RAM Ratings has assigned a final rating of AAA(fg)/Stable to Hanwha Q CELLS Malaysia Sdn Bhd's (HQC) proposed RM150 mil Guaranteed Medium-Term Notes (2021/2024) (proposed MTN). In doing so, we have reviewed all relevant transaction documents and find them to be in line with our expectations when the preliminary rating was assigned (published on 30 July 2021). 

The rating reflects the credit enhancement provided to the notes by an irrevocable and unconditional guarantee from Credit Guarantee Investment Facility (CGIF, rated AAA/P1 by RAM). 

HQC is a manufacturer of solar photovoltaic (PV) cells and modules in Malaysia, with respective production capacities of 2.11 GW and 1.84 GW as at end-December 2020. HQC is indirectly wholly owned by Hanwha Q CELLS Co. Ltd (Hanwha Q CELLS), the solar arm of Hanwha Solutions Corporation (the Group). Based in South Korea, with operations worldwide, the Group is also involved in the chemicals and advanced materials sectors among others.

Excluding the guarantee, HQC's credit profile is strong, considering its very close relationship with Hanwha Solutions. HQC is a key manufacturing and research and development arm of Hanwha Q CELLS, and rides on its parent's renowned product technology and solid branding. Among the 10 largest PV module manufacturers globally, Hanwha Q CELLS is the top player in several advanced countries. HQC's products are mostly sold internally, with quantities typically fixed and the selling price marked up at a given rate to production cost. As such, HQC's operating profit before depreciation, interest and tax margin has been fairly stable, with debt coverage adequate.

Moderating HQC's credit profile is a highly leveraged balance sheet and weak liquidity profile. HQC's business viability depends on Hanwha Solutions' ability to maintain its market position in the competitive global solar PV sector. Players are exposed to obsolescence risk and changes in government renewable energy targets. The Group iss