Hyundai Energy Solutions Expects Performance Recovery Due to Global Solar Demand Improvement

As the United States accelerates investment in renewable energy, interest in domestic solar-related companies is also increasing. The Joe Biden administration has declared carbon neutrality by 2050 and announced plans to significantly increase investments in renewable energy such as solar power. Developed countries, including the European Union (EU) and China, are also joining efforts to expand the share of renewable energy to address climate issues. Additionally, with the U.S. showing moves to ban polysilicon produced in the Xinjiang Uyghur region, it is expected to create opportunities for other polysilicon manufacturers. Could this become a stepping stone for a resurgence for domestic polysilicon leaders like OCI and Hyundai Energy Solutions, which manufactures solar cells and modules, after a prolonged period of stagnation? We take a closer look at the management status of these two companies and assess their future growth potential.

[Asia Economy Reporter Yoo Hyun-seok] Hyundai Energy Solutions, which experienced a decline in performance last year, is making a comeback. With the expansion of eco-friendly infrastructure investments this year, its performance is expected to improve.

Hyundai Energy Solutions primarily focuses on the manufacturing and sales of solar cells and modules. It also operates businesses such as inverters (PCS), energy storage systems (ESS), and EPC installation. It was established in December 2016 as an independent entity after separating from Hyundai Heavy Industries' Green Energy Division. It was listed on the KOSPI in November 2019. As of last year, cells and modules accounted for 85.74% (KRW 338.1 billion) of total sales. PCS·ESS and others accounted for 13.54% (KRW 53.41 billion) and 0.72% (KRW 2.8 billion), respectively.

Last year's performance was sluggish. On a consolidated basis, sales were KRW 394.4 billion with an operating profit of KRW 8.8 billion. Sales decreased by 11.59% and operating profit dropped by 60.20% compared to the previous year. Particularly in Q4 last year, sales were KRW 98.3 billion with an operating loss of KRW 1 billion. Sales declined by 20.9% year-on-year, and operating profit turned negative.

The U.S. announcement of a two-year extension of the solar ITC (Investment Tax Credit) led to project delays and a reduction in year-end special demand, causing sales to decline. Additionally, the reimposition of tariffs on bifacial modules exported to the U.S. and the suspension of cell factory operations increased cost of sales. Price reductions due to COVID-19 and low-price orders also impacted operating profit.

This year, performance improvement is expected. Hyundai Energy Solutions projected sales of KRW 590.4 billion for this year in January, a 49.70% increase from the previous year. The basis for this projection is the expectation of increased global solar demand as COVID-19 stabilizes. According to the ‘KEXIM Overseas Economy’ report published last month by the Export-Import Bank of Korea, global solar demand in 2021 is expected to exceed 150GW due to the stabilization of the COVID-19 situation and the full emergence of climate change issues. The bank analyzed that last year's solar installations exceeded 130GW and forecasted an increase to around 200GW in 2022.

As global solar demand is expected to rise, Hyundai Energy Solutions is preparing for market expansion by increasing production capacity. In July last year, it completed a 750MW scale module solar smart factory in Eumseong, Chungcheongbuk-do. Through this, production capacity more than doubled from the previous 600MW to 1.35GW of solar module production capacity.

However, there are concerns that the company’s sales target may be difficult to achieve. For performance growth, expanding sales overseas, especially in the U.S., is necessary, but the share has been declining since 2017. In 2017, overseas sales accounted for 57.06% of Hyundai Energy Solutions’ total sales, but dropped to 19.69% in 2018 and 23.55% in 2019. Last year, it recorded 34.98%, but has not recovered to the 2017 level. The U.S. share, which has a high profit margin, also fell from 50% in 2017 to 14% in 2018 and 2019. Last year, it was 20%.

Additionally, the delayed operation of the cell factory is a worrying factor. Hyundai Energy Solutions halted factory operations last August due to new facility investments in the cell factory. The factory was scheduled to resume operations in January but was delayed and reportedly restarted production this month.

Hanwha Investment & Securities forecast Hyundai Energy Solutions’ sales and operating profit this year to be KRW 531.8 billion and KRW 26 billion, respectively. Lee Jae-yeon, a researcher at Hanwha Investment & Securities, said, "The selling price of solar modules in the U.S. is more than 60% higher than in Europe, Australia, and other regions," adding, "Expanding market share in the U.S. will play a key role in Hyundai Energy Solutions’ sales growth."

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