To Benefit from Expansion of US and European Solar Markets
The author is an analyst of NH Securities and Investment. He can be reached at yk.choi@nhqv.com. -- Ed.
Solar energy market growth should continue to accelerate on both a rise in conventional energy prices and the emergence of policies to support solar energy. An uptick in demand in downstream industries should make it easier for Hanwha Solutions to raise product prices.
To benefit from expansion of US and European solar markets
Owing to a rise in conventional energy prices induced by the Russia-Ukraine war, the US and Europe’s energy transition should accelerate. The US plans to expand solar power generation from 7.5GW as of now to 22.5GW by 2024, and Europe intends to double solar panel installation from the current level by 2025 under its REPowerEU plan. Accordingly, its annual installation should average 50GW. Of note, the US and Europe take up roughly 60% of Hanwha Solutions’ total module sales.
Considering its lofty land and labor costs, Europe shows strong need for the installation of high-efficiency solar modules. In addition, it has been announced that solar panel installation will be mandatory for all new buildingsin the region. As the leading play in the US household solar module market, Hanwha Solutions should benefit from growth of the high-efficiency module market.
Solar power division highly likely to report earnings improvement
In March, the US launched an investigation into whether Chinese solar equipment manufacturers are evading tariffs by sending components to Southeast Asian countries. This has resulted in a suspension of solar power projects in the US and module supply shortages, making it easier for solar power module makers to raise module prices. In response, the US announced that it would waive tariffs on solar panels imported to the US from Cambodia, Malaysia, Thailand, and Vietnam for 24 months.
At the same time, President Biden has invoked the Defense Production Act (DPA) in order to spur solar power module production in the US, thus securing supply chains outside of China. In line, Hanwha Solutions acquired a stake in REC Silicon, a US polysilicon producer, to expand production capacity in the US. The firm plans to expand its module production capacity by 1.4GW to a total of 3.1GW in the US, with an aim to start operations in 1H23. By utilizing capacity expansion for TOPCon-based cells of 0.9GW in Korea, it plans to manufacture high-efficiency modules in the US. Demand uptick in downstream industries and solar power’s increased competitiveness in terms of levelized cost of energy (LCOE) have made it easier for the firm to pass cost increase on to module prices. Over the mid/long term, we anticipate ASP improvement effects based on a hiked sales portion of high-efficiency products. We view that share price momentum remains intact, backed by ASP expansion effects in the short term and earnings improvement at the solar power division in the mid/long term.