[Click eStock] "Hanwha Solutions, Lack of Earnings Improvement Momentum... Investment Opinion and Target Price Downgraded"

Target Price Revised Down 36% from Previous
Investment Opinion Changed from 'Buy' to 'Neutral'

NH Investment & Securities on the 23rd downgraded its target price for Hanwha Solutions from 47,000 KRW to 30,000 KRW and lowered its investment rating from 'Buy' to 'Hold', citing the absence of performance improvement momentum this year amid a sharp increase in net debt.

Choi Young-kwang, a researcher at NH Investment & Securities, explained, "We have lowered Hanwha Solutions' operating profit forecast for this year by 51% and reflected the steep increase in net debt due to a 3.4 trillion KRW capital expenditure (CAPEX) burden, resulting in a 36% cut in the target price and a downgrade in the investment rating."

Hanwha Solutions' fourth-quarter performance last year was sluggish. Sales reached 3.9 trillion KRW, up 32.2% quarter-on-quarter, but operating profit fell 58.6% to 40.7 billion KRW. Researcher Choi analyzed, "The large pre-tax loss was due to one-time costs of 350 billion KRW, including the shutdown of the Eumseong plant and impairment losses on small-area wafer idle assets. The chemical division recorded an operating loss of 79 billion KRW due to weak spreads, while the renewable energy division posted an operating profit of 150.5 billion KRW."

It is expected to turn to a loss in the first quarter. Researcher Choi said, "Operating loss is expected to be 53.6 billion KRW in the first quarter, marking a turnaround from the previous quarter's profit. With continued weak chemical spreads and a simultaneous decline in solar module prices and sales volume, operating profit is expected to turn negative."

Both the chemical and solar energy sectors are expected to lack annual performance improvement momentum this year due to oversupply. Researcher Choi stated, "The inflow of modules manufactured in Southeast Asia into the U.S. has significantly increased, leading to weak U.S. module prices. Despite the resumption of tariffs on Southeast Asian modules, high inventory levels will make price rebounds difficult in the second half of the year." He added, "Excluding the Advanced Manufacturing Production Tax Credit (AMPC), the module operating profit margin is expected to turn negative from 6% this year to -3% next year."

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