Hana Securities on the 10th said it expects an easing of oversupply in the U.S. solar module market and higher module prices for Hanwha Solutions(009830). It kept its investment view at "buy" (BUY) and raised its target price to 60,000 won from 46,000 won. The previous session's closing price was 30,800 won.
Yoon Jae-sung, an analyst at Hana Securities, said, "Hanwha Solutions' operating profit in the second quarter of this year will come in at 230.7 billion won, up 149% from the previous quarter and 126% from a year earlier," and noted, "This is 29% above the market consensus (forecast) of 179.2 billion won."
Yoon expected operating profit to improve in both the solar and chemical businesses. In particular, he saw the solar segment posting operating profit of 128.9 billion won, up 107% from the previous quarter, narrowing module losses.
Yoon added, "As the premium for Non-FEOC modules that are not subject to the Foreign Entity of Concern (FEOC) rule has widened, module prices rose 9% from the previous quarter," and "the advanced manufacturing production credit (AMPC) will be similar to the previous quarter at 213.6 billion won."
The chemical business also was estimated to have posted operating profit of 96.9 billion won, up 184% from the previous quarter, helped by price gains after the Iran war and an ethylene sourcing strategy. Selling products at higher prices in regions with tight supply proved effective, according to assessments.
In the third quarter, a decline in the chemical business (operating profit forecast of 4.5 billion won) is inevitable due to the end of the war, but the core solar business is expected to continue further improvement. Hana Securities forecasts Hanwha Solutions' third-quarter solar operating profit at 185.8 billion won, up 44% from the previous quarter.
Yoon explained, "From July, with the full-scale operation of the Cartersville cell plant in the United States, it became possible to produce modules that meet the domestic content advantage (DCA) requirement in the U.S.," adding, "Along with the resulting price increase, the new 3.3 gigawatts (GW) of cell and wafer capacity will lift AMPC receipts to 237.5 billion won."
He also said the risk from calls to investigate circumvention dumping on Korean-made solar cells, which had weighed on the stock recently, has entered a resolution phase. Because the petitioning companies are stakeholders in Southeast Asian supply chains, the impact on Hanwha Solutions, which has led reshoring in the U.S. and achieved vertical integration, is expected to be limited.
Yoon said, "As moves to exclude China-linked companies in the United States become clearer, Hanwha Solutions' vertically integrated module premium will expand further," adding, "This year's annual operating profit is expected to turn around to 791.1 billion won, an improvement of 1.1 trillion won from a year earlier, but the share price remains at the level at the start of the year, making the valuation attractive."