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HSOL: Undervalued And Underestimated! A Worthy Potential Investment In The PV Sector.

|Includes: Hanwha Q CELLS Co., Ltd. (HQCL)

HSOL: undervalued and underestimated! A worthy potential investment in the PV Sector.

After its latest Q report HSOL pps has lost >20%. In my view this is completely overdone and I strongly believe that not long from now we will see new highs!

As it has become nearly impossible to make a decent post on the Yahoo Message Board I will use this instablog post to share some important information about HSOL.

First of all, I agree with hangmaniceman1's assessment about HSOL at the Yahoo Message Board and I share his belief that HSOL is much undervalued and very few analysts have a clue about their future potential.

Please also check HSOL website investor relations: First Q Review and Update slide presentation

Improved turn-over, higher ASP, higher gross margin: count on it that this trend will continue for 2013:

Confirmed by HSOL mgmt. during the CC

Multiple sources such as Mercom Solar, Lux Research, Taiwan Digitimes, solarserver, pvinsight websites etc…are confirming a price uptrend for modules in recent weeks/months

Taiwan Digitimes expects another up to 10% price increase of PV modules this year.

Despite wide opposition amongst EU member states, the European Trade Commissioner, Karel de Gucht has forged ahead with temporary duties of 11.8% leaving a 2 months window for further negotiations.

Although a final outcome of the ruling is only expected in December, the current trade dispute has already pushed up PV prices in Taiwan and Europe.

Common sense tells me a compromise will be negotiated to avoid a trade war and to avert slow down on the expansion of PV installations in Europe. Google article:

"Europe's anti-dumping tariff about to finalize, Chinese PV manufacturers' three contingency plans"

Current HSOL Geographic sales distribution:


Everyone who tracks the growth of the solar sector has learned in the last week that "Japan is poised to be world's largest solar market", (See "reneweconomy"). Japan is forecast to install $20 billion worth of PV systems in 2013, up 82% from 2012 and representing 24% of global PV system revenue.

Recent products shipments (33% of Q1 shipments) show HSOL's strong market position in this high growth/ high margin market. Remember that in August 2012 HSOL struck a deal with Marubeni Corporation to supply 500 MW PV Modules for the Japanese market spread over 4 years and that we have now only started to see increased shipments. Considering the growth of the Japanese PV market is beyond forecasts and HSOl's valuable partnership with Marubeni I see a good chance that the volume of the deal might be increased in the future.

We can expect further increase of shipments to both these markets!

South Africa:

21% of HSOL's shipments in Q1 went to the South-African market. Also this is a very strong growing market where HSOL is well positioned. The potential of this market was also accentuated by Google's recent investment as described in "Google invests in big South African solar project" published in gigaom.

CEE market:

Have a look to the article published by Bloomberg Businessweek: "EU Solar Duty May Spur Short-Term Imports as Deal Sought". Some extracts:

"The European Commission yesterday announced provisional anti-dumping duties of 11.8 percent on photovoltaic products from more than 100 Chinese manufacturers, an initial rate that may increase more than fivefold in August. The rate comes as a relief to Chinese producers that were anticipating steeper penalties, said Angelo Zino, an analyst at Standard & Poor's Financial Services LLC in New York. European customers may stockpile panels before the duties increase, and some companies expect Beijing and the EU to negotiate a deal that avoids the higher tariffs."

As compared to other China based PV manufacturers HSOL already has alternatives to avoid high punitive import duties. It can approach the European market via QCells Germany or with PV modules assembled in Taiwan (currently ongoing for US market).

In this context I suggest you Google: "limited-exposure-to-europe-will-warrant-better-returns-for-chinese-solar-" which appeared in the website of pv-magazine.

USA market :

HSOL currently sells Hanwha HSL Poly Series as "Tariff free High Performance Taiwan Cells" avoiding heavy import duties.

I love HSOL's strategic market approach in the US through the investments made by HANWHA in "OneRoof Energy" and "SilentPower". Now that OneRoof Energy has recently lined up $100 million funding to finance residential rooftop installations it targets installing roughly 60-70 megawatts of solar panels throughout 2013.

Specifically for the commercial- and utility scale projects HSOL is capable of offering full services through QCells USA.

This market approach is quite young and is expected to come to fruition in H2 and 2014.

With regards to the tariffs that the US imposed on Chinese Solar panels an interesting article came out on June 2 in the Financial Times. Please Google: "US China solar duties fail to halt imports as EU prepares its move". Rhone Resch, president of the Solar Energy Industries Association, said tariffs have had "a very small impact on the US market": neither sending cell prices soaring, nor rebuilding the domestic manufacturing base. While imports from China have slowed significantly, those from other parts of Asia have soared.

Asia Pacific market beyond Japan:

With the recent product improvements and HSOL's lower COGS compared to other players HSOL can tackle these markets in a very competitive way!

HSOL and QCells are making good progress in Australia with recent commercial scale rooftop PV projects in WA, NSW and SA totalling >500 kW.

Besides the Thai, Indian and Malaysian market where HSOL has obtained sales already the Indonesian market looks very promising. Recently, the Indonesian Ministry of Energy and Mineral Resources, announced the government's plan to increase the number of solar power facilities to 153 this year, from last year's 117.

I also expect HSOL to participate in the recently launched Tender For 150 MW Of Solar Photovoltaics.

The Indonesian market has a very attractive potential, given Indonesia's electrification ratio only reached 55-60% and almost the entire area is non-electrified rural areas located far from electrical power plants.

Chinese market:

Although China only represented 3% of Module revenue by shipping destination Q1 13 a major market potential for HSOL and other Chinese PV players will open up in H2 2013, thanks to a policy shift: Google "China's policy shift in 2013 to stimulate on-grid installations and address abandoned power issues"
"Energytrend" expects HSOL to sell about 140MW in China during 2013 thanks to this policy shift. These 140MW may conservatively not been included in HSOLs outlook while it may drastically improve revenues and profitability!

Over more, if the Chinese home market starts to bloom it will quickly resolve the PV manufacturing over capacity in China and result in higher PV module prices, worldwide.

Russian Market:

Is also getting attractive for Hanwha Solar having already a presence in Moscou. Google the Bloomberg article "Russia Approves Subsidy Program to Boost Renewable-Energy Output": Russia approved an incentive program to boost renewable-energy production, targeting almost 6 gigawatts of new capacity by 2020 and its first solar parks.

Middle East Market:

In March Hanwha also indicated increased demand from the Middle East.

Improved Cost Structure will result in improved margins and profitability in Q2, and H2:

Filtering the comments from Ki-Joon Hong, Chairman and CEO we obviously can expect better GM and profitability: Q1 shipments (+45%) rose sharply, plants are running at full utilization favorably impacting our cost structure!

Now, think twice, the increased shipments mainly went to those markets with a higher ASP! The only factor here that I am a little weary off is the weaker Japanese Yen.

HSOL also implemented some production efficiency methods that were already applied in Qcells' manufacturing plants and for the new HSL PV Modules some savings were achieved on materials.

Latest early 2014 Hanwha Chemical's polysilicon plant at Yeosu, South Korea will start production and supply to Solarone which is also expected to favorably improve cost structure.


With the purchase of Q-Cell's R&D center and manufacturing factories in Germany, Hanwha now ranks 3rd globally for its capacity to produce solar energy (Q-Cell annual capacity is 2.3 GW).

Improved market conditions, higher module pricing for a higher quality product, better market penetration, favourable outlook for the Chinese market and lower cost structure will result in profitability for the remainder of 2013 and I wouldn't be surprised we may even see some double digit margins.

For further reading, please Google the following articles:

"Evolving into global solar giant" published in koreaittimes

Polysilicon Seen Rebounding as China Plans Import Duties: Energy published by Bloomberg

Disclosure: I am long HSOL.