX as a % of Revenue bottomed in 2017 at 19.8% and was growing since that time.
Return on investment
The company operates at low ROIC (5.6%) and ROE (5.4%). ROIC decreased on 6.6 pp from 12.2% to 5.6% in 2019. ROE decreased on 2.9 pp from 8.3% to 5.4% in 2019. During the last 5 years ROIC topped in 2017 at 23.2% and was declining since that time. During the last 5 years ROE topped in 2017 at 28.1% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.5x and Debt / EBITDA is 4.0x. Net Debt / EBITDA jumped on 2.2x from 1.2x to 3.5x in 2019. Debt jumped on 90.0% while cash dropped on 20.8%. During the last 5 years Net Debt/EBITDA bottomed in 2017 at 0.9x and was growing since that time.
DAQO New Energy Corp. has short term refinancing risk: cash is only 22.6% of short term debt.
Valuation and dividends
DAQO New Energy Corp.'s trades at EV/EBITDA 9.3x and P/E 18.9x.
Management team
DAQO New Energy Corp.'s CEO is Longgen Zhang. Longgen Zhang is a founder and has 2 years tenure with the company. DAQO New Energy Corp.'s CFO is Ming Yang. Ming Yang has 5 years tenure at the company.
At the end of financial year the company had 7.4% shares owned by insiders.
The company has 1,892 employees. Average revenue per employee in 2019 was
$184,985.
Financial and operational results
FY ended 12/31/2019
DAQO New Energy Corp. ($DQ) key annual financial indicators| mln. $ | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 182.0 | 229.1 | 323.2 | 301.6 | 350.0 | 16.0% |
| Gross Profit | 37.5 | 80.4 | 144.0 | 98.1 | 80.1 | -18.4% |
| SG&A | 12.6 | 16.1 | 16.0 | 27.1 | 32.5 | 19.9% |
| EBITDA | 57.6 | 99.3 | 158.7 | 109.0 | 94.9 | -12.9% |
| EBIT | | | | | 47.6 | |
| Net Income | 13.0 | 43.5 | 92.8 | 38.1 | 29.5 | -22.6% |
| Stock Based Compensation | | | | | 17.9 | |
Balance Sheet
|
|---|
| Cash | 14.5 | 16.0 | 53.8 | 65.4 | 51.8 | -20.8% |
| Accounts Receivable | | | | | 0.0 | |
| Inventory | | | | | 36.4 | |
| Accounts Payable | | | | | 12.7 | |
| Short Term Debt | 144.1 | 131.7 | 88.6 | 67.4 | 229.9 | 241.0% |
| Long Term Debt | 118.5 | 111.9 | 111.4 | 133.3 | 151.6 | 13.7% |
Cash flow
|
|---|
| Capex | 81.4 | 67.5 | 64.1 | 143.1 | 279.0 | 95.0% |
Ratios
|
|---|
| Revenue growth | -0.3% | 25.9% | 41.1% | -6.7% | 16.0% | |
| EBITDA growth | -4.1% | 72.4% | 59.8% | -31.3% | -12.9% | |
|
|---|
| Gross Margin | 20.6% | 35.1% | 44.6% | 32.5% | 22.9% | -9.6% |
| EBITDA Margin | 31.6% | 43.3% | 49.1% | 36.1% | 27.1% | -9.0% |
| EBIT Margin | | | | | 13.6% |
| SG&A, % of revenue | 6.9% | 7.0% | 5.0% | 9.0% | 9.3% | 0.3% |
| SBC, % of revenue | | | | | 5.1% |
| Net Income Margin | 7.1% | 19.0% | 28.7% | 12.6% | 8.4% | -4.2% |
| CAPEX, % of revenue | 44.7% | 29.5% | 19.8% | 47.4% | 79.7% | 32.3% |
|
|---|
| ROIC | 5.2% | 12.7% | 23.2% | 12.2% | 5.6% | -6.6% |
| ROE | 5.8% | 17.0% | 28.1% | 8.3% | 5.4% | -2.9% |
| Net Debt/EBITDA | 4.3x | 2.3x | 0.9x | 1.2x | 3.5x | 2.2x |
People
|
|---|
| Insider ownership | | | | | 7.4% | |
| Employees | | | | | 1,892 | |
| Revenue/Employee, th. $ | | | | | 185 | |
DAQO New Energy Corp. ($DQ) key quoterly financial indicators
| mln. $ | 19Q1 | 19Q2 | 19Q3 | 19Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 81 | 66 | 84 | 119 | | -21.6% | -1.4% | 24.6% | 57.4% |
| EBITDA | 18 | 12 | 20 | 45 | | -65.1% | -61.1% | 325.1% | 64.4% |
| Net Income | 7 | -2 | 5 | 20 | | -77.9% | -114.9% | | 75.7% |
Balance Sheet
|
|---|
| Cash | 65 | 31 | 27 | 52 | | 4.2% | -80.7% | -75.5% | -20.5% |
| Short Term Debt | 110 | 165 | 148 | 230 | | -22.2% | 27.2% | 189.6% | 241.2% |
| Long Term Debt | 150 | 152 | 164 | 152 | | 38.4% | 63.6% | 37.4% | 14.0% |
Ratios
|
|---|
| Gross Margin | 23.0% | 13.0% | 22.0% | 30.0% | | -21.8% | -27.6% | 2.9% | 7.6% |
| EBITDA Margin | 22.2% | 18.2% | 23.8% | 37.8% | | -27.7% | -27.9% | 16.8% | 1.6% |
| Net Income Margin | 8.6% | -3.0% | 6.0% | 16.8% | | -22.0% | -23.1% | 33.1% | 1.8% |
Peers in Semiconductor Equipment
Below we provide DAQO New Energy Corp. benchmarking against other companies in Semiconductor Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| 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. ($SEDG) | 144.0% | 50.7% | 23.9% | 54.4% | |
| |
|---|
| Median (37 companies) | -0.5% | 6.9% | 24.2% | 15.5% | 0.7% |
|---|
| DAQO New Energy Corp. ($DQ) | | 25.9% | 41.1% | -6.7% | 16.0% |
Top companies by Gross margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Xperi Corporation ($XPER) | 99.8% | 99.8% | 98.3% | 96.7% | |
| KLA-Tencor Corporation ($KLAC) | 56.8% | 61.0% | 63.0% | 64.1% | |
| Teradyne, Inc. ($TER) | 55.8% | 54.7% | 57.2% | 58.1% | |
| Nova Measuring Instruments Ltd. ($NVMI) | 51.9% | 45.9% | 59.1% | 57.8% | |
| Nanometrics Incorporated ($NANO) | 47.9% | 51.6% | 52.9% | 56.7% | |
| |
|---|
| Median (38 companies) | 38.9% | 40.0% | 43.2% | 41.2% | 35.7% |
|---|
| DAQO New Energy Corp. ($DQ) | 20.6% | 35.1% | 44.6% | 32.5% | 22.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| KLA-Tencor Corporation ($KLAC) | 26.4% | 34.4% | 38.3% | 39.6% | |
| Xperi Corporation ($XPER) | 67.5% | 47.6% | 23.4% | 34.3% | |
| Lam Research Corporation ($LRCX) | 20.3% | 23.2% | 27.6% | 32.0% | |
| Cabot Microelectronics Corporation ($CCMP) | 22.6% | 23.4% | 27.2% | 31.5% | |
| Versum Materials, Inc. ($VSM) | 27.6% | 33.3% | 30.8% | 31.0% | |
| |
|---|
| Median (37 companies) | 9.4% | 11.4% | 16.0% | 16.2% | 13.1% |
|---|
| DAQO New Energy Corp. ($DQ) | 31.6% | 43.3% | 49.1% | 36.1% | 27.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Rubicon Technology, Inc. ($RBCN) | 4.0% | 3.6% | 0.0% | 58.8% | |
| AXT Inc ($AXTI) | 5.4% | 3.4% | 21.6% | 39.6% | |
| STR Holdings Inc ($STRI) | 8.1% | 1.6% | 9.0% | 36.6% | |
| Photronics, Inc. ($PLAB) | 19.8% | 10.4% | 20.4% | 17.3% | |
| PDF Solutions, Inc. ($PDFS) | 4.9% | 10.5% | 10.1% | 15.3% | |
| |
|---|
| Median (37 companies) | 2.4% | 2.2% | 2.8% | 2.9% | 4.1% |
|---|
| DAQO New Energy Corp. ($DQ) | 44.7% | 29.5% | 19.8% | 47.4% | 79.7% |
Top companies by ROIC, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| KLA-Tencor Corporation ($KLAC) | 16.5% | 27.2% | 34.0% | 39.9% | |
| Lam Research Corporation ($LRCX) | 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) | 30.2% | 41.2% | 45.7% | 31.3% | |
| SolarEdge Technologies, Inc. ($SEDG) | 33.6% | 31.2% | 26.5% | 28.6% | |
| |
|---|
| Median (39 companies) | 6.6% | 6.9% | 12.2% | 11.2% | 10.6% |
|---|
| DAQO New Energy Corp. ($DQ) | 5.2% | 12.7% | 23.2% | 12.2% | 5.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Xperi Corporation ($XPER) | -0.1x | 4.2x | 5.0x | 2.6x | |
| Ultra Clean Holdings, Inc. ($UCTT) | 1.5x | 0.4x | -0.2x | 2.4x | |
| Ichor Holdings ($ICHR) | 1.7x | -0.4x | 2.0x | 1.8x | |
| Versum Materials, Inc. ($VSM) | -0.1x | 2.7x | 2.1x | 1.4x | |
| Entegris, Inc. ($ENTG) | 1.4x | 0.7x | 0.1x | 1.1x | |
| |
|---|
| Median (31 companies) | -1.3x | -1.3x | -0.7x | -1.0x | -0.9x |
|---|
| DAQO New Energy Corp. ($DQ) | 4.3x | 2.3x | 0.9x | 1.2x | 3.5x |
