Hanwha Solutions, Solar Performance Weak but... "Need a Long-Term Approach"

[Asia Economy Reporter Gong Byung-sun] Although Hanwha Solutions' solar power division is expected to perform poorly for the time being, an analysis suggests that investment should be made with a long-term perspective considering its growth potential.

On the 21st, Ebest Investment & Securities maintained a target price of 64,000 KRW and a 'Buy' rating on Hanwha Solutions, noting that the solar power division's performance is weak and growth is not clear, requiring a mid- to long-term approach.

Hanwha Solutions is expected to face cost issues due to rising costs in the solar power division and the addition of the N-type process, continuing from last year. In the fourth quarter of last year, the solar power division saw an increase in power generation business realization and module sales, but recorded an operating loss due to rising prices of raw materials such as polysilicon and tempered glass, as well as increased logistics costs. Analyst Lee Anna of Ebest Investment & Securities explained, "The burden of raw material prices is still ongoing, and the costs incurred from adding the N-type process, which has better impurity tolerance compared to the P-type, are expected to result in poor performance."

However, the long-term growth potential of the solar power division is expected to remain valid. The analyst said, "They will mass-produce cells and modules with N-type modules and perovskite tandem technology with high photo-conversion efficiency, strengthen system capabilities through software development, and expand distributed energy systems (DES) and green energy solutions (GES) businesses. If the business structure changes to include virtual power plants (VPP), long-term growth potential is expected."

In the chemical division, although profits decreased compared to the previous quarter, a significant increase in operating profit is anticipated this year. In the fourth quarter of last year, large-scale regular maintenance and regular maintenance of the Yeocheon Naphtha Cracking Center (YNCC) involved the use of expensive raw materials and reflected performance bonuses, causing operating profit to drop from about 159 billion KRW in the third quarter to about 66 billion KRW in the fourth quarter. However, the analyst assessed, "With the completion of regular maintenance and continued expansion of major product spreads, a significant improvement in operating profit is expected in the chemical division."