[Click eStock] The Answer of OCI and Hanwha Solutions Lies in the US... Positive Buy and Increased Weight

[Asia Economy Reporter Lee Seon-ae] Hyundai Motor Securities maintained a buy perspective and advised increasing investment weight on solar industry companies such as Hanwha Solutions and OCI on the 25th, citing positive issues.

The rise in polysilicon prices that had continued since the second half of last year has temporarily paused. In particular, prices reversed to a decline after 28 weeks. However, considering the still tight polysilicon market conditions, a sharp price drop is unlikely; instead, some adjustment followed by stabilization is expected. Not only polysilicon prices but also the prices of transportation, steel, aluminum, semiconductors, copper, and other auxiliary materials have risen significantly. Recently, IHS forecasted that if these cost burdens persist, solar installation demand this year could fall from 181GW to 156GW, raising concerns about demand contraction. However, it is not entirely fair to blame only the rise in polysilicon prices for this situation.

As of the 23rd, despite polysilicon prices falling slightly to around $30 per kg, Daqo New Energy's stock price rose by 2.87%. Rather than concerns over polysilicon price declines, the fact that polysilicon prices fell more than module prices seems to have positively influenced the stock price by alleviating some demand burden concerns. However, the stock fell 13% in after-hours trading. This is believed to be due to the U.S. Department of Commerce placing five companies in China's Xinjiang region on the Economic Black List citing human rights issues.

It is judged that this movement is likely to expand to Europe in the long term. The German Green Party maintains high approval ratings, and relations between Europe and China have gradually distanced compared to the past since COVID-19. The G7 issued statements criticizing China when mentioning Xinjiang human rights issues. This situation is expected to keep the spot polysilicon market continuously tight. Of course, some price adjustments may occur due to cost burdens, but the possibility of a sharp decline is considered limited.

On the 22nd, U.S. Senator Jon Ossoff of Georgia introduced the 'Solar Energy Manufacturing for America Act,' hoping for its passage by the end of the year. This bill provides tax credit benefits for the next 10 years to facilities producing solar-related products (polysilicon, wafers, cells, modules) manufactured in the U.S. Considering that the current U.S. solar module price is about $0.34 per watt, module companies will receive tax credits amounting to 32% of the selling price, which is a significant benefit.

Among domestic companies, those with facilities in the U.S. are Hanwha Solutions (Q CELLS), LG Electronics, and OCI (Mission Solar Energy). All possess module facilities, with capacities of approximately 1.7GW, 550MW, and 200MW respectively, with Hanwha Solutions having the largest facility. Kang Dong-jin, a researcher at Hyundai Motor Securities, stated, "As the cost competitiveness of solar facilities in the U.S. increases, module expansion within the U.S. is expected to continue, centered around these companies." He added, "Also, if OCI expands its U.S. module factory, it is expected to diversify its business beyond focusing on polysilicon, so we maintain a positive view on domestic solar companies OCI and Hanwha Solutions."