Daqo New Energy IPO Expected This Week

| About: DAQO New (DQ)

Daqo New Energy (NYSE:DQ), a China-based manufacturer of polysilicon for solar power applications, is expected to go public this week.

Business Overview (from prospectus)

We are a leading polysilicon manufacturer based in China. We manufacture and sell high-quality polysilicon to photovoltaic product manufacturers, who further process our polysilicon into ingots, wafers, cells and modules for solar power solutions. With an installed annual production capacity of 3,300 metric tonnes, or MT, as of September 30, 2009, we believe we are one of the largest polysilicon manufacturers in China. We plan to increase our installed annual production capacity to 9,300 MT by March 2012. In addition to ramping up our capacity, we have consistently focused on producing high-quality polysilicon in a cost-efficient manner, which we believe has contributed to our market position and will benefit us and our customers.

Offering: 6.5 million shares at $13 - $15 per share. Net proceeds of approximately $90.4 million will be used to expand manufacturing facilities and for working capital.

Lead Underwriters: Piper Jaffray (NYSE:PJC), Lazard (NYSE:LAZ)

Financial Highlights:

In the nine months ended September 30, 2008, we had revenues of $19.7 million. We sold 69 MT polysilicon, which was all of the polysilicon we manufactured from July to the end of September in 2008. For the nine months ended September 30, 2008, our cost of revenues was $9.1 million and our gross profit was $10.6 million. In the nine months ended September 30, 2009, we had revenues of $79.5 million, including $74.5 million generated from sales of polysilicon and $5.0 million from sales of photovoltaic cells processed from our polysilicon through tolling arrangements with third party cell manufacturers. We sold 901 MT polysilicon and used approximately 16 MT polysilicon to process cells in the nine months ended September 30, 2009, which was substantially all of the 995 MT of polysilicon we manufactured during this period. For the nine months ended September 30, 2009, our cost of revenues was $45.6 million and our gross profit was $33.9 million.


We face competition in China and in the international market in which we may operate. The polysilicon market is dominated by a few major manufacturers with a large number of small manufacturers competing for the remaining small portion of the market. We face competition mainly from top manufacturers who have succeeded in establishing a strong brand name with solar companies. Our major international competitors include Hemlock, MEMC (WFR), REC, Wacker, and our domestic competitors include Jiangsu Zhongneng Polysilicon Technology Development Co., Ltd., China Silicon Corporation Ltd. and Sichuan Xinguang Silicon Science and Technology Co., Ltd.

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