Good day, welcome to the Daqo New Energy Corp. Fourth Quarter 2025 Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then 1 on a touch-tone phone. To withdraw your question, please press Star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Jessie Zhao, Investor Relations Director. Please go ahead.

Hello, everyone, I am Jessie Zhao, the Investor Relations Director of Daqo New Energy Corp. Thank you for joining our conference call today. Daqo New Energy Corp. just issued its financial results for the fourth quarter of 2025, which can be found on our website at dqsolar.com. Today, attending the conference call, we have our Deputy CEO, Ms. Anita Xu, our CFO, Mr. Ming Yang, and myself. Our Chairman and CEO, Mr. Jiang Xu, is on a business trip now, so Ms. Anita Xu will deliver our management remarks on behalf of Mr. Xu. Today's call will begin with an update from Ms. Xu on market conditions and company operations, and then Mr. Yang will discuss the company's financial performance for the quarter. After that, we will open the floor to Q&A from the audience. Before we begin the formal remarks, I would like to remind you that certain statements on today's call, including expected future operational and financial performance and industry growth, are forward-looking statements that are made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statements. Further information regarding these and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission. These statements only reflect our current and preliminary review as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today's call is as of today, and we undertake no duty to update such information except as required under applicable law. During the call, we will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer this translation into U.S. dollars solely for the convenience of the audience. I will now turn the call to our Deputy CEO, Ms. Anita Xu. Ms. Xu, please go ahead.

Hello, everyone. This is Anita. Happy Year of the Horse, and I will now deliver the remarks on behalf of our chairman, Mr. Xu. In 2025, China's NT Revolution Initiative supported the solar PV industry's gradual emergence from a cyclical downturn. As a result, solar products market prices rebounded from the third quarter onward, with the polysilicon sector posting the most notable gains. Following this trend, our utilization rate increased from 33% in Q1 to 55% in Q4, bringing our annual production volumes to 123,652 metric tons, in line with our guidance of 121,000-124,000 metric tons, representing a 39.7% year-over-year decrease from 205,068 metric tons in 2024. Furthermore, our 2025 sales volume reached 126,707 metric tons, exceeding production volume and reducing year-end inventory to a reasonable level. In the second half of 2025, we strategically ramped up sales efforts to capitalize on favorable pricing dynamics. The strong market response highlighted growing customer confidence in our product quality and their continued preference for our brand in this new pricing environment. Polysilicon ASPs decreased 7.2% from $5.66 per kilogram in 2024 to $5.25 per kilogram in 2025. This lower pricing, combined with reduced sales volume, resulted in revenue of $665 million in 2025, compared to $1 billion in 2024. Despite the decline in our top line, we significantly narrowed our losses during the year compared to 2024. In particular, EBITDA swung to a positive $1.7 million in 2025, compared to a negative $337.4 million in 2024. While net loss attributable to Daqo New Energy Corp. shareholders narrowed to $170.5 million from $345.2 million in 2024. Moreover, we generated $66.1 million in positive operating cash flow in 2025, marking a notable turnaround from the $435 million outflow recorded in 2024. We continue to maintain a strong balance sheet and ample cash reserves. At the end of 2025, we had a cash balance of $980 million, short-term investments of $114 million, bank notes receivable of $136 million, and a fixed-term bank deposit balance of $1 billion. In total, these highly liquid assets stood at $2.27 billion, representing an increase of $57 million compared to the end of the previous quarter. This solid financial foundation provides us with confidence and strategic flexibility to navigate the ongoing market recovery and capitalize on long-term opportunities. Operationally, we continued to implement proactive measures in the fourth quarter to mitigate market oversupply, including operating at a nameplate capacity utilization rate of 55%. Total polysilicon production for the fourth quarter was 42,181 metric tons, in line with our guidance range of 39,500-42,500 metric tons. Our sales volume for the quarter reached 38,167 metric tons. In addition, we comprehensively reduced our production costs through process improvements, manufacturing efficiency gains, and raw material cost optimization. Extending our ongoing cost reduction initiatives, total production costs declined by 9% to $5.83 per kilogram in Q4 2025, from $6.38 per kilogram in Q3 2025. Total idle facility-related costs, which consist primarily of non-cash depreciation expenses, alongside approximately $0.10 per kilogram in cash costs for maintenance, also fell to $0.74 per kilogram in Q4 from $1.18 per kilogram in Q3, driven by higher production levels. Notably, cash costs decreased by 2% from $4.54 per kilogram in Q3 to a new record low of $4.46 per kilogram in Q4. In light of current market conditions, we expect our total polysilicon production volume in the first quarter of 2026 to be approximately 35,000-40,000 metric tons, and our full year 2026 production volume to be in the range of 140,000-170,000 metric tons. Chinese authorities demonstrated strong resolve in tackling irrational competition and industry overcapacity, formally designating anti-involution as a national priority within China's fifteenth Five-Year Plan, and the solar PV industry was a key focus of these efforts. These initiatives have driven a structural shift from price-based competition to value-driven differentiation. To advance industry governance, authorities deployed targeted measures, including standards, guidance, quality supervision, price enforcement, and promotion of technological progress. Specifically, this involved updating legislative frameworks such as the revised Anti-Unfair Competition Law and the Draft Amendment to the Pricing Law, which mandate that sales shall not be below cost. Furthermore, a new mandatory national standard was drafted to set strict energy consumption limits for polysilicon production on a per-unit basis. Led by the China Photovoltaic Industry Association, major polysilicon manufacturers have proactively responded to these initiatives, enforcing self-discipline and exploring innovative market-oriented approaches to combat excess capacity and pricing violations. These coordinated efforts have yielded measurable results in curbing overcapacity. The overall production volume fell by 28.4% to 1.32 million metric tons in 2025, and market prices surged more than 50% from the mid-2025 lows to RMB 50-56 per kilogram by year-end. Looking ahead, we expect anti-involution initiatives will remain a central theme for the solar PV industry, supporting a more balanced supply and demand dynamic and driving higher quality growth through 2026. More broadly, the solar PV industry continues to exhibit compelling long-term growth prospects. In 2025, China's newly installed solar PV capacity grew 14% year-over-year to 317 gigawatts, setting yet another record high and proving that market potential continues to exceed expectations. As the global AI industry scales rapidly, space-based solar power is increasingly viewed as a vital solution to the immense and expanding energy demands of AI data centers, creating a significant new growth engine for the sector. Looking ahead, as one of the world's lowest-cost producers of the highest-quality N-type polysilicon, with a strong balance sheet and no debt, we remain optimistic about the sector and believe we are ideally positioned to capitalize on the market recovery and these long-term growth opportunities. We will continue to strengthen our competitive edge through advancements in high-efficiency N-type technology and cost optimization via digital transformation and AI adoption. As the world accelerates its transition to clean energy, we are confident in our ability to play a leading role in powering the future. I will now turn the call over to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter. Ming, please go ahead.

Thank you, Anita. Hello, everyone. This is Ming Yang, CFO of Daqo New Energy Corp. We appreciate you joining our earnings conference call today. I will now go over the company's fourth quarter 2025 financial performance. Revenues were $221.7 million, compared to $244.6 million in the third quarter of 2025, and $195.4 million in the fourth quarter of 2024. The decrease in revenue compared to the third quarter of 2025 was primarily due to a decrease in sales volume. Gross profit was $15.4 million, compared to $9.7 million in the third quarter of 2025, and a gross loss of $65.3 million in the fourth quarter of 2024. Gross margin was 7%, compared to 3.9% in the third quarter of 2025 and -33% in the fourth quarter of 2024. The increase in gross margin compared to the third quarter of 2025 was primarily due to the decrease in production costs. Selling, General and Administrative expenses were $18.7 million, compared to $32.3 million in the third quarter of 2025 and $29.4 million in the fourth quarter of 2024. The decrease was primarily due to the reduction in non-cash share-based compensation costs related to the company's share incentive plan, which was $0 for the fourth quarter and $18.6 million in the third quarter of 2025. The company recognized a $19.3 million non-cash expense related to the allowance for credit loss in the fourth quarter, mainly due to the uncertainty regarding the recoverability of long-outstanding other receivables. Let me give a little more context on this. During the early development stage of the company's Inner Mongolia polysilicon project, funds were lent to a local government-affiliated industrial park development entity for supporting the infrastructure building and development of our Inner Mongolia polysilicon site. The local government-affiliated entity will repay these funds later. However, due to the industry downturn that resulted in insufficient local tax revenue, the repayment has been delayed. As a result, we recorded an allowance for credit loss due to the delayed repayment of these funds. All amounts due have been reserved, and we do not expect any future related allowance for credit loss. R&D expenses were $0.7 million, compared to $0.6 million in the third quarter of 2025 and $0.4 million in the fourth quarter of 2024. R&D expenses converted from period to period reflect the R&D activities that take place during the quarter. As a result, the foregoing loss from operations was $20.9 million, compared to $20.3 million in the third quarter of 2025 and $300 million in the fourth quarter of 2024. Operating margin was negative 9.4%, compared to negative 8.3% in the third quarter of 2025 and negative 154% in the fourth quarter of 2024. Net loss attributable to Daqo New Energy Corp. shareholders was $7.3 million, compared to $14.9 million in the third quarter of 2025 and $180 million in the fourth quarter of 2024. Loss per basic ADS was $0.11, compared to $0.22 in the third quarter of 2025 and $2.71 in the fourth quarter of 2024. Adjusted net loss attributable to Daqo New Energy Corp. shareholders, excluding non-cash share-based compensation costs, was $7.3 million, compared to adjusted net income attributable to Daqo New Energy Corp. shareholders of $3.7 million in the third quarter of 2025, and adjusted net loss attributable to Daqo New Energy Corp. shareholders of $170.6 million in the fourth quarter of 2024. Adjusted loss per basic ADS was $0.11, compared to adjusted earnings per basic ADS of $0.05 in the third quarter of 2025, and adjusted loss per basic ADS of $2.56 in the fourth quarter of 2024. EBITDA was $52 million, compared to $45.8 million in the third quarter of 2025 and negative $235 million in the fourth quarter of 2024. EBITDA margin was 23.7%, compared to 18.7% in the third quarter of 2025, and negative 120% in the fourth quarter of 2024. I will go over the company's full year 2025 financial results. Revenues were $665 million, compared to $1.03 billion in 2024. The decrease was primarily due to lower sales volume, as well as lower polysilicon average selling prices. Gross loss was $137.9 million, compared to $212.9 million in 2024. Gross margin was negative 20.7%, compared to negative 20.7% in 2024. The decrease in gross loss was primarily due to lower revenue. SG&A expenses were $118.2 million, compared to $143 million in 2024. The decrease was primarily due to the reduction in non-cash share-based compensation costs related to the company's share incentive plan, which was $55.8 million and $72.4 million in 2025 and 2024, respectively. R&D expenses were $2.6 million, compared to $4.6 million in 2024. R&D expenses reflect R&D activities that take place during the period. As a result, the foregoing loss from operations was $270 million compared to $564 million in 2024. Operating margin was negative 40.6%, compared to negative 54.8% in 2024. Net interest income was $9 million, compared to $30.2 million in 2024. The decrease in interest income was due to a lower cash bank balance, as well as lower bank interest rates. In addition to the interest income, the company did record $24.1 million in gain on short-term investments for 2025, related to the purchase of bank short-term investment products. Net loss attributable to Daqo New Energy Corp. shareholders was $170.5 million, compared to $345 million in 2024. Loss per basic ADS was $2.53, compared to $5.22 in 2024. Adjusted net loss to Daqo New Energy Corp. shareholders was $114.7 million, compared to $272 million in 2024. Adjusted loss per basic ADS was $0.70, compared to $4.12 in 2024. EBITDA was $1.7 million, compared to negative $337 million in 2024. EBITDA margin was 0.3%, compared to negative 32.8% in 2024. On the company's financial condition, as of December 31, 2025, the company had $980 million in cash equivalents and restricted cash, compared to $551.6 million as of September 30, 2025, and $1.04 billion as of December 31, 2024. As of December 31, 2025, short-term investment was $114 million, compared to $431 million as of September 30, 2025, and $9.6 million as of December 31, 2024. As of December 31, 2025, note receivable balance was $135.5 million, compared to $157 million as of September 30, 2025, and $55.2 million as of December 31, 2024. Note receivables represent bank notes with maturity within six months. As of December 31, 2025, a balance of fixed-term deposit within one year was $972.4 million, compared to $1.03 billion as of September 30, 2025, and $1.08 billion as of December 31, 2024. On the company's cash flows, for the 12 months ended December 31, 2025, net cash provided by operating activities was $56.1 million, compared to net cash used in operating activities of $435 million in the same period of 2024. For the 12 months ended December 31, 2025, net cash used in investing activities was $140.7 million, compared to $1.48 billion in the same period of 2024. The net cash used in investing activities in 2025 includes $179.5 million for the purchase of property, plant and equipment, primarily related to the remaining capital expenditures of the company's Inner Mongolia polysilicon project. For the year 2026, the company currently expects approximately $100 million-$150 million of capital expenditures for the year, primarily related to the remaining payments for the Inner Mongolia project, as well as maintenance CapEx. For the 12 months ended December 31, 2025, net cash used in financing activities was $0.9 million, compared to $47.4 million in the same period of 2024. The net cash used in financing activities in 2025 was related to $0.9 million in stock repurchases made by the company's subsidiary, Xinjiang Daqo, to its minority shareholders. That concludes our prepared remarks. We will now open the call to Q&A from the audience. Operator, please begin.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Alan Han with JP Morgan. Please go ahead.

Thank you, management, for taking my questions, and it is great to see a recovery for the company. I have the first question regarding a potential buyback, because it is great to see we are finally generating positive operating cash flow for the full year last year. In this sort of environment, how should we think about a buyback strategy?

Thank you, Alan, for raising the question. First, I would say that share repurchase is absolutely a topic that we have been monitoring closely as part of our capital allocation strategy. We are taking a more prudent and informed approach, especially given the evolving landscape around China's anti-involution policies in the solar sector. While we definitely see tremendous value and intrinsic value in our shares, especially amid the current market dynamics, we believe it is essential to wait for more clarity on the policy implementation and the outcomes before proceeding. We believe that this wait-and-see stance would allow us to optimize the timing and the impact of the repurchase program better.

Thank you. My next question is on the policy outlook. We are aware that a consolidation platform was formed in December, soon after followed by antitrust questions by some of the regulators. Can you give us color on how the industry consolidation would happen? Should we discount the consolidation for the moment, or how should we think about that? Also, I noticed one of your peers has just conducted M&A on buying out some of the small traders. Is that part of your strategy as well?

Thank you, Alan. Maybe I will answer the question of the recent acquisition by our peers first and then move on to the anti-involution dynamics. I would say that we see this as the individual player's strategic decision, reflecting their confidence in the sector's future and their determination to further strengthen their competitive positioning. For us, I would say we are completely open-minded toward opportunities that could create value for the industry and for our shareholders. We view such transactions as constructive and ones that would drive the market consolidation the national anti-involution policy is designed to achieve. Direct acquisition or consolidation via the SPV that you mentioned are both forms toward achieving the same goal, essentially shifting toward a more rational and more efficient industry structure, something that we strongly support. That being said, I want to reiterate that anti-involution is designated as a national priority within China's next Five-Year Plan. As one of the major players in the industry, we are determined to address the overcapacity challenge, which we believe would optimally become a value-driven game by innovations and technological progresses, instead of the current price-based competition, and lead to a healthier and more sustainable industry. Indeed, the SPV for consolidation that many of you might be aware of was successfully established by the end of 2025 in December, which marks the first step and signals our resolve to collaboratively tackle the overcapacity issue. Of course, it is not an easy task, with lots of back and forth within the participants and with the government entities. I want to say that discussions are actively ongoing, with a strong emphasis on maintaining a more market-oriented approach to ensure that we meet fair competition and that we are abiding by the regulatory guidelines. To provide more context, we will approach this in well-defined phases, potentially with initial investment injections anticipated in the near term, which would lay the foundation of financial stability. From there, we will gradually move towards consolidation, allowing for more efficient resource allocation and enhanced operational synergies across the value chain. We believe that this structured progression will not only align with the current regulatory guidelines but also position our company and the industry at large for longer-term resilience and profitability. We are quite optimistic about these developments.

Okay, thank you for your answer. With that, I will pass it on.

Thank you, Alan.

The next question comes from Phil Shen with ROTH Capital Partners. Please go ahead.

Hey, guys. Thanks for taking my questions. As a follow-up to that last question from Alan, I was wondering if you might be able to share what are some of the key milestones that we should be looking for in the coming quarters that show progress on the mandatory national standard? There is a draft, but when does that become implemented, for example? With the Anti-Unfair Competition Law and the Draft Amendment to the Pricing Law, what are the milestones that we should be following so that we can see the progress in the industry structure, as well as the competition or the industry consolidating? Thank you.

Thank you, Phil. I would say because there is not much information, and there is a lack of clarity and transparency in the current dynamics, it is difficult for us to say exactly what we might be monitoring because not a lot of details are released until the policies land. Prices, we definitely see a pricing recovery, and as part of the price laws, sales should not be below the industry-level cost, so that is a positive side. I would say we would have to be a bit more patient with the policies, as the conversations are still ongoing.

Okay, got it. Thank you. Then—

This is Ming.

Go ahead, Ming.

Let me just quickly follow up. I think there is a very high-level government meeting coming up that will discuss the next Five-Year Plan. As part of that, I think there is a presentation by a key government agency on the progress of anti-involution. I think after the top-level central government meeting, more policies will come forward. That is something to monitor.

Okay, great. Thanks, Ming. Shifting over to the price outlook, I know there is not as much clarity on the milestones for policy, but what is your assumption for poly prices in Q1 and Q2? If you have a view for the rest of the year, that would be great. Thanks.

As I just said, as part of the Pricing Law, sales should not be below the industry-level cost. I would say the lower bound will be at least RMB 53-54 per kilogram, and we would remain around that level for the coming quarters. It is hard for us to say where prices would go in the coming quarters, because that would essentially depend on how the SPV would evolve and the pace of consolidation.

Okay, got it. For the things that you can control, costs were down and hit a record low in Q4. How much do you think you can lower your cash costs by the end of 2026? Thanks.

Hi, Phil, this is Ming. I think we continue to make progress on both production costs and cash costs. This quarter we benefited from lower energy prices or costs, as well as manufacturing efficiencies. I think we should continue to benefit. I think for Q1 and Q2, we are likely to see similar cash costs to the Q4 level, and then further reduction in the second half.

Great. Okay. All right, Ming, Anita, thank you very much. I will pass it on.

Great. Thank you.

Thank you, Phil.

The next question comes from Emmett Lau with Jefferies. Please go ahead.

Thanks for taking my question. It is a follow-up on the previous question. Basically, it is intertwined. If the price you mentioned should be above RMB 60, the question here is: if the price is not allowed to push up to above RMB 60, then what is the incentive for acquiring others' capacities like the plan before? I do not know what was the thinking behind or if the acquisition will happen like what your peers are doing. Basically, are companies acting on a standalone basis, or how is the whole coordination versus the price coordinated?

Sorry, Lau, can you repeat the question again? I do not think I caught all the question.

Yes. Previously, the incentive, to my understanding, is that the remaining players can push prices above RMB 60. I think there was some window guidance from the regulator saying that you cannot control prices. If the industry or the larger players are still going to acquire the smaller players, and you cannot push up the prices, what is the point of acquiring small players? How do you expect the price outlook going forward? If you could not make money, why would you acquire anyone?

As I said, I think it would have to be done in phases. First step is that you are not allowed to sell below cost, then gradually you would move on to consolidation and phasing out the excess and outdated capacities. It is hard for us to say how high prices can go, because we want to focus on a more market-oriented approach to achieving this.

Do you mean the acquisition will happen in phases which probably last for a longer time?

Yes, I would say it would have to be done over a couple of years. It will not be done all at once.

I see. I have noticed that prices actually have gone down a little bit recently from around RMB 60 to the 50-ish. I think futures prices are below 50 already. What do you expect the pricing in the first quarter and second quarter?

Phil also touched upon the pricing outlook for the first half of 2026. I would say it would be at least around RMB 53-54, given that is roughly the industry-level cost currently. Moving forward, it will really depend on the pace of consolidation. That will determine.

Do you mean that the ASP in Q4 was below spot price?

Yes.

Okay. I think in Q4 the mix is such that because we were ramping up additional volume—production—and the initial batch of production from that initial ramp-up, it is consistent with our past experience that the qualities were not that great. Those actually had a market discount. Maybe in December, we kind of normalized in terms of product quality. It is that factor that led to a slightly lower overall ASP.

I see. Could investors understand this as a factor that would be normalized in first quarter, meaning that even if the spot market prices are marginally lower, the ASP of the company will probably be more flattish than the decline in spot prices?

Yes, we would expect that. Yes.

Thank you. My last question is on the broader perspective from the industry. Would you consider any acquisition? I noticed that Anita Xu mentioned you are open-minded, but are you liaising with any other specific player already, or is it still not on the schedule yet?

Thank you, Lau. As I mentioned at the beginning, we are open-minded toward different opportunities, either via acquisition or consolidation. As part of the SPVs, we are quite confident that we will see something in formation in the near term or in the coming quarters. That would be our primary focus for now. However, in the worst case, of course, acquiring directly would also be something that we could consider.

I see. Thanks. I will pass on. Thank you.

Great. Thanks, Lau.

The next question comes from Man Win with Goldman Sachs. Please go ahead.

Hello. Thanks for management for taking my question. I have two follow-up questions. First is regarding our M&A target. I heard, Anita, you say you are open-minded for the acquisition opportunities. Could you elaborate from here? Is there any more keener target for us, like from 10-plus to further higher in the future? What kind of capacity do we prefer more in terms of acquisition on our own? That is my first question.

Thank you, Man. First, I would say that we are comfortable with where we are right now, given the current market dynamics, because essentially none of the players is operating at full utilization rates. Of course, in the future, like our peers, if we want to further strengthen our positioning by grasping more market share, we do not have a specific number in mind as to where we want to be. I would say, if it is aligned with the national anti-involution initiative, it is something that we will consider doing in the future.

Thank you. That follows my second question. Can you help us to understand a bit more, based on our conversation with government and with the leading industry players, how we should define the success of the anti-involution in the poly sector from here? Because in the past, we saw the poly price increase to above our operating cost, and then that could conclude the success of the anti-involution. It seems poly price continues increasing and is a bit bumpy. Also, there are some ongoing acquisitions. What shall we look forward to in terms of the future anti-involution progress? When can we call it a successful, complete anti-involution in our poly sector? Thank you.

First, I think that for the anti-involution initiative, it would extend over a number of years, given that this round the excess problem is very deep-rooted. The nameplate capacity, including everything, is more than 3 million metric tons, which is more than double the demand now. I would say until the more outdated and smaller players exit, and prices restore to a healthier level so that the industry as a whole becomes profitable to support the overall renewable energy goal. That is when we would say the anti-involution is completed.

Thank you, Anita. Can we understand in this way: the key target for the anti-involution is to sustain the poly price at over current level at least, to help facilitate outdated capacity exit, and that will take longer time than expected. Ultimately, the key target going forward is to take the smaller players offline. Is that correct?

Yes, I would say that is the aim.

Thank you, Man.

The next question comes from Gordon Johnson with GLJ Research. Please go ahead.

Hey, guys. Thanks for taking the question. Really appreciate it. Piggybacking off a question that was touched on earlier, it seems like in the spot market, polysilicon prices had surged and now they have come off. Specifically, when I talk about the spot market, I am talking about the futures market. It also seems like, due to the policy changes in China, demand has been somewhat subdued. Can you give us an outlook on what your expectations are with the puts and takes around anti-involution? What is your outlook on polysilicon prices in the first quarter and maybe the second quarter? I have a follow-up. Thank you.

Thank you, Gordon. You are asking about the futures market and the pricing outlook for the first and second quarter?

Yes, please.

For the pricing outlook question, I can repeat it again. For the first and second quarter for pricing, as mandated by the Pricing Law, sales should not be below the industry-level cost. I would say it should be at least RMB 53-54 per kilogram in the coming quarters. For the futures market, I would say it is an area with the potential for risk management and pricing stability in our industry. We see participation in the futures market as an extension of the current sales strategy, offering the chance to hedge against volatility and to secure profitable margins. Similar to our approach on share repurchases, we are prioritizing policy clarity around the anti-involution dynamics in China before diving into the futures market. We will employ a more disciplined strategy in the future, gathering more insights as the policy unfolds, to ensure that our involvement is strategic and value creative.

That is helpful. Looking at the futures price, RMB 46.315 right now, and looking at the recent comments from the government on anti-involution, is there any potential that prices could come in in the first half below the RMB 53-54 range you are targeting? Is that something that you are pretty certain of?

I think that is the industry-level cost at the moment. Given that we are not supposed to be selling below that cost due to the Pricing Law, I would say it should be somewhat sustained at that level.

Helpful. The last question is, you made significant improvement on your free cash flow—congratulations—in 2025. Do you have any thoughts on how you expect free cash flow to trend this year? Thanks for the questions.

Hi, Gordon. Let me answer that. This is Ming. Thanks for your question. I think free cash flow will turn positive, especially in the second half of 2025. Given our expectation for both volume and average selling price to be held more steady, as well as costs to remain stable to lower, we do believe that. Based on the Q4 level, free cash flow should—without giving specific numbers—improve further from the Q4 level going forward for 2026.

Thanks again for the question.

Great. Thank you so much.

This concludes our question and answer session. I would like to turn the conference back over for any closing remarks.

Thank you everyone again for participating in today's conference call. Should you have any further questions, please do not hesitate to contact us. Thank you and have an awesome day. Goodbye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.