Korean solar stocks' sharp drop seen as buying opportunity as US peers hit record highs

Analysts say the recent sharp decline in Korean solar stocks presents a buying opportunity, as US solar shares continue to surge on the back of growing energy security concerns and rising power demand — trends that are boosting the value of so-called "non-China" solar supply chains.

Hana Securities said Wednesday that the recent tumble in Korean solar stocks could be a buying opportunity, citing the broader push to exclude China from the US solar supply chain. Analyst Yoon Jae-seong said in a report that share prices of Korean solar companies including Hanwha Solutions and OCI Holdings had tumbled since early this month, but called the selloff "a golden buying opportunity."

Yoon said US solar stocks are soaring. First Solar hit an all-time high last week, T1 Energy reached a four-year high, and SUNation set a one-year high this week, he said.

He attributed the gains to a premium being priced in for companies that have built non-China supply chains ahead of an anticipated announcement related to Section 232 of the Trade Expansion Act. "From an energy security standpoint, given that Korea is central to building a non-China supply chain capable of addressing the US's near-term power shortage, the drop in Korean solar stocks appears to reflect a simple supply-demand issue rather than any change in fundamentals," Yoon said.

He added that upward momentum is likely to strengthen in June and July. "The Section 232 announcement is expected to come this month or next," he wrote, adding that SpaceX began construction of a solar cell factory in Texas in March and that the scale of polysilicon supply agreements with Korean companies should become clear soon.

Yoon also said domestic solar stocks are currently undervalued.

Regarding SUNation, whose shares surged 420 percent on the New York Stock Exchange on Monday local time, Yoon said the jump reflected a reverse merger with unlisted solar cell manufacturer Sunvia, which effectively gave Sunvia a backdoor listing on the Nasdaq. Based on the combined entity's market capitalization, he estimated Sunvia's enterprise value at between 800 billion won ($527 million) and 2 trillion won per gigawatt of capacity.

"Hanwha Solutions, which receives more in AMPC production subsidies, is valued at only 1.1 trillion won per gigawatt — this transaction confirms it is relatively undervalued," he said.

Solar stocks refer to shares in companies that develop or manufacture products and technology — including modules and inverters — related to the solar power generation industry, which converts sunlight into electricity.

Korean solar stocks have weakened recently. Hanwha Solutions has fallen 15 percent and OCI Holdings has tumbled 27 percent since early June, according to the report.

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