[Edaily Reporter kyoungeun kim ] NH INVESTMENT & SECURITIES lowered its target price for HANWHA SOLUTIONS(009830)—whose third-quarter earnings fell short of market expectations—by 14.0%, from 43,000 won to 37,000 won. The firm maintained its “Buy” rating.

Choi Young-gwang, an analyst at NH INVESTMENT & SECURITIES, stated in a report on the 30th, “While the occurrence of unexpected costs is disappointing, the path toward improved profitability has become clearer.”

HANWHA SOLUTIONS posted third-quarter earnings that fell short of market expectations due to losses in its chemicals division and increased costs in its solar energy engineering, procurement, and construction (EPC) business.

HANWHA SOLUTIONS’ third-quarter operating profit was 90.5 billion won, down 70.5% from the previous quarter and below the consensus estimate (209.0 billion won). The operating profit margin was 2.3%. Analyst Choi explained, “This was due to a larger-than-expected operating loss in the Chemicals division, as well as increased costs and project delays related to development assets and the EPC business within the Renewable Energy division.”

In the module division, profitability improved slightly as sales volume rose 54%, despite a 6% decline in selling prices compared to the previous quarter. Sales volume stood at 2.0 GW, falling short of the forecast (2.5 GW). Analyst Choi interpreted this as “a strategic decision to build up inventory in order to increase sales volume further when module prices rise following the implementation of the 232 Regulation.”

Operating profit for the fourth quarter is estimated at 94.4 billion won, a 4.3% increase from the previous quarter. He predicted, “While increased costs related to EPC and development assets, as well as delays in revenue recognition, are expected to continue, these will be offset by rising module prices (5%), increased sales volume (3.2 GW, a 60% increase), and the expansion of the Advanced Manufacturing Production Credit (AMPC).”

Analysts note that the path toward improved profitability has become clearer due to rising solar module prices resulting from the implementation of Section 232 of the U.S. Trade Expansion Act.

Research Analyst Choi stated, “The company recently mentioned that, due to the impact of Section 232, the selling price for new contract volumes has risen by more than 10 cents per watt compared to previous levels,” adding, “Gradual improvements in profitability will begin to emerge starting in 2027, when sales of these volumes commence.” He added, “As operations at the Cartersville cell facility ramp up in earnest, the production and sales of high-priced modules that meet the requirements for the Domestic Content Addition (DCA) tax credit in the U.S. are increasing, which is also a factor driving up the weighted average selling price (ASP).”

The downward revision of the target price reflects a 33.9% and 14.0% reduction in operating profit forecasts for this year and next year, respectively, due to increased staffing costs related to the EPC business, rising material costs, and construction delays. NH INVESTMENT & SECURITIES forecasts operating profit of 584 billion won for this year and 1.156 trillion won for next year. Analyst Choi noted, “The current stock price is trading at the lower end of the range, with a price-to-book ratio (PBR) of 0.6 times for this year,” and concluded, “Given the clear trajectory of earnings improvement next year, the potential for further price declines is limited, while the upside potential is significant.”