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China Sunergy Co., Ltd. (NASDAQ:CSUN)

Q1 2014 Earnings Conference Call

May 28, 2014 08:00 AM ET

Executives

Stephen Cai - CEO

Yongfei Chen - CFO

Elaine Li - Senior IR Manager

Analysts

James Medvedeff - Cowen & Company

Xu Min - ROTH Capital Partners

Pranab Sarmah - AM Capital Ltd.

Operator

Welcome to China Sunergy’s First Quarter 2014 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

Ms. Elaine Li, Senior Investor Relations Manager; you may begin your conference.

Elaine Li

Thank you, operator and welcome to China Sunergy’s first quarter 2014 earnings conference call. This is Elaine Li speaking, CSUN’s Senior Investor Relations Manager. We have posted a presentation on our Web site and during today’s discussion we will be closely following and referring to that. With us today are China Sunergy’s CEO, Mr. Stephen Cai; CFO, Mr. Yongfei Chen.

Today, before the market opened, the Company issued a press release announcing our first quarter 2014 financial results and our guidance for the second quarter. This press release is also available on the Investor Section of our Web site at www.csun-solar.com.

To start, Stephen will present an overview of our first quarter results and a quick review of important developments at CSUN and the solar industry update. Then, CFO, Mr. Chen will explain our financial results in more detail. Following that, Stephen will close with a quick technology update and our guidance. Afterwards, they will all be available to take your questions.

Before I turn the call over to Stephen, I’d like to remind our listeners that the management’s prepared remarks include forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Act of 1995. Forward-looking statements involve inherent risks and uncertainties and as such, our results may be materially different from the views expressed here today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. China Sunergy does not undertake any obligation to update any forward-looking statements, except as required under applicable law. As a reminder, this conference is being recorded.

Now, I’d like to turn the call over to CEO, Mr. Stephen Cai. Stephen?

Stephen Cai

Thank you. Thank you all for joining today’s conference call. We are pleased that in the first quarter we executed and made good progress on our four key initiatives for 2014 and laid a foundation for the future development.

Firstly, we’ve been actively seeking to upgrade the quality of our OEM customers and this has resulted in our ability to secure initial orders from a notable South Korea customer in May. We are also making headway into the OEM markets in Japan and anticipate the securing order there in the second half of this year. Thus far, we’re on plan to extend -- expand our oversea OEM volume to full extend and we anticipate earning high gross margins and generating better cash flows from OEM arrangements.

Secondly, we make notable progress to further integrate our global supply chain for wafer. In May we established a sourcing agreement with an oversea polysilicon supplier and with a wafer processor. This arrangement enable us to purchase wafer without incurring anti-dumping tax thereby lowering our total wafer costs, while obviously enabling us to better control wafer quality.

Based on our initial estimates, the resulting cost of the wafer secure us through these arrangement will set us about $0.02 to $0.03 per watt or came to 15% lower than the current cost, as you may recall wafer cost on average has historically accounted for about 40% in our total cost of the module and the lower average wafer cost of 2% to 3% per watt can translate into the potential improvement of about 300 to 400 basis points to our gross margin.

Moreover, we were also be able to deliver this lower cost wafer directed to our Turkey plant to produce cell and we estimate this could lead to a saving of $0.03 to $0.04 per watt or 15% to 20% lower than the current cost.

Thirdly, we enhance our manufacturing processes by upgrading to automated soldering machines at our manufacturing base in Nanjing. Based on our assessment, the upgrades in line were improved processing rate by roughly 50% and lower manufacturing labor cost by over 30%. At the same time, the upgrade line will also significantly improve quality and consistency, which in fact is one of the key winning criteria for OEM business from South Korea and the Japanese (technical difficulty). We aim to complete the four upgrades in Nanjing by end of June and anticipate this will meaningfully contribute to our profitability in the second half of 2014.

Fourthly, we gain additional oversea financing channels with an additional loan of $3 million from the local banks in Turkey. As you can see we make good progress on each of our key initiatives. With that said, let me now provide you with a more detailed review of our first quarter results.

As summarized on Slide 4, in the first quarter of 2014 we shipped a total of 140.2 megawatt, representing growth of 36.8% year-over-year, embedded in the total shipments was nearly (technical difficulty) to OEM including 16.5 megawatts in module and a 33.3 megawatt in cell.

Blended ASP for modules in the first quarter increased by 7% -- $0.07 sequentially to $0.66 per watt. This significant sequential rise of nearly 12% in ASP for module was primarily driven by more sales to higher priced regions, especially in Japan and France, and lower sales to China. Overall, we achieved the gross margin of 3.7% and delivered total revenue of $62.7 million.

Please turn to Slide 5 for update on our operations in Turkey. As you recall our top priority in Turkey was to ramp up production and capacity utilization in order to enhance efficiency and profitability.

In the first quarter, our monthly module production volume from the Turkey plant increased to 11 megawatts, or nearly half of the total designed capacities. During quarter, total sales volume from Turkey was 29 megawatt, a sequential increase of 16% from the 25 megawatts in the previous quarter.

During the first quarter, we fulfilled a solar module supply contract totaling 7.8 megawatts for project in Romania, which is developed and owned by a well-known Chinese solar conglomerate. Additionally, our Turkey made module were shipped to 240 kilowatt project by Asunim, in Turkey and a 540 kilowatt solar park by Fibernet Solar, a Slovenia APC company in Croatia.

All three customers are repeat customers as they value our excellent product quality, strong fulfillment capability and a competitive price. Benefiting from these customer successes and a higher production volume, we further extended the gross margin at our Turkey plant by 100 basis points to 9% for the first quarter of 2014, much higher than the average gross margin from our China plant.

On a stand-alone basis, our Turkey plant is already profitable and as we further ramp production there, we’re confident to generate great profit for the remainder of 2014 and beyond.

Now please turn to Slide 6 for our revenue breakdown by geography. This quarter we’ve strategically expand our market presence in Japan as the country offers one of the highest ASP for modules. During the quarter, our total shipment to Japan more that doubled to 31 megawatts from 13 megawatt in the previous quarter.

This April, we’ve opened our first sales office Japan and in May we established a joint venture with a local partner. Thus far, we’ve already completed registration and anticipate our localized team will further upgrade our knowledge and expertise, which should help us to further expand shipment to Japan in the coming quarters.

With Japan leading the way, Asia continued to be the largest market for us and accounted to 63.5% of total revenue during the first quarter respectively. Japan, China, and India accounted for 33.4%, 21.5%, and 8.2% of the total revenue. We shipped less to China this quarter as the overall market in China faced a severe overhearing from excess inventory in the channels that persisted throughout the first several months of 2014.

Cells to European markets represented 35.7% of total revenue in the first quarter, with France and Germany contributing 21.2% and 10.3% of total revenue respectively. The pricing environment in France and Germany remains robust with ASP of more than $0.73, much higher than our overall ASP of $0.66 in the first quarter.

Now let’s turn to Slide 7 for a review of the conversion cost. This quarter, conversion cost of the cell were at $0.14 per watt which improved by $0.01 from the previous quarter. The conversion cost of the module however increased by $0.01 from the previous quarter to $0.20 per watt mainly due to the high production mix from our Turkey plant where manufacturing costs is comparatively higher than that at our Mainland factories.

During the first quarter, the conversion cost of the module at the Turkey plant improved to $0.22 per watt compared to the $0.23 per watt in the first quarter and a $0.26 per watt two quarters ago. As our Turkey plant further expands, manufacturing scale and it catches up to our normal operating efficiency, we anticipate the conversion cost of the module in the Turkey will continue to improve by another $0.02 in 2014. As such, we’re confident we can further improve our overall conversion cost in 2014.

Now I’d like to turn the call over to Yongfei Chen, our CFO, to go through the numbers in detail.

Yongfei Chen

Thank you, Stephen. During the first quarter, from the financial perspectives, managing a very firm working capital remain as our top priority and I like to highlight three metrics that demonstrate our objectives.

Firstly, we successfully renewed approximately 83% over the short-term loss due by the end of the first quarter of 2014. Secondly, we achieved a savings of $2.4 million in finance expenses. Thirdly, we imposed a strict top down control on operating expenses, which lowered general spending by $2.5 million compared with previous quarter.

Now let’s turn to Slide 8 of the PowerPoint presentation for more details on the first quarter financials. In the first quarter of 2014 we shift a total of 140.2 megawatts, an increase of 36.8% from 102.5 megawatts in the same period of last year and a decrease of 40.5% over the previous quarter due to weaker demand in China.

Correspondingly, our revenue this quarter was $62.7 million, up by 1.6% from the same period of last year, but down by 50% sequentially. Our module ASP increased $0.07 sequentially to $0.66, primarily due to increased shipments to higher priced regions.

Total revenue from our self-branded cell and module was $57.5 million from approximately 91.7% of all revenue during the first quarter of 2014. The remainder $5.2 million was revenue from OEM arrangements.

Gross profit was $2.3 million on gross margin of 3.7%, compared to gross margin of 0.4% for the first quarter of 2013, and 5.2% for the fourth quarter of 2013. The year-over-year increase in gross margin during the quarter was mainly attributable to the decrease in manufacturing cost. Excluding our inventory provision of $0.5 million, non-GAAP gross profits totaled $2.9 million, a non-GAAP gross margin of 4.6% for the quarter.

During the quarter total OpEx decreased by $5.1 million year-over-year to $10.1 million. G&A expenses which includes a reversal of bad debt provision of $0.4 million for the quarter or $6.4 million, a significant improvement from $7.6 million and $8.9 million respectively in the same periods of last year and previous quarter. Sales and marketing expenses was $3.2 million, much improved from $5.8 million a year-ago and $3.9 million last quarter.

Net interest expense decreased to $6.8 million compared with $7.5 million a year-ago, and $9.2 million in the previous quarter. This savings in interest expenses were mainly attributable to our continuous efforts in managing working capital and employing less discounted notes receivables.

All in all, net loss attributable to ordinary shareholders was $14.7 million and net loss per ADS was $0.99 in the first quarter. Non-GAAP net loss attributable to ordinary shareholders was $14.6 million and net loss per ADS was $0.98.

Going into our balance sheet and cash items on Slide 9. This quarter cash and cash equivalents totaled $30.1 million and restricted cash was $200.3 million. Our total inventories increased by $19.5 million sequentially to $64.1 million and operating cash outflow was $35.1 million compared with $41.7 million in the same period of last year, and $6.3 million in the previous quarter.

CapEx was $6.3 million this quarter, a decrease from $18.7 million and $9.6 million from the same period of last year and the previous quarter.

Let me now turn the call over to Stephen to provide you with our technology updates and guidance.

Stephen Cai

Thank you, Mr. Chen. We once again made very significant improvement in conversion efficiency during the first quarter as displayed on Slide 10. Average efficiency of our multi-cell improved sequentially to 17.51% from 17.43%, and the mono-cells to 18.9% from 18.66% during the first quarter. Additionally, our high efficiency mono-cells using a combination of approved technology and our own innovations which conversion efficiency milestone are 20.47% in the later making one of the highest jump in recent quarters.

This quarter, average QSAR II cell efficiency in mass production further improved to 19.5% from 19.2% in the first quarter, moreover our piece highest efficiency path 20% during the first quarter. Lastly we also received a Black & Vitch U.S. market certification for all of the China based plants. In our Turkey plant was in this process to receive Back & Vitch as well as UL certification.

In conclusion we remain committed to executing our key initiatives for 2014 and further lowering our cost structure. We are seeing solid progress in our effort to upgrade our OEM customer base, integrate our supply chain and enhance our manufacturing processes and obtain additional overseas financing. We anticipate this effort’s will significantly lower our cost and drive meaningful improvements to profitability in the second half of 2014.

Now turning to our guidance on Slide 11. We estimate that the total shipment for second quarter of 2014 will range from 150 megawatts to 160 megawatts, including 40 megawatts to 50 megawatts of cell and the module shipment and OEM arrangement. We expect gross margin for the second quarter of 2014 to remain stable at the level of the previous quarter.

At this time, we’d like to take your question. If you have additional questions after this call please do contact us afterwards.

Operator, you may begin with the first question.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from the line of James Medvedeff from Cowen & Company. Please go ahead. Mr. James your line is open. You may ask your questions.

James Medvedeff - Cowen & Company

I apologize, I had it on mute. Can you hear me now?

Stephen Cai

Yes, clearly.

James Medvedeff - Cowen & Company

Yes, you can hear me clearly?

Stephen Cai

Yes.

Elaine Li

Yes, loud and clear.

James Medvedeff - Cowen & Company

Okay. I wanted to get a little bit more information perhaps on the shipments. So, were there any modules that were shifted to projects this year -- this quarter?

Elaine Li

You mean our own projects?

James Medvedeff - Cowen & Company

Your own; you downstream projects. You’ve shown asset on the balance sheet of $10 million.

Stephen Cai

Yes. This quarter there isn't no, any project which could upset our module supply.

James Medvedeff - Cowen & Company

Okay. And then just to be, to get all the little details. Were there any sales of off-spec cells?

Stephen Cai

Yes, correct. Yes, I thought this be 6.4 megawatts.

James Medvedeff - Cowen & Company

And that’s included in the 39.7 total cells that you reported?

Stephen Cai

Yes, yes.

James Medvedeff - Cowen & Company

Thank you. The ASP for cell tolling or OEM arrangements; what is that ASP?

Stephen Cai

Okay, that’s -- yes, the cells ASP for OEM arrangement, the ASP is about $0.13 per watt. And modules of cells -- yes modules is about $0.04 per watt, OEM based.

James Medvedeff - Cowen & Company

OEM, yes, I understand. And what is the ASP for standard cells that you sell?

Stephen Cai

Modules?

Elaine Li

No, cell.

Stephen Cai

Cell, okay. Yes, cell is about $0.28 per watt.

James Medvedeff - Cowen & Company

And it appears that you may have purchased some cells in the quarter also, is that true?

Stephen Cai

Yes, you’re right. Because we need some special spec of the cell we required for high efficiency module to supply in Japan [ph] [the module]. So we purchased a very high efficiency cell from our side.

James Medvedeff - Cowen & Company

Okay. So, could you just -- could you share how many megawatts of cells you purchased and what was the ASP of those?

Stephen Cai

So, external purchase of the cell where the volume is about just the 53 megawatt.

James Medvedeff - Cowen & Company

And the ASP?

Stephen Cai

And ASP is $0.41 per watt, which is including the power Taiwanese cell we purchased for Turkey plant.

James Medvedeff - Cowen & Company

Okay and thanks for the information. I’ll get back in the queue and congratulations and I look forward to hearing more from you later in the year. Thank you.

Stephen Cai

Thank you.

Operator

Thank you. And our next question comes from the line of Xu Min from ROTH Capital. Please go ahead.

Xu Min - ROTH Capital Partners

Hi, Stephen, Mr. Chen, thanks for taking my question. My first question is related to your Turkey plant. You mentioned your Turkey production in Q1 was 11 megawatt. What do you expect the Q2 production to be and what was the ASP for the shipment out of your Turkey plant, and do you have space for further expansion in your Turkey facility?

Stephen Cai

Yes, second quarter also -- I think so while still it remains 11 megawatts per month, and possibly later off in the June possibly maybe we will have -- we will reach to 12 megawatt in the June, but the average is above 11 to 12 megawatts per month. Yes, in end of June or early of July our margin capacity will expand to a designed level such as the 300 megawatt per year. So, at moment we just only have the 200 megawatt capacity which could be used. But now -- but by end of June we will reach to 25 megawatt per month as the capacity in Turkey plant.

Xu Min - ROTH Capital Partners

Great. And what was the ASP for the shipment out of your Turkey plant?

Stephen Cai

Okay. ASP now as to follow-up this European average price, so about $0.70 per watt.

Xu Min - ROTH Capital Partners

All right. And do you have space for further expansion? Do you have plan to further expand since your Turkey facility gross margin is higher than corporate average?

Stephen Cai

Yes, in second half of this year we are still continuing to find this another space to further expand the plant. So this is the plant we now set up, but at current -- the current place there are no any further expand the space to be developed. So, we will find another place in Turkey. And additionally the current space we also need to -- we also have now current 100 megawatt of cell production line, we will start it -- we will really start from June to produce the low cost there in Turkey. But we have also -- we have another plant in second half of this year to expand another 100 megawatt of cell production line in same place.

Xu Min - ROTH Capital Partners

Got it. So basically after you expand everything you will have 300 megawatts module and 200 megawatt cell?

Stephen Cai

You’re right.

Xu Min - ROTH Capital Partners

Great. So my second question is on the Japan market. How many megawatts do you expect to ship to Japan in Q2, and what percentage of Japan shipment was OEM and what was the Japan ASP in Q1 and in Q2?

Stephen Cai

In Japan -- in second quarter, Japan we're -- the estimate is at least over 20 megawatts, but there is no any OEM business in the second quarter.

Xu Min - ROTH Capital Partners

And what's the Japan ASP in Q1 and Q2?

Stephen Cai

Okay, Japan I think still this remain the stronger ASP, Q1 average is 67, Q2 I think will remain in this level.

Xu Min - ROTH Capital Partners

Okay, all right. My last question is on China market. What percentage of your shipment to China is into the distributor generation market and what do you expect the total China DG market to be in 2014?

Stephen Cai

This is total demand; you’re saying that, right?

Xu Min - ROTH Capital Partners

Yes, I am talking -- first of all I am talking about your shipment. So, for your shipment to China in Q1, is there any shipment that’s into the distributor projects?

Stephen Cai

Okay. Q1, we have about 36.7 megawatt and so far these are very small numbers to be supply to the distributor project because so far there is no any, we call this execution law to be launched by Central Government. So that is, I’d say that a segment project, which is not -- it belongs to this Chinese Government plan. So that is the situation.

Xu Min - ROTH Capital Partners

And what do you expect like for total market, what can be the DG market in 2014 for China?

Stephen Cai

Okay. So my estimate is the total demand also from the China market is from the 10 to 12 gigawatt. Why this, my view is slight different from the public numbers because the 8 gigawatt came from this ground project in 2014 and 2 to 4 gigawatts from the distributor project possibly. So far there is the uncertainty, the situation for the distribution project because so far there is no any law to be launched by Central Government.

Xu Min - ROTH Capital Partners

Got it. Thanks for the color, Stephen.

Stephen Cai

Thank you, Xu Min.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of Pranab Sarmah from AM Capital. Please go ahead.

Pranab Sarmah - AM Capital Ltd.

Hi, thank you for taking my question. My first question is on the Turkey plant. What is your production cost now on the Turkey plant, and how much do you expect it could be down when it is fully ramped probably by beginning of next year I guess, when you have 200 megawatt cell and 300 megawatts modules?

Stephen Cai

Okay. So, our modules conversion cost now is $0.22 per watt in Turkey plant. And we buy these external cells from -- currently from Taiwan. The ASP of the cell is $0.41 to $0.42 per watt.

Pranab Sarmah - AM Capital Ltd.

So how much you think that you’ll be able to bring it down by end of this year -- that cost?

Stephen Cai

So lots of change from the total global situation, I think the end of this year’s Taiwanese cell the ASP will come to $0.38 probably is my forecast. So, there also Turkey module conversion cost will reach to at $0.20 per watt.

Pranab Sarmah - AM Capital Ltd.

$0.20 plus $0.38 is about $0.58 sort of you might expect to ramp the year. Thank you.

Stephen Cai

Yes.

Pranab Sarmah - AM Capital Ltd.

That’s a good number in Turkey. And could you also update the demand supply situation, the domestic in Turkey, I understand there are a little bit of incentives are going on in Turkey market through your solar project, what you have seen at the Turkey market?

Stephen Cai

Yes, two and half years ago we heard a lot of the story about this Turkey market while be robust -- to raise about the robust, but so far just several weeks ago, Turkey government announced that they will launch their 600 megawatt for coming quarters. But still there will be some uncertainty when that 600 megawatt will be installed -- will be finished with this Turkey government incentive. But since like Turkey local market is stocked, so maybe in coming quarters that will be a warm market I think.

Pranab Sarmah - AM Capital Ltd.

And my last question will be, you have a manufacturing plant in Turkey, will you have some advantage in domestic projects in Turkey and if so, means what type of domestic project will be expected over next one year and how you’re going to fund them?

Stephen Cai

Yes, if we make local module in Turkey the project -- the local’s project could gather some high incentive which means that if the project buys local module it could carry incentive from a government and that’s the situation.

Pranab Sarmah - AM Capital Ltd.

Okay. Thank you very much.

Stephen Cai

Thank you.

Operator

Thank you. And our next question comes from the line of (indiscernible). Please go ahead.

Unidentified Analyst

Hi, Stephen.

Stephen Cai

Hi, (indiscernible).

Unidentified Analyst

Just a follow-up question on the Turkey production cost. You forecasted that Taiwanese cell probably will drop to sort of $0.08 in the second half, and you also have roughly 200 megawatt cell line you’re going to bring to production bring on line in the second half. What would be the target cost for your own cell production in Turkey?

Stephen Cai

Okay. Our cell target -- our target this -- this is a 30 -- 36 is our target in the second half of this year. But of course if we continue to manage, organize our global supply chain possibly we still could be going down from $0.36 per watt to possibly $0.34.

Unidentified Analyst

If you achieve your target by the end of the year, you’re at $0.36 self produce cell and then adding $0.20 to your production cost in Turkey will reach roughly $0.56, is that your target?

Stephen Cai

Yes, of course. Yes, we hope.

Unidentified Analyst

And your target market for your Turkey production is European Union right?

Stephen Cai

Still there are mainly two folks on this are Europe, but possibly we will do some insight possibly if we have cost competitive to the other markets then we will focus on other market. For example say U.S. market possibly, still is our opportunity.

Unidentified Analyst

Got you. And what is your thought or your view on European ASP in the second half?

Stephen Cai

Will be going down little bit. Currently is the €0.51 to -- our average is €0.51 to €0.52, but in the second half we will touch down €0.49 -- below €0.50 maybe.

Unidentified Analyst

So it's probably $0.67’ish?

Stephen Cai

Yes, for cost. Yes, possibly.

Unidentified Analyst

And $1.35 for exchange, so we’re looking at, if you achieve your goal and to the market how corporate stay at close to $0.70 you’re looking at close to above 20% gross margin for on your Turkey plant?

Stephen Cai

Yes, correct. If we -- yes Turkey will be profitable by our global supply chain for the cost saving and also operating cost saving. So two ways we can control our cost totally and we can get more than 15% of gross margin. So, as we increase the production and the shipment from Turkey we expect even there’s a great profit from there, this is my, this is our -- one of the strategies in second half this year.

Unidentified Analyst

Right. And what is the biggest challenge for you to reach your both production and cost target in Turkey?

Stephen Cai

Challenge is confirmed, is the supply chain. Firstly our cost now is logistic cost is become the main -- not as main, it's a little bit sensitive the cost increase. So we now will change some shipment away to do that. So just the cell normally we take the flight -- flight this supply, but maybe later on we will use this -- the sea shipment such as. And another thing is that we will use more automatically machine such as more soldering machine, we will save the local labor cost.

Unidentified Analyst

Got you. And you have roughly how many megawatts on your balance sheet I mean downstream products?

Stephen Cai

You mean our own project?

Unidentified Analyst

Right, because I saw you have roughly $10 million worth product guide set on your balance sheet?

Stephen Cai

Just few megawatts.

Unidentified Analyst

Are those in China or are those in Europe; where are the products located?

Stephen Cai

U.K.

Unidentified Analyst

And what's -- it looks like you put in the current assets or you’re planning to sell it?

Stephen Cai

Yes, of course. U.K. its 5 megawatts.

Unidentified Analyst

And what is your target gross margin on those products?

Stephen Cai

The gross margin is at the 5%. 5% to 10%. So far we do not reached the final agreements for that.

Unidentified Analyst

Are you talking to the buyer -- potential buyers and looking for sale?

Stephen Cai

Yes, correct.

Unidentified Analyst

Okay. And can you give us some thought on your downstream strategy in China?

Stephen Cai

Okay. We were continue to develop this planned project in China, pipeline our targets, possibly well to 50 megawatts. As you know now this year there is a lot of uncertainty to get this -- run the project. So we’re trying our best. But so far we cannot fix the number.

Unidentified Analyst

Okay. So you’re looking at the downstream opportunity, but you don’t have any pipeline yet?

Stephen Cai

We have the pipeline, but so far we can -- we haven’t got the permission.

Unidentified Analyst

Permit -- you haven’t got the final permit from the government?

Stephen Cai

Yes.

Unidentified Analyst

Okay, got it.

Stephen Cai

(Indiscernible) yes.

Unidentified Analyst

Got it. All right. Thank you for taking the call. Thank you.

Stephen Cai

Yes.

Operator

Thank you. That does close the -- end of the session. Now I will turn the call back to the management for closing remarks.

Stephen Cai

Thank you for participating in today’s quarterly earning call. We look forward to speaking with you again soon. Thank you.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.

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