Urethane Blog

Hanwha Update

February 23, 2023

Hanwha Solutions shares slump on spin-off, no dividend plans

[Courtesy of Hanwha Solutions]
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Shares of Hanwha Solutions Corp. fell as trading the stock will be suspended for about a month on its spin-off plan, lower solar module prices and its decision to pay no dividends for three consecutive years.

The shares fell about 5 percent during past month until Tuesday to 43,150 won and dropped 24 percent from the previous high on Nov. 25. This contrasts with a rise in its rivals as the Korea Exchange Energy & Chemical Index rose by 9.9 percent to 3250 from 2955 during the same period as China’s reopening is expected to generate demand. The index includes many major domestic chemical companies, including LG Chem Ltd., Lotte Chemical Corp. and Kumho Petrochemical Co.

Hanwha Solutions will be suspended from trading from Feb. 27 to March 30 ahead of its planned spin-off of its department store unit. Institutional investors are likely to sell Hanwha Solutions shares rather than keeping them tied to a share that’s suspended for about a month. According to the Korea Exchange, institutional investors net sale of Hanwha Solutions shares reached 142.3 billion won this year and from Feb. 10 to 21, they were net sellers for eight consecutive trading days.

Shares are also lower because export prices of solar modules recently fell about 15 percent from the previous peak as prices of alternative energy sources dropped. The chemical industry had its worst year in 2022 on slowing demand and rising inventory. Given that the company’s renewable energy division, which produces solar cell modules, has been the driving force behind its corporate value, the recent decline is due to rising concerns that the division’s earnings could underperform.

Hanwha Solutions said in a conference call on Feb. 16 that it will take steps to improve shareholder returns, including share buybacks and dividend payouts, when its investment plans to grow the business start to reflect into its earnings. The company plans to spend 2.7 trillion won in U.S. facilities this year.

Investors reacted negatively by saying that Hyundai Energy Solutions Co., which runs a similar solar module business, and Hyosung Corp., which runs a chemical business, are implementing cash dividend policies.

However, some observers say that Hanwha Solutions’ stock will be able to rebound as its performance is expected to improve from this year, helped by falling raw material prices.

“The impact of the price decline in solar cell modules is expected to be offset by an increase in sales in the U.S. following its module production expansion in the U.S.,” Mirae Asset Securities analyst Lee Jin-ho said.

Hanwha Solutions’ chemical material business can also improve its performance from the first quarter of this year. In its earnings announcement this year, Hanwha Solutions predicted that demand for products such as low-density polyethylene, PVC and toluene diisocyanate could recover, helped by demand in China following its shift to live with Covid and measures to stimulate its economy.