Company Reports

Sungrow Power Supply's first-half revenue fell 29% year on year, while net profit declined 32%.

On June 30, Reuters reported that the US Federal Communications Commission is drafting a ban on the import of foreign inverters over concerns that they could be used to disrupt power supplies. The restriction could apply ‌to new inverter models and be introduced as early as this year.

Sungrow's first-quarter 2026 revenue fell by 18% year on year to CNY 15.6 billion, while net profit attributable to shareholders plummeted by 40% to CNY 2.3 billion.

Sungrow Power Supply is one of the largest solar inverter suppliers. The firm has established a stronghold in supplying inverters for utility-scale solar, and is trying to expand its presence in distributed solar. Following years of exponential growth, solar installation has slowed. As a result, we project only a 5% compound annual growth rate in inverter revenue over the next five years.

Sungrow's fourth-quarter 2025 revenue fell by 18% year on year, while net profit plummeted by 54%.

Sungrow's share price has declined 19% since November, lagging the ChiNext Price Index, which rose 5% over the same period.

Sungrow's third-quarter revenue grew by 21% year on year, while net profit surged by 57%.

Sungrow Power Supply is one of the largest suppliers of solar inverters with more than 20% market share by shipments in 2023. The firm has established a stronghold in supplying inverters for utility-scale solar, and is trying to expand its presence in distributed solar. Distributed solar is a more fragmented market than utility-scale solar and we expect Sungrow to face more competition on this front. While Sungrow has benefited from the rapid growth in global solar installations in recent years, we expect a deceleration in inverter shipment growth as the pace of new installations moderates. We expect only a 8% compound annual growth rate in solar inverter revenue over the next five years.

Sungrow's first-half revenue grew by 40% year on year, while operating profit rose by 58%.

Sungrow Power Supply is one of the largest suppliers of solar inverters with more than 20% market share by shipments in 2023. The firm has established a stronghold in supplying inverters for utility-scale solar, and is trying to expand its presence in distributed solar. Distributed solar is a more fragmented market than utility-scale solar and we expect Sungrow to face more competition on this front. While Sungrow has benefited from the rapid growth in global solar installations in recent years, we expect a deceleration in inverter shipment growth as the pace of new installations moderates. We expect only a 8% compound annual growth rate in solar inverter revenue over the next five years.

Sungrow recorded a moderate 8% year-on-year revenue growth in the fourth quarter of 2024, but growth accelerated to 51% in the first quarter of 2025.

Sungrow's 2025 share award plan underscores our cautious view of the firm's outlook. Under the plan, shares will vest annually over 2025-28 if either the revenue or net income targets are met; otherwise, they will be forfeited. The plan sets revenue targets at 124% of the 2023 level in 2025, 145% in 2026, 168% in 2027, and 185% in 2028, translating to a 13% revenue compound annual growth rate for 2023-28, substantially lower than the 47% CAGR during 2018-23. Alternatively, net income targets are set at 110% of the 2023 level in 2025, 120% in 2026, 130% in 2027, and 140% in 2028. The implied 7% net income CAGR for 2023-28 lags the revenue CAGR, indicating an expectation of margin compression. As we had already anticipated slowing growth and margin contraction, our estimates remain unchanged. We believe the shares are fairly valued, trading at an 11% premium to our valuation of CNY 63 per share.

We maintain our fair value estimate of CNY 63 for Sungrow and consider the shares to be currently overvalued. Sungrow's third-quarter results were slightly disappointing, with adjusted operating profit dropping 11% year on year despite a 6% increase in revenue. Consequently, while keeping our revenue forecast, we have lowered our gross margin forecast by 1.2 percentage points, leading to a 6% reduction in our net profit forecast to CNY 11.6 billion for 2024. Our estimates beyond 2024 remain unchanged, as we had already factored in sequentially lower gross margins.

Sungrow’s first-half results beat market expectations but are shy of our estimates. Despite strong shipment growth, average selling prices fell more than we assumed. After factoring this in, we reduce our estimates for revenue by 6%-11% and net income by 9%-13% for 2024-28. We now project CNY 12.3 billion net profit in 2024, which still represents a decent 30% year-on-year growth. Following these adjustments, we cut our fair value estimate by 6% to CNY 63. With the share price up 5% on the market beat, we see the shares as fairly valued.

Sungrow Power Supply is one of the largest suppliers of solar inverters, with more than 20% global market share in 2022. With an established stronghold in supplying inverters for utility-scale solar, Sungrow is trying to expand its presence in distributed solar. Distributed solar is a more fragmented market than utility-scale solar, and we expect Sungrow to face more competition on this front. Nonetheless, we expect Sungrow’s solar inverter shipment to grow at a 15% CAGR over our projected five-year period given rapid growth in solar installations.

Sungrow Power Supply is one of the largest suppliers of solar inverters, with more than 20% global market share in 2022. With an established stronghold in supplying inverters for utility-scale solar, Sungrow is trying to expand its presence in distributed solar. Distributed solar is a more fragmented market than utility-scale solar, and we expect Sungrow to face more competition on this front. Nonetheless, we expect Sungrow’s solar inverter shipment to grow at a 15% CAGR over our projected five-year period given rapid growth in solar installations.

Sungrow's fourth-quarter 2023 and first-quarter 2024 results beat expectations as its new-energy investment and development segment got a boost from strong solar installation activity and falling solar module costs. In addition, gross margin for its energy storage system segment also surprised positively on low lithium-ion cell costs. We expect profitability to remain high in 2024, as contracted sales prices should lag the drop in input costs. After raising our gross margin assumption to 31.9% from 25.1%, we increase our net income estimate to CNY 14 billion from CNY 11 billion for 2024. We raise our fair value estimate to CNY 94 from CNY 86. The shares closed 3% above our fair value estimate on April 23, and we think they are fully valued.

Sungrow Power Supply is one of the largest suppliers of solar inverters, with more than 20% global market share in 2022. With an established stronghold in supplying inverters for utility-scale solar, Sungrow is trying to expand its presence in distributed solar. Distributed solar is a more fragmented market than utility-scale solar, and we expect Sungrow to face more competition on this front. Nonetheless, we expect Sungrow’s solar inverter shipment to grow at a 15% CAGR over our projected five-year period given rapid growth in solar installations.

Sungrow’s third-quarter revenue is in line, but net income beat our expectation as gross margin expanded to 34.4%, up 9.2 percentage points year on year. Management attributed the strong gross margin to a higher proportion of overseas sales. We estimate overseas revenue accounted for 59% of total revenue in the third quarter compared with 53% during the same period last year. In addition, we believe lower inputs and shipping costs also helped. After raising our gross margin assumption to 29.4% from 27%, we increase our net income estimate to CNY 9.3 billion from CNY 8.8 billion for 2023, representing a 160% increase year on year. We maintain our assumptions for 2024 and beyond. We expect gross margin to contract to 25.1% in 2024 but net income should still grow by 22% year on year on higher shipments. We keep our fair value estimate at CNY 86. The shares closed 2% below our fair value estimate on Oct. 31. We suggest investors wait for better entry points.

We initiate coverage of Sungrow Power Supply, one of the largest solar inverter and energy storage system suppliers in the world, with a no-moat rating. Although Sungrow is leading peers in both solar inverters and energy storage systems, we do not have high conviction that it can maintain its lead for at least the next 10 years. We think the shares are fairly valued relative to our CNY 86 fair value estimate.