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Front-loaded demand to provide a short-term boost

Maintain Buy rating and TP of W51,000; still our top pick for 2H25

We reiterate our Buy rating on Hanwha Solutions with a target price of W51,000 and retain the stock as our top pick. Despite our downward forecast revisions, we keep our target price unchanged, in light of: 1) solid visibility on the growth of the third-party ownership (TPO) business (with subsidies set to remain in place through 2027); and 2) the likelihood of a near-term pull-forward of demand, which could drive up US module prices. While we trimmed our 2025 earnings estimates to reflect won appreciation and potential delays to the start-up of new facilities, other investment points remain intact, including: 1) supply shortages following the full implementation of antidumping and countervailing duties (AD/CVD); 2) strong growth potential in residential energy; and 3) upside to US module prices. As such, we believe the stock still has plenty of room to run.

2Q25 preview: Earnings surprise likely

For 2Q25, we look for operating profit of W144.8bn, 25% above the consensus of W115.8bn. At the renewable energy division, we estimate operating profit at W192.3bn, which breaks down into: 1) a W91.2bn loss from modules/other; 2) a W2bn loss from EPC/power generation asset sales; 3) advanced manufacturing production credit (AMPC) recognition of W195.5bn; and 4) W90bn from the residential energy business.

Module price increases are likely to have been weaker than expected due to policy uncertainties. We estimate that residential energy earnings remained solid in 2Q25, although we take a slightly more conservative view compared to 1Q25. The chemicals division saw no major changes in fundamentals, but operating losses should narrow due to the absence of large-scale maintenance work.

TPO demand to remain solid through end-2027; slowdown to begin in 2028

In the near term, we expect the front-loading of demand to push module prices and TPO orders higher in the US. With the passage of the One Big Beautiful Bill Act, projects must now begin construction within?12 months?of the?bill’s enactment to qualify for clean electricity investment tax credits. As project timelines speed up as a result, US module prices―which have remained flat due to policy uncertainties since the Jun. 9 issuance of AD/CVD orders―are anticipated to move higher. Going forward, we advise closely monitoring changes in price indicators and US import volumes.

We also project that the TPO business (a key part of the residential energy unit) will enjoy solid demand through end-2027. This gives the business roughly two and a half years to scale into a major power producer. TPO demand should gradually slow from 2028 (when the investment tax credit gets phased out).