Mandatory Solar Installations in Public Parking Lots: A Boost for HD Hyundai Energy Solutions’ Stock?

The Ministry of Climate and Environment’s announcement of mandatory solar installations in public parking lots is expected to have a significant impact on the domestic renewable energy market. According to a report by the Chosun Ilbo, starting on the 28th, public parking lots with a parking area of over 1,000㎡ must be equipped with power facilities of at least 100㎾. Personally, I believe this is not just a regulation but a substantial opportunity for the domestic solar industry.

Historically, whenever such policies are introduced, related stocks tend to fluctuate, and this time seems no different. I expect this policy to positively impact the stock prices of large solar companies like HD Hyundai Energy Solutions (267260). But is this really the case? It seems necessary to take a closer look.

First, examining the market size is crucial, specifically how many public parking lots over 1,000㎡ exist nationwide. According to data from the Ministry of the Interior and Safety, there are about 12,000 public parking lots nationwide, with approximately 30-40% estimated to be over 1,000㎡. This suggests that around 3,500-4,000 locations are likely to be affected by this policy. Even if only 100㎾ is installed per parking lot, a new market of 350-400㎿ could open up.

This is by no means a small market. Calculating the cost of solar power facilities at around 1.5 million KRW per ㎾, the total market size is estimated to be between 525 billion and 600 billion KRW. Although this won’t happen all at once, it is expected to proceed gradually over the next 3-5 years, potentially creating an additional annual demand of over 100 billion KRW.

HD Hyundai Energy Solutions’ Competitiveness and Benefit Prospects

HD Hyundai Energy Solutions is in an optimal position to benefit from this policy. The company possesses significant technological prowess and construction experience. As of 2023, it holds about a 15% share of the domestic solar module market, with a particular strength in securing large-scale projects. Since public parking lot solar installations are typically large projects commissioned by local governments or public institutions, large companies like HD Hyundai Energy Solutions have an advantage.

In fact, the company successfully completed a solar project at the Gangwon Provincial Government parking lot last year. This project, with a capacity of 2.3㎿, reportedly produces about 3,100㎿h of electricity annually. With such references, the company is likely to gain a competitive edge in the future public parking lot solar market. Of course, competitors like Hanwha Q CELLS and Shinsung E&G are also formidable.

Notably, HD Hyundai Energy Solutions’ integrated solution capabilities stand out. The company offers a one-stop service from design to construction and maintenance, not just supplying solar modules. Public parking lot solar installations are complex projects that must maintain existing parking functions, and companies with such integrated capabilities are naturally more competitive in securing contracts. With the company’s 2023 sales around 1.2 trillion KRW, this policy could potentially add 20-30 billion KRW in annual revenue.

From a stock perspective, HD Hyundai Energy Solutions has risen about 20% this year, yet its valuation is still not high compared to its peers. Its current PER is around 12, which is relatively undervalued compared to Hanwha Solutions (409570) at 15 and Shinsung E&G (083650) at 18. If performance improvements become visible due to this policy benefit, a valuation re-rating could be anticipated.

Opportunities and Challenges for the Domestic Solar Industry

This policy is likely to positively impact not only HD Hyundai Energy Solutions but the entire domestic solar industry. The domestic solar market has so far focused on small-scale residential installations, but this could be an opportunity to expand into the commercial and public sectors. With increased urban installations, the existing rural-centric solar installation pattern is expected to change.

Hanwha Solutions, with its Q CELLS brand, is strong in the high-efficiency solar module market, and demand for high-efficiency products is likely to increase in limited spaces like public parking lots. The company recently began mass production of high-efficiency modules using heterojunction (HJT) technology, which could prove competitive in public parking lot projects.

Shinsung E&G is also expected to benefit. The company excels in designing and constructing solar structures, likely standing out in the installation of upper structures in parking lots. Unlike typical ground installations, parking lot solar requires special structures considering vehicle traffic, where technology and experience are crucial.

However, it’s not all rosy. Initially, securing budgets for local governments or public institutions might be challenging. Especially with local finances under strain, additional investment burdens could arise. Although the government has promised support measures, specific financial support plans or incentive systems are not yet clear.

Additionally, the opposition from citizens using existing parking lots must be considered. Solar panel installations could reduce parking space or cause inconvenience during construction. How these issues are resolved could affect the policy’s implementation speed.

From a competitive standpoint, there are considerations as well. The influx of low-cost Chinese solar modules is likely to increase. Since public projects do not necessarily require domestic products, competition with Chinese companies on price is inevitable. With Chinese companies like LONGi Solar and JinkoSolar increasing their presence in the domestic market, domestic companies need to focus more on cost competitiveness.

Overall, however, this is seen as a positive change. With the government setting a goal to increase the share of renewable energy generation to 30% by 2030, such mandatory policies are likely to continue. In Europe, policies mandating solar installations in large buildings or parking lots are already spreading, and it seems our country is following this global trend.

From an investment perspective, related stocks are likely to rise in the short term due to policy benefit expectations. However, in the long term, sustained stock price increases will require actual order performance and revenue growth. For HD Hyundai Energy Solutions, related order news is expected to start emerging from the fourth quarter of this year, and if performance improvements become visible, it could positively impact the stock price.

Personally, I believe this policy could be a new turning point for the domestic solar industry. It seems like a good opportunity for domestic companies to strengthen their competitiveness in an industry that has been heavily reliant on overseas markets. While dramatic changes in the short term are unlikely, it is expected to be a meaningful growth driver in the medium to long term.

This article was written by adding personal opinions and analysis after reading a Chosun Ilbo article.

Disclaimer: This blog is not a news outlet, and the content is the author’s personal opinion. The responsibility for investment decisions lies with the investor, and the author assumes no responsibility for investment losses based on this article.