[Click eStock] "Hanwha Solutions Needs Time to Escape Deficit in Solar Cell Modules"

[Asia Economy Reporter Song Hwajeong] Yuanta Securities maintained a 'Hold' investment rating and a target price of 40,000 KRW for Hanwha Solutions on the 14th, stating that it will be necessary to wait until the end of this year for the solar cell module segment to escape its deficit.

Yuanta Securities estimated Hanwha Solutions' performance this year at 10.5 trillion KRW in sales and 654.3 billion KRW in operating profit. The operating profit estimate represents an 18% decrease compared to the previous year. By segment, the figures are 750.6 billion KRW for Chemicals, -129.3 billion KRW for Solar Cells, and 56.5 billion KRW for Advanced Materials & Distribution. Researcher Hwang Kyuwon of Yuanta Securities explained, "As the global supply shortage is resolved, a decline in profits in the Chemicals segment is inevitable," adding, "The deficit in the solar cell module segment, which began due to restrictions on the use of polysilicon from China's Xinjiang region, will continue until the mid to late 2022, after which the investment appeal will be restored."

The price of polysilicon, the raw material for solar cell modules, surged from 8 USD per kilogram in early 2020 to 36 USD at the end of last year. Regulations on the use of Chinese polysilicon due to human rights abuses caused a global supply shortage. This situation is expected to improve toward the end of this year. Researcher Hwang said, "Global solar photovoltaic installation demand in 2022 is expected to be 214 GW, requiring 600,000 tons of polysilicon," and added, "The production capacity of major polysilicon companies is expected to increase from about 590,000 tons to 700,000 tons, reaching 1.28 million tons by the end of this year. Since most of the capacity expansion is concentrated in the mid to late part of the year, polysilicon prices are expected to stabilize downward toward the end of the year."

The benefits from the global supply issues of chemical products are expected to gradually diminish. Last year, the operating profit margin for the Chemicals segment surged abnormally to 20% (compared to a past average of 9.0%). Supply issues led to strong performance in PVC (windows, pipes) and EVA (double-sided adhesive). In the case of PVC, supply was interrupted from February to October last year due to sudden cold waves and hurricanes in the United States. In China, the production cost of PVC increased due to a sharp rise in coal prices, a raw material. For EVA, a surge in natural gas prices caused a strong price increase along the methanol-acetic acid-VAM value chain. Researcher Hwang said, "This year, with the normalization of PVC facilities in the U.S., strong efforts by the Chinese government to control coal prices, and a gradual decline in global natural gas prices, Hanwha Solutions' profits are expected to return to normal."