RAM Ratings has reaffirmed the AAA(fg)/Stable rating of Hanwha Q CELLS Malaysia Sdn Bhd's (HQC or the Company) RM150 mil Guaranteed Medium-Term Notes (2021/2024) (MTN). 

The rating reflects an irrevocable and unconditional guarantee on the MTN from Credit Guarantee Investment Facility (rated AAA/P1 by RAM). HQC is a manufacturer of solar photovoltaic (PV) cells and modules in Malaysia. It is indirectly wholly owned by Hanwha Q CELLS Co. Ltd (Hanwha Q CELLS), the solar arm of Hanwha Solutions Corporation (the Group)  a leading petrochemical player in South Korea, with operations globally.

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 (R&D) arm of Hanwha Q CELLS, with Malaysia being one of the Group's four manufacturing and R&D sites globally. It rides on its parent's renowned product technology and respectable position. Hanwha Q CELLS is consistently ranked among the 10 largest PV module manufacturers globally and is the top player in advanced countries like the US, Germany, the UK and Japan. As a contract manufacturer of Hanwha Q CELLS, HQC's products are sold mostly internally, with quantities typically fixed and the selling price marked up at a given rate to production cost.

HQC's revenue improved by 20% y-o-y to RM2.18 bil in FY Dec 2021 on the back of better solar module prices. Its operating profit before interest, tax and depreciation (OPBDIT) margin however shrank to a lower than expected 2% (FY Dec 2020: 11%) due to a spike in logistics cost and raw material prices as well as a lag in revising product prices. HQC's pre-tax loss widened in FY Dec 2021, weighed down by continued write-offs on property, plant and equipment following plant upgrades. Nevertheless, product prices have been revised upwards this year, lifting revenue to RM1.71 bil in 1H fiscal 2022 (+57% y-o-y) and returning the Company's bottom line to the blac