[Click eStock] Hanwha Solutions, Earnings Surprise... Riding the Upcycle

[Asia Economy Reporter Lee Seon-ae] Kiwoom Securities announced on the 25th that it maintains a 'Buy' investment rating and a target price of 68,000 KRW for Hanwha Solutions.

Lee Dong-wook, a researcher at Kiwoom Securities, analyzed, "Hanwha Solutions' operating profit for the first quarter of this year is expected to be 250 billion KRW, a 282.2% increase compared to the previous quarter, significantly exceeding market expectations (189.2 billion KRW). Although cost increases are expected in the solar power division, the spreads of key petrochemical products are anticipated to improve sharply."

The chemical division's operating profit is expected to be 229.6 billion KRW, a 247.9% increase from the previous quarter. The surge in transportation costs is influencing strong product prices, and the high domestic demand, coupled with offshore supply disruptions of major products such as LDPE/PVC/EVA, has caused spreads to rise sharply. Additionally, prices for TDI and caustic soda have improved compared to the previous quarter. The Q CELLS division is expected to record an operating profit of 1 billion KRW, turning positive from the previous quarter, as polysilicon prices surge and the company’s solar raw and subsidiary material prices continue to rise.

The advanced materials division is expected to post an operating profit of 4.1 billion KRW, turning positive from the previous quarter. This is attributed to the base effect of one-time costs incurred in the previous quarter and a turnaround in the automotive industry. The Galleria division's operating profit is expected to be 7.4 billion KRW, a 29.0% decrease from the previous quarter, but performance is expected to improve significantly compared to the same period last year due to the easing of social distancing measures.

According to IHS, PVC is expected to enter an upcycle due to strong demand and limited new capacity additions. Although there was a 2% decrease in demand last year, demand is projected to grow at an average annual rate of 4.5% until 2025. Supply is expected to increase by only 1.8% annually until 2025 due to restrictions on new projects. Although the global PVC operating rate dropped to 78% last year due to COVID-19, it is expected to rise sharply to 81% this year and 90% by 2025. For reference, Hanwha Solutions’ consolidated PVC production capacity (including its Chinese subsidiary) is 1.13 million tons, ranking it among the top 12 PVC producers worldwide. Meanwhile, LDPE is also expected to maintain a strong market condition until next year due to tight supply and demand of its co-product EVA and restrictions on large-scale capacity expansions.

This content was produced with the assistance of AI translation services.