The KOSPI Rose, but Solar Stocks Plunged—Even Expectations of U.S. Benefits Could Not Stop the Slide

[Financial News] Solar stocks that surged in the first half of this year on expectations of benefits from U.S. policies have been giving back much of their gains since the second half began. Although the companies are expected to benefit from tariffs and the production tax credit (AMPC), their stock prices have been slow to recover as it will take time for the operation of local plants and increased sales to be reflected in earnings.
According to the Korea Exchange (KRX) on the 22nd, solar stocks surged from the beginning of the year through the first half as they priced in expectations of U.S. benefits, but later gave back a substantial portion of those gains. HD Hyundai Energy Solutions rose 341.23% from the beginning of the year to its intrayear high, but had fallen 52.13% from that peak as of the 22nd. OCI Holdings also rose 267.77% over the same period before declining 51.55% from its high. Shinsung E&G and Hanwha Solutions rose 164.96% and 118.69%, respectively, from the beginning of the year to their peaks, but had fallen 61.44% and 50.25%, respectively, from those highs.
Recent trading has also diverged from the broader market. OCI Holdings and HD Hyundai Energy Solutions fell 1.57% and 1.52%, respectively, on the 22nd, while Shinsung E&G and Hanwha Solutions declined 1.19% and 0.54%, respectively.
Securities firms attribute the sector's weakness to the fact that expectations of U.S. policy benefits have not yet been fully reflected in earnings. Companies with production bases in the United States may benefit from tariffs and the AMPC, but investors need to determine whether the operation of local cell and module facilities and increased sales will actually lead to improved profitability. Analysts say it will be difficult to drive a rebound in stock prices based solely on policy expectations until higher selling prices and the scale of AMPC benefits become clearer.
Although U.S. solar demand is recovering, the trend has not translated directly into improved earnings across domestic solar-related stocks. According to Mirae Asset Securities, U.S. solar installations totaled 11.4 GW in the second quarter of this year, up 45% from a year earlier, with the utility-scale segment accounting for most of the total at 9.6 GW. By contrast, residential installations fell 12%. The recovery in demand centered on large-scale power-generation projects could mean that benefits are concentrated among companies with local production capacity, long-term supply contracts, and power-generation capabilities.
Another variable is that, starting in December, the United States will implement Section 232 of the Trade Expansion Act, applying a 15% tariff and a minimum import price to imported solar products. If imported module prices rise, companies with low reliance on Chinese raw materials and non-Chinese supply chains could become more price-competitive. Lee Jin-ho, a researcher at Mirae Asset Securities, said, "The strategy of increasing exposure to non-Chinese solar companies remains valid," forecasting that earnings improvements would be relatively greater for companies with supply chains extending from polysilicon to cells. However, profitability is likely to improve only if increased installations lead to actual sales growth, higher module selling prices, and improved utilization rates at local plants.
The difficulty of avoiding competition from low-priced Chinese products through module manufacturing alone is also cited as a factor delaying a revaluation of the sector. Lee Dong-wook, a researcher at IBK Securities, noted, "Panels are in oversupply, while electricity during the hours it is needed remains in short supply," adding, "The profit center of the solar industry is shifting from simple module manufacturing toward energy storage systems (ESS), long-term power purchase agreements (PPAs), power-generation businesses, and electricity services."
[email protected] Lee Jung-hwa Reporter