Deye Shares (605117.SH): 2025 Annual Review & 1Q26 Preview – Accelerating Growth in C&I and Residential Storage Drives Upside Surprise

Date: April 10, 2026
Rating: BUY (Maintained)
Target Price: CNY 163.00
Current Price: CNY 126.91
Analysts: Zeng Duohong, Guo Yanan, Hu Junying, Yu Huiyong | Soochow Securities Institute

Executive Summary

Deye Shares (605117.SH), a leading global provider of hybrid inverters and energy storage systems, has demonstrated robust operational resilience and accelerating growth momentum heading into 2026. The company’s full-year 2025 financial results reflect a strategic transition period, characterized by steady revenue growth and margin stabilization despite headwinds in legacy product lines. More importantly, the preliminary guidance for the first quarter of 2026 (1Q26) signals a significant inflection point, driven by explosive demand in commercial and industrial (C&I) storage and residential battery packs, particularly in key markets such as Australia and Europe.

In 2025, Deye Shares reported total revenue of CNY 12.22 billion (+9.1% YoY) and attributable net profit of CNY 3.17 billion (+7.1% YoY). While top-line growth moderated compared to the high-base effect of previous years, the underlying quality of earnings improved, with operating cash flow surging by 18.4% to CNY 3.99 billion. The gross margin remained healthy at 38.1%, underpinned by the strong performance of the high-margin inverter segment and the rapid scaling of the battery pack business, albeit with some pressure from declining lithium carbonate prices.

The core investment thesis for Deye Shares is reinforced by its 1Q26 performance preview, which significantly exceeded market expectations. The company forecasts 1Q26 attributable net profit between CNY 1.1 billion and CNY 1.2 billion, representing a year-over-year growth of 56-70%. This surge is attributed to a doubling of hybrid inverter shipments and a 260% year-over-year increase in battery pack sales, fueled by policy-driven rush installations in Australia and the broader adoption of C&I storage solutions globally.

Consequently, we have substantially revised our earnings forecasts for 2026-2028 upwards. We now project attributable net profits of CNY 5.71 billion, CNY 7.15 billion, and CNY 8.61 billion for 2026, 2027, and 2028, respectively. These figures represent year-over-year growth rates of approximately 80%, 25%, and 20%. Based on a target P/E multiple of 26x for 2026—reflecting the company’s superior market expansion capabilities and improving profitability profile—we maintain our BUY rating with a raised target price of CNY 163.00.

Key Takeaways

1. 2025 Financial Performance: Stability Amidst Transition

Deye Shares’ 2025 annual results depict a company successfully navigating a complex macroeconomic environment while laying the groundwork for future growth. The modest single-digit growth in revenue and profit masks significant structural shifts within the business portfolio.

Revenue and Profitability Analysis:
* Total Revenue: Reached CNY 12.22 billion in 2025, a 9.08% increase from CNY 11.21 billion in 2024. This growth was primarily driven by the energy storage sector, which offset declines in traditional home appliance segments.
* Net Profit: Attributable net profit stood at CNY 3.17 billion, up 7.11% YoY. Deducted non-recurring net profit was CNY 3.04 billion, increasing by 8.2% YoY, indicating that core operational profitability remained intact.
* Margins: The overall gross margin was 38.1%, a slight decrease of 0.6 percentage points (pct) YoY. The net profit margin attributable to shareholders was 25.9%, down 0.5 pct YoY. These minor contractions were largely due to product mix changes and competitive pricing pressures in certain regions, rather than fundamental cost inefficiencies.

Quarterly Momentum (4Q25):
The fourth quarter of 2025 showed signs of acceleration, setting the stage for the strong start to 2026.
* 4Q25 Revenue: CNY 3.38 billion, up 5.9% YoY and 2.0% QoQ.
* 4Q25 Net Profit: CNY 820 million, up 14.3% YoY. The sequential stability (-0.1% QoQ) in net profit, despite seasonal fluctuations, highlights effective cost management.
* 4Q25 Margins: Gross margin improved to 37.0% (+1.7 pct YoY), although it decreased sequentially by 3.3 pct due to year-end promotional activities and inventory adjustments. The net margin expanded to 24.4% (+1.8 pct YoY).

Source: Company Reports, Soochow Securities Institute Estimates

2. Segment Breakdown: Storage Dominance and Appliance Consolidation

The divergence in performance across Deye’s business segments underscores the company’s successful pivot towards high-growth energy storage solutions.

A. Energy Storage Inverters: The Core Profit Engine

The hybrid inverter business remains the cornerstone of Deye’s profitability, benefiting from strong brand recognition in emerging markets and established distribution networks in Europe and Africa.
* Revenue: CNY 5.22 billion in 2025, representing an 18.9% YoY increase. This outpaced the overall company growth rate, confirming the segment’s role as the primary growth driver.
* Gross Margin: Maintained at an impressive 51.1%, only slightly down by 0.7 pct YoY. This resilience is notable given the intense competition in the inverter market. It suggests that Deye’s product differentiation, particularly in low-voltage hybrid inverters for off-grid and weak-grid areas, allows it to command a premium.
* Market Dynamics: The growth was driven by continued penetration in South Africa, Brazil, and Southeast Asia, alongside a recovery in European demand during the second half of the year.

B. Energy Storage Battery Packs: Rapid Scaling and Volume Driver

The battery pack segment has emerged as a critical revenue contributor, transitioning from a supplementary product to a major growth pillar.
* Revenue: Surged to CNY 3.83 billion, a remarkable 56.3% YoY increase.
* Volume: Shipments reached 6.5 GWh, more than doubling from the previous year with a 164% YoY growth rate.
* Pricing and Margin: The average selling price (ASP) dropped to CNY 0.6/Wh, and gross margin declined by 9.5 pct to 31.8%.
* Analysis: The decline in ASP and margin is primarily attributable to the fall in lithium carbonate prices, which is a industry-wide phenomenon. While this compresses margins on a per-unit basis, the significant volume expansion (164%) more than compensated for the price drop, resulting in substantial absolute profit growth. Furthermore, lower battery costs make the complete storage system more affordable, stimulating downstream demand.
* Strategic Implication: Deye’s ability to scale battery production and integrate it seamlessly with its inverters creates a powerful "inverter + battery" bundle offering, enhancing customer stickiness and average order value.

C. PV Inverters: Facing Headwinds

The traditional string inverter business faced challenges in 2025, reflecting saturation in certain residential markets and delayed utility-scale projects.
* Revenue: Declined by 7.2% YoY to CNY 1.05 billion.
* Gross Margin: Decreased by 1.4 pct to 32.1%.
* Outlook: This segment is expected to stabilize as the company focuses more on hybrid solutions. The decline here is strategically acceptable as resources are reallocated to higher-growth storage areas.

D. Dehumidifiers and Home Appliances: Cyclical Downturn

The legacy dehumidifier business, once a cash cow, experienced a contraction due to weak domestic real estate activity and consumer spending caution in China.
* Revenue: Fell by 16.9% YoY to CNY 810 million.
* Gross Margin: Dropped by 4.7 pct to 29.7%.
* Implication: This segment is no longer a growth driver but continues to provide stable cash flow. The company is likely minimizing investment here to focus on international energy storage expansion.

3. 1Q26 Performance Preview: A Clear Acceleration Signal

The most compelling aspect of this report is the preliminary guidance for the first quarter of 2026, which indicates a dramatic acceleration in both top-line and bottom-line growth.

Guidance Details:
* Attributable Net Profit: Estimated between CNY 1.1 billion and CNY 1.2 billion.
* YoY Growth: +56% to +70%.
* Deducted Non-recurring Net Profit: Estimated between CNY 1.04 billion and CNY 1.14 billion.
* YoY Growth: +70% to +86%.

Drivers of the 1Q26 Surge:

1. Hybrid Inverter Volume Doubling:
   We estimate that Deye’s hybrid inverter shipments in 1Q26 will reach 250,000 units, representing a 100% YoY increase. This volume spike is not merely a seasonal adjustment but reflects genuine demand acceleration. The company has successfully captured market share in key regions where grid instability persists, and the need for energy independence is paramount.

2. Battery Pack Explosion (+260% YoY):
   The battery pack business is projected to grow by 260% YoY in 1Q26. This extraordinary growth is driven by two main factors:

   • Australia Market Rush: Anticipation of changes in subsidy policies or grid connection rules in Australia triggered a "rush installation" phenomenon in 1Q26. Deye, with its strong presence in the Australian residential storage market, was a primary beneficiary.
   • C&I Storage Ramp-up: The commercial and industrial (C&I) storage segment is gaining traction. As electricity prices remain volatile in many European and Asian markets, businesses are increasingly adopting behind-the-meter storage solutions to arbitrage peak-valley price differences. Deye’s new C&I products are seeing rapid adoption.

3. Profitability Leverage:
   The disproportionate growth in deducted non-recurring net profit (+70-86%) compared to attributable net profit (+56-70%) suggests improved operational efficiency and potentially favorable foreign exchange movements or reduced non-operating expenses. The scaling effect of higher volumes is beginning to significantly leverage fixed costs, leading to margin expansion.

4. Operational Efficiency and Cash Flow Health

Beyond the income statement, Deye’s balance sheet and cash flow metrics demonstrate a high-quality earnings profile and prudent financial management.

Expense Management:
* Total Period Expenses (2025): CNY 1.1 billion, up 12.2% YoY.
* Expense Ratio: 9.0%, a slight increase of 0.3 pct YoY.
* 4Q25 Expenses: CNY 390 million, up 41.7% YoY and 28.1% QoQ. The expense ratio in 4Q25 rose to 11.4%.
* Context: The increase in expenses, particularly in Q4, is likely associated with increased R&D spending for new C&I products and higher sales/marketing efforts to support the global expansion. While the sequential rise in expense ratio is notable, it is a strategic investment to secure future market share. The fact that the full-year expense ratio only increased marginally (0.3 pct) indicates that the company is managing its overheads effectively relative to its growing scale.

Cash Flow Strength:
* Operating Cash Flow (2025): CNY 3.99 billion, a robust 18.4% YoY increase.
* 4Q25 Operating Cash Flow: CNY 1.32 billion, surging 93.7% YoY and 27.4% QoQ.
* Significance: The strong operating cash flow, especially the Q4 surge, indicates excellent working capital management and strong collection capabilities. It suggests that the reported profits are backed by actual cash inflows, reducing the risk of receivables bad debts. This cash generation capability provides Deye with the financial flexibility to fund R&D, expand production capacity, and navigate potential market downturns without relying heavily on external financing.

Inventory and Working Capital:
* Inventory (End-2025): CNY 1.79 billion, up 31.2% from the beginning of the year.
* Analysis: The increase in inventory is a proactive measure to prepare for the anticipated demand surge in 1Q26 and throughout 2026. Given the strong 1Q26 guidance, this inventory build-up appears justified and strategic rather than a sign of sluggish sales. It positions the company to meet immediate customer orders, reducing lead times and enhancing competitiveness.
* Receivables: Operational receivables were managed well, contributing to the positive cash flow trend.

5. Revised Financial Forecasts and Valuation

Based on the stronger-than-expected 1Q26 guidance and the visible momentum in the C&I and residential storage sectors, we have significantly upgraded our earnings estimates for the next three years.

Earnings Revisions:
* 2026E Net Profit: Raised to CNY 5.71 billion (Previous: CNY 4.0 billion). This represents a 79.97% YoY growth.
* 2027E Net Profit: Raised to CNY 7.15 billion (Previous: CNY 4.8 billion). This represents a 25.28% YoY growth.
* 2028E Net Profit: Introduced at CNY 8.61 billion, representing a 20.44% YoY growth.

Rationale for Upgrades:
1. Higher Volume Assumptions: We have increased our shipment forecasts for both hybrid inverters and battery packs, reflecting the 1Q26 run-rate and the ongoing strength in Australia, Europe, and emerging markets.
2. Margin Expansion: We anticipate that the gross margin will improve from 38.1% in 2025 to 40.81% in 2026, and stabilize around 40% in 2027-2028. This improvement is driven by:
* Economies of scale in battery production.
* A higher proportion of high-margin C&I storage solutions in the product mix.
* Stabilization of raw material costs (lithium).
* Operational leverage as fixed costs are spread over a larger revenue base.
3. Cost Control: While R&D and sales expenses will increase in absolute terms to support growth, we expect the expense ratio to remain manageable due to revenue scaling.

Valuation and Target Price:

• Current Valuation: At the current price of CNY 126.91, the stock trades at a 2026E P/E of approximately 20.2x.
• Peer Comparison: Deye Shares commands a premium valuation compared to pure-play inverter manufacturers due to its integrated "inverter + battery" model, higher growth trajectory, and superior profitability (ROE > 30%).
• Target Multiple: We assign a 26x P/E multiple for 2026E earnings. This multiple is justified by:
  • High Growth Visibility: The 80% expected earnings growth in 2026 is highly visible based on 1Q26 data and order books.
  • Market Leadership: Deye is a leader in the high-growth hybrid inverter and residential storage segments.
  • Quality of Earnings: Strong cash flows and high ROIC (Return on Invested Capital) support a higher multiple.
• Target Price Calculation:
  • 2026E EPS: CNY 6.28
  • Target P/E: 26x
  • Target Price: 6.28 * 26 = CNY 163.28 (Rounded to CNY 163.00)

Source: Soochow Securities Institute Estimates

Risks / Headwinds

While the outlook for Deye Shares is overwhelmingly positive, institutional investors must consider the following risks that could impact the investment thesis:

1. Intensifying Competition

The energy storage and inverter markets are attracting significant new entrants, including traditional electrical giants and specialized battery manufacturers.
* Price Wars: Increased competition could lead to aggressive pricing strategies, particularly in the residential inverter and battery segments, potentially compressing gross margins below our forecasts.
* Market Share Erosion: Competitors with deeper pockets or vertical integration advantages (e.g., own battery cell production) may erode Deye’s market share in key regions like Europe and Australia.

2. Demand Volatility and Policy Changes

The growth of the residential and C&I storage markets is heavily influenced by government subsidies and electricity pricing policies.
* Subsidy Reductions: Any unexpected reduction or removal of subsidies in key markets (e.g., Germany, Italy, Australia, California) could dampen demand. The 1Q26 "rush installation" in Australia is a double-edged sword; if it pulls forward demand from subsequent quarters, 2H26 growth might appear slower sequentially.
* Grid Policy Shifts: Changes in net metering rules or grid connection fees could alter the economic case for residential storage, impacting long-term adoption rates.

3. Supply Chain and Raw Material Prices

• Lithium Price Fluctuations: While falling lithium prices have helped reduce costs, extreme volatility can disrupt inventory valuation and pricing strategies. A sudden spike in lithium or other raw material costs (e.g., copper, aluminum) could hurt margins if the company cannot pass these costs on to customers quickly.
• Component Shortages: Global supply chain disruptions for electronic components (chips, IGBTs) could constrain production capacity and delay deliveries.

4. Geopolitical and Trade Risks

• Tariffs and Trade Barriers: Increasing protectionism in the US and Europe could lead to tariffs on Chinese-made inverters and batteries. Deye’s exposure to these markets requires careful monitoring of trade policies.
• Currency Fluctuations: As a significant exporter, Deye is exposed to foreign exchange risks. Appreciation of the RMB against the USD, EUR, or AUD could negatively impact reported revenues and margins. Conversely, depreciation can boost competitiveness but may raise import costs for raw materials.

5. Execution Risk in New Markets

• C&I Storage Adoption: The success of the C&I storage segment depends on Deye’s ability to execute large-scale projects and manage complex customer relationships. Any failures in project delivery or performance could damage reputation and slow down adoption.
• Channel Management: Rapid expansion requires robust channel management. Issues with distributor inventory levels or after-sales service quality could impact brand perception.

Rating / Sector Outlook

Sector Outlook: Structural Growth in Energy Storage

The global energy storage sector is undergoing a structural transformation, shifting from a niche market to a mainstream component of the energy infrastructure. Several macro trends support a positive sector outlook:

1. Energy Security and Independence: Geopolitical tensions and grid instability are driving households and businesses to seek energy independence through solar-plus-storage systems. This trend is particularly strong in Europe, Australia, and parts of Africa and Latin America.
2. Electrification and Decarbonization: Government mandates for carbon neutrality are accelerating the transition to renewable energy. As the share of intermittent renewables (solar and wind) increases, the need for energy storage to balance the grid becomes critical.
3. Cost Competitiveness: The declining cost of batteries and inverters is making storage systems economically viable for a broader range of applications, including peak shaving and frequency regulation.
4. Policy Support: Continued policy support, such as the Inflation Reduction Act (IRA) in the US and various EU Green Deal initiatives, provides a favorable regulatory environment for storage adoption.

Within this sector, hybrid inverter manufacturers with integrated battery capabilities are best positioned to capture value. They offer a one-stop solution for customers, simplifying installation and maintenance, and capturing higher margins through system integration. Deye Shares is a prime example of this business model.

Investment Rating: BUY

We maintain our BUY rating on Deye Shares. The company has demonstrated its ability to navigate market cycles, innovate in product offerings, and expand globally. The 1Q26 performance preview confirms that the company is entering a high-growth phase, driven by the dual engines of residential and C&I storage. The upward revision in earnings forecasts and the attractive valuation relative to growth prospects (PEG < 0.3 for 2026) make the stock compelling for long-term investors.

Investment View

Core Investment Logic

1. Inflection Point in Growth Trajectory:
Deye Shares is transitioning from a period of moderate growth (2024-2025) to a phase of accelerated expansion (2026 onwards). The 1Q26 guidance is not an anomaly but a reflection of underlying demand trends and the company’s successful product strategy. The expected 80% earnings growth in 2026 is highly credible given the visibility of orders and the "rush installation" dynamics in key markets.

2. Superior Product Portfolio and Integration:
The "Inverter + Battery" synergy is a key competitive advantage. Deye’s hybrid inverters are widely recognized for their reliability and ease of use, particularly in off-grid and weak-grid scenarios. By integrating its own battery packs, Deye offers a optimized, cost-effective, and warrantied system. This integration allows for better margin control and customer lock-in compared to companies that only sell inverters or rely on third-party batteries.

3. Diversified Geographic Exposure:
Deye has successfully diversified its revenue base across multiple regions, reducing dependence on any single market.
* Emerging Markets: Strong presence in South Africa, Brazil, and Southeast Asia provides a stable base of demand driven by grid instability.
* Developed Markets: Growing penetration in Europe and Australia offers higher-margin opportunities and volume scale.
* New Frontiers: Expansion into C&I storage opens up a new, larger addressable market with different demand drivers (economic arbitrage vs. backup power).

4. Financial Quality and Capital Efficiency:
The company’s strong operating cash flow and high ROIC (>30% in 2026E) indicate a high-quality business model. Deye generates substantial cash from operations, which can be reinvested in R&D and capacity expansion without excessive debt. The improving balance sheet (lower debt-to-assets ratio projected) enhances financial resilience.

5. Valuation Appeal:
Despite the recent rally, the stock trades at a reasonable valuation relative to its growth potential. A 2026E P/E of 20x for a company growing earnings at 80% is attractive. The target P/E of 26x is conservative compared to historical averages for high-growth tech-enabled manufacturing companies in bull markets.

Strategic Recommendations for Investors

• Long-Term Hold: Institutional investors should view Deye Shares as a core holding in the renewable energy and storage theme. The long-term secular trends supporting energy storage are intact, and Deye is well-positioned to benefit.
• Monitor Quarterly Execution: While the 1Q26 guidance is strong, investors should monitor subsequent quarters to ensure that the growth momentum is sustained and not just a result of pull-forward demand. Key metrics to watch include inverter shipment volumes, battery pack ASPs, and gross margin trends.
• Watch for Policy Changes: Keep a close eye on policy developments in Australia, Europe, and the US. Any significant changes in subsidies or trade policies could impact short-term sentiment and demand.
• Competitive Landscape: Monitor the actions of key competitors (e.g., Huawei, Sungrow, GoodWe) to assess any potential threats to Deye’s market share or pricing power.

Conclusion

Deye Shares stands at the forefront of the global energy storage revolution. Its 2025 annual results demonstrated resilience, and its 1Q26 preview signals a powerful acceleration in growth. With a robust product portfolio, expanding geographic footprint, and strong financial health, the company is well-equipped to capitalize on the surging demand for residential and C&I storage solutions. We believe the market has yet to fully price in the magnitude of the 2026-2028 earnings growth, presenting a significant upside opportunity. We reiterate our BUY rating with a target price of CNY 163.00.

Appendix: Detailed Financial Analysis

Balance Sheet Strength

Deye’s balance sheet reflects a conservative yet growth-oriented financial structure.

• Assets: Total assets are projected to grow from CNY 19.9 billion in 2025 to CNY 47.4 billion in 2028. This growth is driven by increases in current assets, particularly cash and inventory, to support higher sales volumes.
• Cash Position: Monetary funds and transactional financial assets are expected to surge from CNY 8.3 billion in 2025 to CNY 30.6 billion in 2028. This massive cash buildup underscores the company’s strong cash generation capabilities and provides ample liquidity for strategic investments, M&A, or shareholder returns.
• Liabilities: The liability structure is improving. The debt-to-asset ratio is projected to decline from 48.1% in 2025 to 28.7% in 2028. Short-term borrowings are expected to drop significantly, indicating a shift towards self-funded growth.
• Equity: Shareholders’ equity is set to more than triple from CNY 10.3 billion in 2025 to CNY 33.8 billion in 2028, driven by retained earnings. This strengthens the company’s capital base and supports higher ROE.

Income Statement Drivers

• Revenue Growth: The projected CAGR of ~33% for 2025-2028 is ambitious but achievable given the current trajectory. The key drivers are:
  • Inverters: Steady growth driven by market share gains and replacement cycles.
  • Batteries: Exponential growth driven by volume expansion and new applications (C&I).
  • New Products: Potential entry into new product categories or markets.
• Margin Expansion: The gross margin is expected to expand from 38.1% in 2025 to 40.8% in 2026. This is driven by:
  • Product Mix: Higher contribution from high-margin C&I storage and integrated systems.
  • Scale Effects: Lower unit costs due to higher production volumes.
  • Cost Management: Effective procurement and operational efficiency improvements.
• Expense Control: While absolute expenses will rise, the expense ratio is expected to remain stable or decline slightly due to revenue scaling. R&D spending will remain high to maintain technological leadership, but this is a necessary investment for long-term competitiveness.

Cash Flow Dynamics

• Operating Cash Flow: Projected to grow from CNY 4.0 billion in 2025 to CNY 9.2 billion in 2028. This strong cash flow generation is a testament to the company’s business model and working capital management.
• Investing Cash Flow: Capital expenditures are expected to increase to support capacity expansion, but they will be comfortably covered by operating cash flow.
• Financing Cash Flow: The company is expected to reduce its reliance on external financing, with negative financing cash flows indicating debt repayment or dividend payments.

Key Financial Ratios

Note: ROE and ROIC are expected to remain at exceptionally high levels, indicating superior capital efficiency.

Sensitivity Analysis

To provide a more nuanced view, we conduct a sensitivity analysis on the target price based on variations in the 2026E P/E multiple and EPS estimates.

• Bear Case: Assumes slower-than-expected growth due to intense competition or policy headwinds, leading to lower EPS and a compressed multiple.
• Base Case: Reflects our current assumptions of strong growth and stable margins.
• Bull Case: Assumes even faster adoption of C&I storage, higher margins, and a market willingness to award a premium multiple for sustained high growth.

The asymmetry of the risk-reward profile favors the upside, given the strong visibility of the 1Q26 performance and the structural tailwinds in the energy storage sector.

Final Remarks

Deye Shares represents a high-quality growth opportunity in the renewable energy sector. The company’s ability to innovate, scale, and maintain profitability in a competitive environment is commendable. The 1Q26 performance preview is a clear validation of our investment thesis, signaling the start of a new growth cycle. We encourage institutional investors to accumulate shares on any weakness, with a medium-to-long-term horizon. The combination of strong fundamentals, visible growth, and reasonable valuation makes Deye Shares a compelling buy.

Disclaimer:
This report is prepared by Soochow Securities Institute for institutional clients only. It is based on information believed to be reliable, but Soochow Securities does not guarantee its accuracy or completeness. The opinions expressed herein are subject to change without notice. This report does not constitute an offer to sell or a solicitation of an offer to buy any securities. Investors should make their own independent decisions and consult with their financial advisors before investing. Past performance is not indicative of future results.