Investment opportunities in Taiwan energy stocks emerge: How to strategize in green energy concept stocks

As global climate change becomes increasingly severe, renewable energy has become an inevitable choice for energy transition in various countries. Taiwan, as an Asian tech hub, also faces urgent needs for energy structure adjustment. Under the promotion of the “2025 Non-Nuclear Homeland” policy, Taiwan’s energy stocks are gradually becoming the market focus, and investors are beginning to pay attention to the opportunities and risks in this field.

Current Status of Taiwan’s Energy: Broad Development Space

According to data from the Ministry of Economic Affairs’ Energy Bureau, in 2022, renewable energy accounted for only 8% of Taiwan’s power system, far below the over 40% in advanced European countries. More notably, Taiwan’s imported energy makes up 97.3% of total consumption, indicating a very low energy self-sufficiency. This situation implies that the new energy industry where Taiwan’s energy stocks are involved has enormous growth potential.

The government has set clear targets: by 2025, achieving 20GW of solar photovoltaic capacity and 5.6GW of offshore wind power, increasing the renewable energy share to 15.1%. In other words, within the next three years, Taiwan’s renewable energy sector should at least double in size, benefiting related industries from policy dividends.

Data from the International Energy Agency also shows optimistic signals. In 2022, global renewable energy generation accounted for nearly 30%, a 1.5% increase from the previous year. The US further passed the “Inflation Reduction Act” in 2022, investing USD 369 billion to support energy transition, with solar capacity expected to increase by 69% over the next decade.

Leading Taiwan Energy Stocks Analysis

Delta Electronics (2308): Dual Engines in Energy Storage and Automotive Electronics

Delta Electronics has technological advantages in energy storage and electric vehicle sectors. Since renewable energy generation is unstable, energy storage systems are needed for regulation, making the market for Delta’s energy storage solutions promising. Meanwhile, its automotive electronics products have been recognized by 75% of the top 20 global automakers, and as EV penetration increases, this business will become a key growth driver.

The company’s revenue for June 2023 reached NT$34.825 billion, an 8% year-over-year growth, setting a new high for the same period. Over the past three years, revenue has shown an accelerating growth trend, indicating sustained strong momentum.

Sungrow Power Supply Co., Ltd. (6806): Integrated Solar and Wind Power Service Provider

Sungrow focuses on solar and wind development and operation & maintenance, providing integrated services from site assessment to warranty completion. After completing its IPO at the end of 2022, its performance significantly improved in 2023. In April, revenue surged to NT$774 million, mainly benefiting from recognized income from the second phase of Taiwan Electric’s offshore wind project. This project will continue to contribute revenue over the next two years, with considerable profit growth potential.

Hua Cheng (1519): Dual Tracks of Grid Upgrade and Charging Piles

Hua Cheng is a long-term partner of Taiwan Power Company, supplying transformers and other power equipment. In 2022, Taiwan Power announced a NT$564.5 billion ten-year “Strengthening Grid Resilience Construction Plan,” which will directly benefit Hua Cheng. Additionally, Hua Cheng holds nearly 20% market share in Taiwan’s EV charging pile industry, with a clear leading position. In the first half of the year, revenue reached NT$4.643 billion, a 34.96% increase year-over-year, setting a new high for the same period.

It is worth noting that the stock price has risen by 242.56% since the beginning of the year, indicating potential short-term correction risks.

Cheng Shin (5483): Major Solar Energy Company Benefiting from US Policies

The US “Inflation Reduction Act” will directly benefit Taiwanese solar manufacturers. Cheng Shin’s solar business revenue in 2022 exceeded NT$10.25 billion, a 34.5% increase. However, this year, upstream raw material prices such as silicon and wafers have fallen, putting short-term revenue under pressure. When raw material prices rebound, the company’s stock will present buying opportunities.

Pros and Cons of Investing in Taiwan Energy Stocks

Before investing in new energy concept stocks, investors should rationally evaluate the benefits and risks:

Advantages: Continuous inflow into ESG-themed funds; strong government policy support; huge industry growth space; effective diversification in investment portfolios.

Disadvantages: Higher stock price volatility, more susceptible to policy changes; many listed green energy companies are in expansion phases, with unstable dividends; increasing industry competition, making stock selection difficult; lack of hedging tools like options.

Investment Recommendations

Taiwan’s new energy industry is in a rapid growth phase, and investment opportunities in Taiwan’s energy stocks indeed exist. However, investors should adopt a long-term mindset, implement risk management, and control position sizes. Initially, focus on companies with solid fundamentals and direct policy support, gradually expanding into related fields. Meanwhile, closely monitor changes in government policies, upstream raw material prices, and other external factors to adjust investment strategies in a timely manner.