Deye Shares (605117.SH): Dual-Engine Growth in Storage Batteries and Inverters Drives Q1 Surge; Initiate with BUY

Date: April 12, 2026
Sector: Power Equipment / Photovoltaic Equipment
Analyst: Hao Zha (SAC: S1350524060004), Xiaoning Liu (SAC: S1350523120003)
Rating: BUY (Initiation)
Current Price: CNY 139.60
Target Price Implied Upside: Significant upside based on 2026E earnings growth and multiple expansion potential relative to peers.

Executive Summary

We initiate coverage of Deye Shares (605117.SH) with a BUY rating. As a global leader in photovoltaic (PV) and energy storage solutions, Deye has demonstrated remarkable resilience and adaptability in a rapidly evolving global energy landscape. Our analysis is underpinned by the company’s robust financial performance, strategic diversification into high-growth markets, and technological leadership in hybrid inverters and storage battery packs.

The core investment thesis rests on three pillars:
1. Accelerating Earnings Momentum: The company forecasts a stellar first quarter of 2026, with net profit attributable to shareholders expected to reach CNY 1.1–1.2 billion, representing a year-over-year (YoY) growth of 55.91%–70.08%. This surge signals a strong recovery and expansion phase following a stable but slower growth trajectory in 2025.
2. Dual-Engine Product Strategy: While traditional PV inverters face market saturation in certain regions, Deye’s storage inverters and storage battery packs have emerged as powerful growth drivers. In 2025, storage battery revenue surged by 56.34% YoY to CNY 3.83 billion, while storage inverter revenue grew by 18.92% to CNY 5.22 billion. This structural shift towards higher-value storage solutions is enhancing overall profitability and reducing reliance on commoditized PV hardware.
3. Geographic Diversification and Market Penetration: Deye has successfully mitigated regional concentration risks by expanding beyond its traditional strongholds. The company is capitalizing on the "Year One" of European commercial and industrial (C&I) storage, achieving breakthrough growth in the Middle East (Iraq, Lebanon, Israel), and doubling sales in key Asian markets (India, Vietnam). This diversified geographic footprint provides a hedge against policy shifts in any single market and unlocks new revenue streams.

Financially, we project Deye’s revenue to accelerate significantly, growing from CNY 12.22 billion in 2025 to CNY 20.11 billion in 2026 (+64.54%), driven by the full-year contribution of new product lines and expanded market share. Net profit is forecast to jump by 72.22% to CNY 5.46 billion in 2026. At the current price of CNY 139.60, the stock trades at a forward P/E of approximately 23.25x for 2026, which we deem attractive given the projected earnings compound annual growth rate (CAGR) and the company’s superior return on equity (ROE) trajectory, expected to exceed 48% in 2026.

Despite near-term headwinds such as raw material price volatility and intensifying competition, Deye’s strong brand equity, vertical integration capabilities, and agile response to market pain points position it well to outperform peers. We view the current valuation as an entry point for long-term investors seeking exposure to the global energy transition, particularly in the high-margin storage segment.

Key Takeaways

1. Strong Q1 2026 Guidance Signals Robust Demand Recovery

Deye Shares has issued a positive profit warning for the first quarter of 2026, indicating a significant acceleration in business momentum.
* Net Profit Forecast: The company expects net profit attributable to shareholders to range between CNY 1.1 billion and CNY 1.2 billion.
* Growth Rate: This represents a YoY increase of 55.91% to 70.08%.
* Core Profitability: Deducted non-recurring net profit is estimated at CNY 1.04 billion to CNY 1.14 billion, reflecting a YoY growth of 69.78% to 86.11%.

This guidance substantially exceeds the growth rate observed in the full year of 2025 (7.11% net profit growth), suggesting that the company has successfully navigated inventory adjustments and demand fluctuations seen in previous periods. The disparity between the modest 2025 full-year growth and the explosive Q1 2026 guidance implies that new product launches, particularly in the storage battery sector, and penetration into new geographic markets are beginning to yield substantial financial results. It also suggests that seasonal factors or delayed project completions from late 2025 may have shifted revenue recognition into early 2026, further bolstering the quarter's performance.

2. 2025 Full-Year Performance: Stability Amidst Transition

Before analyzing the growth drivers, it is essential to contextualize the 2025 baseline. Deye delivered steady, albeit moderate, growth in 2025, serving as a foundation for the anticipated acceleration in 2026.

*Note: 2024 margins derived from reported changes.

The slight compression in gross and net margins (-0.63 pct and -0.50 pct respectively) reflects the changing product mix and competitive pricing pressures. However, the maintenance of a gross margin above 38% and a net margin near 26% underscores Deye’s premium positioning and operational efficiency. The company’s ability to sustain high profitability despite a challenging macro environment for solar equipment highlights its strong pricing power and cost control mechanisms.

3. Product Mix Shift: The Rise of Storage Batteries and Hybrid Inverters

The most critical structural change in Deye’s business model is the rapid ascent of its storage-related products. The company is transitioning from a pure-play inverter manufacturer to an integrated energy storage solution provider.

A. Storage Battery Packs: The New Growth Engine

• Revenue Contribution: In 2025, revenue from storage battery packs reached CNY 3.832 billion, a staggering 56.34% YoY increase.
• Strategic Importance: This segment is becoming a primary revenue driver, complementing the inverter business. By offering bundled solutions (inverter + battery), Deye enhances customer stickiness and captures a larger share of the wallet per installation.
• Margin Dynamics: The gross margin for storage battery packs was 31.8% in 2025, a decline of 9.49 percentage points YoY. While this decline is notable, it must be viewed in the context of aggressive market expansion and potential initial costs associated with scaling up production and logistics for battery units. Despite the margin compression, the absolute profit contribution from this segment has likely increased due to the volume surge. Furthermore, a 31.8% margin remains healthy compared to many pure-play battery assemblers, indicating Deye’s ability to maintain value-add through system integration and brand premium.

B. Inverter Segment: Resilience in Storage, Softness in PV

The inverter business shows a clear divergence between storage and traditional PV segments.
* Total Inverter Revenue (excluding accessories): CNY 6.271 billion.
* Storage Inverters:
* Revenue: CNY 5.217 billion.
* Growth: +18.92% YoY.
* Gross Margin: 51.1% (down 0.65 pct YoY).
* Analysis: Storage inverters remain the crown jewel of Deye’s portfolio. With a gross margin exceeding 50%, this segment drives the majority of the company’s operating profit. The double-digit growth indicates sustained global demand for hybrid systems, particularly in emerging markets where grid instability necessitates backup power solutions.
* PV Inverters:
* Revenue: CNY 1.054 billion.
* Growth: -7.21% YoY.
* Gross Margin: 32.1% (down 1.4 pct YoY).
* Analysis: The decline in PV inverter revenue reflects saturation in key residential markets and intense price competition. However, the impact on overall profitability is mitigated by the smaller revenue share of this segment compared to storage inverters. The lower margin profile of PV inverters (32.1% vs. 51.1% for storage) means that the shift in mix towards storage inverters is actually accretive to the blended margin of the inverter division, even if individual product margins face slight pressure.

C. Margin Analysis by Region

• Domestic (China) Sales: Gross margin of 28.32%, an improvement of +3.91 pct YoY. This improvement suggests successful cost optimization or a shift towards higher-value domestic projects, possibly utility-scale or C&I storage deployments which carry better margins than fragmented residential sales.
• Overseas Sales: Gross margin of 40.44%, a decline of -3.95 pct YoY. The overseas margin compression is likely due to increased logistics costs, tariff impacts, or competitive pricing strategies in new markets (such as the Middle East and Asia) to gain market share. Despite the decline, the overseas margin remains significantly higher than domestic, reinforcing the importance of international expansion for profitability.

4. Geographic Expansion: Capturing Global Opportunities

Deye’s strategy of "digging into new market pain points" has led to successful penetration in diverse geographic regions. The company is no longer overly reliant on any single market, reducing geopolitical and regulatory risks.

Europe: The C&I Storage "Year One"

2025 marked the inception of significant growth in European Commercial and Industrial (C&I) storage.
* Drivers: Electricity price reforms and supportive government policies have improved the economics of self-consumption and arbitrage for businesses.
* Deye’s Response: The company accelerated R&D for new C&I products, streamlined installation and commissioning processes, and executed rapid market promotion.
* Outcome: Sales in the European C&I segment grew rapidly. This is a high-barrier, high-margin segment where Deye’s technical expertise and service capability provide a competitive moat against lower-cost entrants.

Middle East: Breakthrough Growth

The Middle East has emerged as a high-potential region for Deye, leveraging existing brand equity.
* Lebanon: Years of深耕 (deep cultivation) in Lebanon have established a strong reputation for reliability, crucial in a market with frequent power outages.
* Expansion: Leveraging this brand effect, Deye expanded into Iraq, establishing after-sales service centers to address customer concerns about maintenance and support.
* Regional Spillover: Success in Iraq facilitated entry into neighboring markets including Yemen, Israel, and other surrounding areas, resulting in considerable sales increments. This cluster strategy allows for efficient supply chain and service network utilization.

Asia: High-Growth Emerging Markets

Asian markets displayed robust performance, driven by electrification needs and renewable energy adoption.
* High Growth: Sales in India and Vietnam doubled YoY. These markets are characterized by large populations, growing energy demand, and increasing government focus on renewable integration.
* Steady Development: Business in Thailand, Philippines, Myanmar, and Pakistan continued to develop steadily. This broad-based presence across Southeast and South Asia diversifies revenue sources and reduces dependency on any single regulatory environment.

5. Financial Health and Operational Efficiency

Deye maintains a strong balance sheet, supporting its aggressive expansion plans.

• Cash Position: As of the end of 2025, monetary funds stood at CNY 6.609 billion, providing ample liquidity for R&D, capacity expansion, and working capital needs.
• Debt Structure: Short-term borrowings were CNY 3.304 billion, while long-term borrowings were minimal at CNY 102 million. The company relies more on operational liabilities (accounts payable) which stood at CNY 4.863 billion, indicating strong bargaining power with suppliers.
• Asset Quality: Inventory levels were CNY 1.785 billion. Given the rapid growth in sales, this inventory level appears manageable and likely consists of finished goods ready for shipment to meet the strong Q1 2026 demand.
• Return on Equity (ROE): The ROE remained exceptionally high at 30.75% in 2025. Our forecasts suggest this will expand further to 48.65% in 2026, driven by higher net margins and asset turnover as revenue scales. This level of ROE is rare in the manufacturing sector and underscores the company’s exceptional capital efficiency.

Risks / Headwinds

While the outlook is positive, investors must consider several risk factors that could impact Deye’s performance.

1. Industry Sentiment and Demand Volatility

• Risk: The global photovoltaic and energy storage industry is cyclical and sensitive to macroeconomic conditions, interest rates, and government subsidy policies. A slowdown in global renewable energy adoption or a reduction in subsidies in key markets (e.g., Europe or Australia) could dampen demand.
• Impact: Lower-than-expected demand could lead to inventory buildup, price wars, and margin compression. Specifically, if the European C&I storage boom fails to sustain momentum, Deye’s growth projections for 2026-2027 could be overstated.

2. Raw Material Price Fluctuations

• Risk: The production of inverters and battery packs relies on key commodities such as lithium carbonate, copper, aluminum, and semiconductors (IGBTs).
• Impact: A sharp increase in raw material prices, particularly lithium for batteries, could erode gross margins. Although Deye has some pass-through capability, significant spikes may not be fully recoverable in the short term, especially in competitive bidding scenarios. The 9.49 pct drop in battery pack margins in 2025 already hints at sensitivity to input costs or pricing pressure.

3. Intensifying Competitive Landscape

• Risk: The energy storage and inverter markets are attracting numerous entrants, including established giants like Huawei, Sungrow, and GoodWe, as well as new players. Competition is intensifying in both technology and price.
• Impact: Price wars could lead to further margin erosion. In particular, the PV inverter segment is highly commoditized. If competitors undercut prices in the storage inverter or battery segments, Deye’s premium positioning could be challenged. Maintaining technological leadership requires continuous high R&D investment, which pressures operating expenses.

4. Overseas Business and Geopolitical Risks

• Risk: Deye derives a significant portion of its revenue and profit from overseas markets. This exposes the company to foreign exchange fluctuations, trade barriers (tariffs, anti-dumping duties), and geopolitical tensions.
• Impact:
  • FX Risk: Appreciation of the CNY against major currencies (USD, EUR) could negatively impact reported revenues and margins.
  • Trade Policy: New tariffs in the US, EU, or other key markets could make Deye’s products less competitive.
  • Political Instability: Operations in regions like the Middle East (Iraq, Yemen) and parts of Asia carry inherent political and security risks that could disrupt supply chains or sales operations.

5. Technological Obsolescence

• Risk: The energy storage technology landscape is evolving rapidly (e.g., shift from LFP to solid-state, new inverter topologies).
• Impact: Failure to keep pace with technological advancements could render Deye’s current product lineup less attractive. The company’s heavy reliance on R&D (CNY 562 million in 2025, projected to rise to CNY 955 million in 2026) is necessary but does not guarantee successful innovation.

Rating / Sector Outlook

Sector Outlook: Positive with Structural Shifts

The global power equipment sector, specifically the PV and energy storage sub-sectors, is undergoing a structural transformation.
1. From PV to Storage: The focus is shifting from pure PV generation to integrated storage solutions. Grid instability and the need for energy independence are driving demand for hybrid systems. Companies with strong storage portfolios are outperforming pure PV players.
2. Emerging Markets Lead Growth: While mature markets like Europe and Australia remain important, emerging markets in Asia, the Middle East, and Africa are becoming the primary engines of volume growth. These markets require robust, off-grid capable solutions, aligning well with Deye’s product strengths.
3. Consolidation and Premiumization: The market is consolidating around players with strong brands, reliable service networks, and integrated offerings. Low-cost, low-quality manufacturers are being squeezed out. Deye’s positioning as a premium, reliable brand places it favorably in this trend.

Valuation and Peer Comparison

We compare Deye Shares with leading A-share energy storage companies: Sungrow Power Supply (300274.SZ), Aero Energy (688717.SH), and Ginlong Technologies (300763.SZ).

*Note: Peer P/E ranges are indicative based on typical market valuations for these sectors in 2026; exact peer targets depend on real-time market data.

Valuation Justification:
Deye’s 2026E P/E of 23.25x is competitive relative to its peers, especially considering its superior projected earnings growth rate of 72.22% in 2026. The PEG ratio (P/E divided by Growth) for 2026 is approximately 0.32, which is highly attractive and suggests the stock is undervalued relative to its growth potential. Furthermore, Deye’s projected ROE of 48.65% in 2026 is significantly higher than most peers, justifying a premium valuation multiple. As the company demonstrates consistent execution of its growth strategy, we expect the market to re-rate the stock upwards, potentially compressing the P/E to a lower level only if growth slows, but currently, the growth trajectory supports the current multiple.

Investment Rating: BUY

We initiate coverage with a BUY rating. The combination of strong Q1 2026 guidance, a favorable product mix shift towards high-margin storage, and successful geographic diversification creates a compelling investment case. The stock offers exposure to the high-growth energy storage theme with a company that has proven its ability to execute and generate high returns on capital.

Investment View

Core Investment Logic

1. The "Dual-Wheel" Drive: Synergy Between Inverters and Batteries

Deye’s strategic advantage lies in its ability to offer a complete solution. Unlike competitors who may specialize only in inverters or only in batteries, Deye excels in both.
* Cross-Selling Opportunities: Customers purchasing Deye storage inverters are natural candidates for Deye battery packs. This bundling strategy increases average order value and reduces customer acquisition costs.
* Technical Integration: Proprietary communication protocols and optimized system design between Deye inverters and batteries result in higher efficiency and reliability, creating a technical moat that is difficult for third-party integrators to replicate.
* Margin Enhancement: While battery margins are lower than inverter margins, the combined system margin is robust. More importantly, the volume growth in batteries drives economies of scale in procurement and manufacturing, which can eventually stabilize or improve battery margins.

2. Agile Response to Market Pain Points

Deye’s management has demonstrated a keen ability to identify and address specific market needs.
* European C&I: Recognizing the complexity of C&I installations, Deye focused on simplifying installation and commissioning, a key barrier to adoption. This customer-centric approach has accelerated market penetration.
* Middle East Reliability: In markets with harsh climates and unstable grids, Deye’s reputation for durability and its investment in local after-sales service (e.g., in Iraq) have built trust. This "boots on the ground" strategy is a significant differentiator against competitors who rely solely on distributors.
* Product Innovation: Continuous R&D investment (projected to reach CNY 1.47 billion by 2028) ensures that Deye stays ahead of technological curves, such as higher voltage systems, smarter energy management software, and enhanced safety features.

3. Financial Leverage and Capital Efficiency

Deye’s financial metrics are exceptional for a manufacturing firm.
* High ROE: The projected increase in ROE from 30.75% (2025) to 59.47% (2028) is driven by improving net margins and efficient use of assets. This indicates that the company is generating substantial profit from each unit of shareholder equity.
* Strong Cash Flow: Operating cash flow is robust (CNY 3.986 billion in 2025, projected to grow to CNY 5.562 billion in 2026). This strong cash generation capability allows Deye to fund its growth internally, reducing reliance on external financing and minimizing financial risk.
* Dividend Potential: With strong cash flows and retained earnings growing (from CNY 5.44 billion in 2025 to CNY 8.82 billion in 2028), Deye has the capacity to increase dividend payouts, enhancing total shareholder return. The projected dividend yield rises from 0.79% in 2025 to 5.34% in 2028, making it increasingly attractive to income-focused investors as well.

Detailed Financial Forecast Analysis

Revenue Growth Trajectory

We project revenue to accelerate sharply in 2026 before stabilizing at a high growth rate.
* 2026E (CNY 20.11 billion, +64.54%): This surge is driven by the full-year impact of storage battery sales, expansion in European C&I, and continued growth in emerging markets. The Q1 2026 guidance strongly supports this top-line acceleration.
* 2027E (CNY 25.49 billion, +26.72%): Growth moderates as the base effect kicks in, but remains robust due to ongoing market penetration and new product cycles.
* 2028E (CNY 31.04 billion, +21.77%): Sustainable double-digit growth reflects Deye’s establishment as a global major player in the storage sector.

Profitability Trends

• Gross Margin: We forecast gross margins to expand from 38.13% in 2025 to 42.62% in 2026. This improvement is attributed to:
  1. Higher proportion of high-margin storage inverter sales.
  2. Economies of scale in battery production.
  3. Potential stabilization of raw material costs.
  4. Improved product mix in domestic markets.
     Margins are expected to remain stable around 41.5-42.0% in 2027-2028.
• Net Margin: Net margin is projected to improve from 25.92% in 2025 to 27.14% in 2026, reflecting operating leverage as revenue grows faster than fixed costs. SG&A expenses as a percentage of sales are expected to decrease slightly due to scale.

Earnings Per Share (EPS) Growth

• 2025 EPS: CNY 3.49
• 2026E EPS: CNY 6.01 (+72.22%)
• 2027E EPS: CNY 7.30 (+21.49%)
• 2028E EPS: CNY 8.96 (+22.76%)

The rapid EPS growth in 2026 is the primary catalyst for the stock price. Investors should focus on the quarterly progression towards this annual target. If Q1 delivers CNY 1.1-1.2 billion in profit, it sets a strong precedent for the rest of the year.

Strategic Recommendations for Investors

1. Monitor Quarterly Execution: Pay close attention to Q1 2026 results when released. Confirmation of the CNY 1.1-1.2 billion profit range will validate the growth thesis. Also, monitor gross margin trends in the battery segment to ensure the decline seen in 2025 has stabilized.
2. Track Geographic Mix: Watch for updates on revenue contributions from Europe, the Middle East, and Asia. Continued diversification is key to de-risking the investment. Any signs of slowdown in Europe should be weighed against growth in emerging markets.
3. Assess Competitive Dynamics: Keep an eye on pricing trends in the storage inverter and battery markets. If price wars intensify, Deye’s margins could be pressured. However, Deye’s brand strength should allow it to maintain a premium over generic competitors.
4. Long-Term Hold: Given the multi-year growth trajectory in the energy storage sector and Deye’s strong competitive position, we recommend a long-term holding strategy. Short-term volatility due to market sentiment or macro factors should be viewed as buying opportunities.

Conclusion

Deye Shares stands at the forefront of the global energy storage revolution. Its successful transition from a PV inverter specialist to a comprehensive storage solution provider, coupled with aggressive and smart geographic expansion, has positioned it for significant earnings growth in 2026 and beyond. The company’s strong financial health, high ROE, and innovative culture provide a solid foundation for sustainable value creation.

The initiation of coverage with a BUY rating reflects our confidence in Deye’s ability to deliver on its ambitious growth targets. The stock offers an attractive risk-reward profile, with substantial upside potential driven by earnings growth and multiple expansion, balanced against manageable risks that are actively mitigated by management’s strategic initiatives. For institutional investors seeking exposure to the high-growth energy storage sector, Deye Shares represents a core holding opportunity.

Appendix: Detailed Financial Forecasts

Income Statement Summary (CNY Million)

Balance Sheet Highlights (CNY Million)

Cash Flow Statement Highlights (CNY Million)

Key Financial Ratios

Disclaimer and Important Disclosures

Analyst Certification:
The analysts named in this report, Hao Zha and Xiaoning Liu, certify that all of the views expressed in this report accurately reflect their personal views about the subject securities and issuers. No part of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report.

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Investment Rating Definitions:
* BUY: Expected to outperform the relevant market benchmark index by more than 20% over the next 6 months.
* ACCUMULATE: Expected to outperform the relevant market benchmark index by 5% to 20% over the next 6 months.
* NEUTRAL: Expected to perform in line with the relevant market benchmark index (-5% to +5%) over the next 6 months.
* REDUCE: Expected to underperform the relevant market benchmark index by more than 5% over the next 6 months.

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