Sungrow Power Supply (300274.SZ): Navigating Q4 Headwinds; Energy Storage Remains the Core Growth Engine

Date: April 1, 2026
Rating: BUY (Maintained)
Current Price: CNY 134.45
Target Price Implied by Valuation: Upside supported by earnings growth trajectory and sector leadership.
Market Cap: CNY 278.7 billion
Analyst: Shenglu Yin (S0790522080001), Hang Zhou (S0790125050020)
Source: Kaiyuan Securities Research Institute

Executive Summary

Sungrow Power Supply Co., Ltd. ("Sungrow" or the "Company"), a global leader in solar inverters and energy storage systems (ESS), released its full-year 2025 financial results on April 1, 2026. While the Company demonstrated robust full-year performance with revenue and net profit growing by 14.55% and 21.97% year-over-year (YoY) respectively, the fourth quarter (Q4) presented significant short-term headwinds. Q4 revenue declined 18.37% YoY, and attributable net profit fell 54.02% YoY, primarily driven by the concentrated delivery of low-margin new energy development projects, lagged pass-through of rising lithium carbonate costs, and shifts in regional sales mix.

Despite the Q4 volatility, the structural integrity of Sungrow’s business model remains intact. The Energy Storage System (ESS) segment continues to be the primary growth driver, achieving a 49.36% revenue increase in 2025 and maintaining healthy gross margins of 36.49%. Overseas ESS shipments surged 90% YoY, underscoring the Company’s successful globalization strategy and premium positioning in high-margin markets. Conversely, the domestic ESS market saw a strategic contraction due to lower profitability, reflecting disciplined capital allocation.

Looking ahead, we maintain our BUY rating. We have adjusted our earnings forecasts for 2026-2027 downward to reflect the Q4 margin pressure and added a 2028 forecast. We project attributable net profits of CNY 15.47 billion, CNY 19.35 billion, and CNY 23.08 billion for 2026, 2027, and 2028, respectively. At the current share price of CNY 134.45, the stock trades at forward P/E multiples of 18.0x, 14.4x, and 12.1x for 2026-2028. This valuation appears attractive given the Company’s dominant market position, the sustained high growth of the global energy storage market (expected 30-50% CAGR), and the emerging potential in AI Data Center (AIDC) power solutions.

Key investment highlights include:
1. Resilient Full-Year Fundamentals: Strong operating cash flow growth (+40.18% YoY) indicates improved earnings quality and working capital management.
2. ESS Dominance & Global Expansion: Overseas ESS shipments are accelerating, offsetting domestic margin pressures. The Company is well-positioned to capture the next wave of global grid-scale storage demand.
3. New Growth Curve (AIDC): Entry into the AI Data Center power supply market, leveraging solid-state transformer (SST) technology, offers a high-value diversification opportunity with initial deliveries expected in late 2026.
4. Valuation Appeal: The recent pullback in earnings expectations has compressed valuations to historically reasonable levels for a high-growth tech-manufacturing leader, providing a favorable risk-reward ratio for long-term institutional investors.

Key Takeaways

1. Financial Performance Analysis: Full-Year Strength vs. Q4 Volatility

1.1 Full-Year 2025 Results: Solid Top-Line and Bottom-Line Growth

Sungrow delivered a commendable full-year performance in 2025, demonstrating its ability to scale amidst a complex macroeconomic environment.

• Revenue: Total operating revenue reached CNY 89.18 billion, representing a 14.55% YoY increase. This growth was primarily fueled by the robust expansion of the energy storage business and steady contributions from the PV inverter segment.
• Net Profit: Attributable net profit to shareholders amounted to CNY 13.46 billion, up 21.97% YoY. Notably, when excluding the impact of employee incentive funds, the adjusted net profit stood at CNY 14.30 billion, reflecting a stronger underlying growth rate of 29.8% YoY. This discrepancy highlights the one-time nature of certain compensation expenses and underscores the core operational profitability.
• Cash Flow: Operating cash flow net amount reached CNY 16.92 billion, a significant 40.18% YoY increase. This substantial improvement in cash generation capability signals enhanced operational efficiency, better receivables management, and stronger bargaining power within the supply chain. It also provides a solid liquidity buffer for future R&D investments and capacity expansions.

Source: Company Reports, Kaiyuan Securities Research Institute

1.2 Q4 2025 Decomposition: Understanding the Miss

The fourth quarter of 2025 deviated significantly from the full-year trend, presenting a "profit warning" scenario that requires careful dissection to distinguish between temporary cyclical factors and structural issues.

• Q4 Revenue: CNY 22.78 billion, down 18.37% YoY.
• Q4 Net Profit: CNY 1.58 billion, down 54.02% YoY.
• Margin Compression: Gross margin declined quarter-over-quarter (QoQ).

Root Causes of Q4 Underperformance:

1. Concentrated Delivery of Low-Margin Projects: The Company experienced a spike in the recognition of revenue from its New Energy Investment Development business (EPC/Project Development) in Q4. Historically, this segment carries significantly lower gross margins (approx. 14.50% in 2025) compared to the core equipment manufacturing businesses (Inverters ~34.66%, ESS ~36.49%). The timing of these project completions skewed the overall product mix toward lower profitability in the quarter.
2. Lagged Pass-Through of Lithium Carbonate Costs: As a key component of battery energy storage systems, lithium carbonate prices exhibited volatility in late 2025. While raw material costs rose, the Company faced a time lag in adjusting selling prices to downstream customers, particularly in fixed-price contracts signed earlier in the year. This temporary mismatch squeezed gross margins in the ESS segment for the quarter.
3. Regional Structure Shifts: There was a notable change in the geographic distribution of shipments. A higher proportion of sales came from regions with intensified competition or lower average selling prices (ASPs), while high-margin markets in Europe and North America may have seen seasonal normalization or inventory digestion phases.

Analyst View: We view these Q4 headwinds as largely transitory. The project delivery timing is a function of construction cycles rather than demand destruction. The lithium cost pass-through issue is expected to resolve as new contracts reflect current input costs. Furthermore, the Company’s strategic decision to shrink low-margin domestic ESS shipments indicates a management team prioritizing quality of earnings over sheer volume, which should support margin recovery in 2026.

2. Segment Analysis: Diverging Trends Across Business Lines

Sungrow’s business portfolio consists of three main pillars: PV Inverters, Energy Storage Systems (ESS), and New Energy Investment Development. The performance dynamics across these segments reveal a clear strategic pivot towards high-value storage solutions.

2.1 Energy Storage Systems (ESS): The High-Growth Engine

The ESS segment has unequivocally become the crown jewel of Sungrow’s growth story, transitioning from a complementary business to a primary revenue driver.

• Financial Performance:

  • Revenue: CNY 37.29 billion in 2025, up 49.36% YoY.
  • Gross Margin: 36.49%, remaining stable despite raw material fluctuations. This stability is testament to the Company’s strong brand premium, technological advantages (e.g., liquid cooling, grid-forming capabilities), and effective hedging strategies.
  • Contribution: ESS now accounts for approximately 41.8% of total revenue, up from roughly 30% in previous years, highlighting the successful diversification away from pure PV dependence.

• Shipment Volume & Geography:

  • Total Shipments: 43 GWh in 2025, a 54% YoY increase.
  • Overseas Shipments: 36 GWh, surging 90% YoY. This represents 83.7% of total ESS shipments. The explosive growth in overseas markets is driven by strong demand in Europe, the Middle East, and emerging markets in Asia-Pacific and Latin America. Overseas markets typically offer higher ASPs and better payment terms, contributing disproportionately to profits.
  • Domestic Shipments: 7 GWh. The Company actively contracted domestic shipments due to the fiercely competitive landscape in China, where price wars have eroded margins. This strategic retreat from low-profit domestic volume demonstrates disciplined management focused on return on invested capital (ROIC).

• 2026 Outlook:

  • Market Growth: The global energy storage market is projected to maintain a high growth rate of 30-50% in 2026. Drivers include the increasing penetration of renewable energy necessitating grid flexibility, declining battery costs improving project economics, and supportive policy frameworks in major economies (e.g., US IRA, EU Green Deal, China’s mandatory storage ratios).
  • Company Target: Sungrow aims for ESS shipments to exceed 60 GWh in 2026. Achieving this would imply a minimum growth rate of ~40%, aligning with market expectations. Given the 90% growth in overseas channels, the Company is well-positioned to meet or exceed this target if it maintains its market share gains in key international regions.

2.2 PV Inverters: Steady Cash Cow with Margin Improvement

While the PV inverter market faces saturation concerns in some regions and intense competition, Sungrow has managed to extract value through product mix optimization and cost control.

• Financial Performance:

  • Revenue: CNY 31.14 billion in 2025, up 6.90% YoY. The modest growth reflects the mature nature of the global PV installation market and the Company’s large existing base.
  • Gross Margin: 34.66%, an improvement of 3.76 percentage points (ppt) YoY. This margin expansion is a critical positive signal. It suggests that the Company is successfully shifting its inverter mix towards higher-efficiency, higher-value products (such as string inverters for commercial/industrial and utility-scale applications) and benefiting from economies of scale and component cost reductions (e.g., IGBTs, passive components).

• Shipment Volume:

  • Total Shipments: 143 GW in 2025, a slight decline YoY.
  • Interpretation: The slight dip in volume coupled with revenue growth and margin expansion indicates a strategic focus on quality over quantity. Sungrow is likely prioritizing profitable orders and reducing exposure to low-margin, highly competitive tender markets. This approach sustains profitability even in a flat-volume environment.

• Competitive Position: Sungrow remains a top-tier global player, consistently ranking among the top 3 in global inverter shipments. Its brand reliability, extensive service network, and bankability provide a moat against newer, lower-cost entrants.

2.3 New Energy Investment Development: Strategic De-emphasis

This segment involves the development, construction, and occasional transfer of solar and wind power plants.

• Financial Performance:

  • Revenue: CNY 16.56 billion in 2025, down 21.16% YoY.
  • Gross Margin: 14.50%, down 4.90 ppt YoY.
  • Profitability: The segment remains barely profitable ("micro-profit").

• Strategic Role: The decline in revenue and margin is intentional. The Company is scaling back this capital-intensive, low-return business to free up resources for higher-margin manufacturing (ESS and Inverters) and R&D. The Q4 margin drag mentioned earlier was partly due to the timing of recognitions in this segment. Going forward, we expect this segment to remain small and non-core, serving primarily to facilitate equipment sales or manage specific strategic partnerships rather than being a primary profit center.

3. Emerging Growth Driver: AIDC Power Solutions

A significant portion of the investment thesis for Sungrow in 2026 and beyond hinges on its successful entry into the AI Data Center (AIDC) power supply market. This represents a strategic diversification into a high-growth, high-tech adjacent sector.

• Market Context: The explosion of generative AI has led to a surge in demand for data centers with extremely high power density requirements. Traditional power distribution units (PDUs) and transformers are struggling to meet the efficiency and space constraints of next-generation AI clusters. There is a critical need for advanced power conversion technologies.

• Sungrow’s Value Proposition:

  • Technology Synergy: Sungrow leverages its decades of expertise in power electronics, specifically in high-voltage, high-efficiency conversion.
  • Solid-State Transformers (SST): The Company is focusing on developing SSTs and integrated power solutions. SSTs offer superior efficiency, smaller footprint, and better controllability compared to traditional line-frequency transformers, making them ideal for AIDC applications.
  • 800V Platform Advantage: Sungrow’s existing mastery of 800V platforms (widely used in EV charging and large-scale storage) provides a technological bridge to the high-voltage DC distribution architectures increasingly favored in modern data centers.

• Progress & Timeline:

  • 2025: Initiated layout and R&D. Engaged in defining product architecture with international leading cloud service providers and domestic top-tier internet enterprises. This early engagement with key opinion leaders (KOLs) and anchor customers is crucial for validating specifications and securing future orders.
  • 2026 (Target): Product landing and small-batch delivery. The second half of 2026 is expected to see the first commercial deployments.
  • 2027 (Target): Entry into mass production and supply phase.

• Investment Implication: While revenue contribution from AIDC will be negligible in 2026, the strategic importance is high. Success in this sector could open a new total addressable market (TAM) valued in the billions, with potentially higher margins than traditional renewable energy equipment due to the specialized nature of the technology. It also enhances Sungrow’s valuation multiple by associating it with the high-growth AI infrastructure theme.

4. Revised Financial Forecasts & Valuation

In light of the Q4 2025 performance and the evolving market landscape, we have updated our financial models.

4.1 Earnings Forecast Adjustments

We have lowered our estimates for 2026 and 2027 to account for the slower-than-expected margin recovery and potential ongoing competitive pressures in certain regions. We have also introduced a 2028 forecast to provide a longer-term view of the Company’s growth trajectory as the AIDC business begins to scale.

Note: Previous estimates for 2026/2027 were CNY 20.08 billion / CNY 22.25 billion. The downward revision reflects a more conservative view on near-term margin recovery.

Key Assumptions:
1. Revenue Growth: Driven by 30-40% growth in ESS shipments and mid-single-digit growth in Inverters. AIDC contributes minimally in 2026-2027 but starts adding to the top line in 2028.
2. Margin Recovery: Gross margins are assumed to stabilize around 29-30% in 2026 as lithium costs stabilize and low-margin project deliveries normalize. Margins gradually expand to 30.4% by 2028 due to higher value-added products (AIDC, advanced ESS).
3. Expense Control: R&D expenses will remain elevated to support AIDC and next-gen ESS development, but operating leverage from revenue growth will help contain SG&A as a percentage of sales.

4.2 Valuation Analysis

At the current share price of CNY 134.45, Sungrow trades at:
* 2026E P/E: 18.0x
* 2027E P/E: 14.4x
* 2028E P/E: 12.1x

Comparative Valuation:
Historically, high-growth renewable energy leaders have commanded P/E multiples in the 20-30x range during expansion phases. The current multiple of 18x for 2026 reflects a "discount" due to:
1. Market concerns over global trade barriers (tariffs).
2. Short-term earnings volatility (Q4 miss).
3. General compression in growth stock valuations.

However, given the 25% expected earnings growth in 2027 and the PEG ratio (Price/Earnings-to-Growth) approaching or falling below 1.0x for the 2027-2028 period, the stock appears undervalued relative to its growth potential. The strong balance sheet (net cash position) and robust cash flows further support the current valuation floor.

Price-to-Book (P/B):
The P/B ratio is projected to decline from 6.0x (2025A) to 4.5x (2026E) and 3.5x (2027E). For a company with an ROE consistently above 20%, a P/B of 3.5-4.5x is reasonable, suggesting limited downside risk from a book value perspective.

Risks / Headwinds

While the long-term outlook remains positive, institutional investors must carefully monitor the following risks which could impact short-to-medium term performance:

1. Energy Storage System Gross Margin Compression

• Risk Description: The report explicitly flags the risk of ESS gross margins declining more than expected.
• Drivers:
  • Intensifying Competition: As the ESS market grows, more competitors (including battery manufacturers integrating downstream and new inverter companies) are entering the space, potentially triggering price wars.
  • Raw Material Volatility: While lithium prices have stabilized, any sudden spike in lithium, nickel, or cobalt prices could outpace the Company’s ability to pass costs to customers, especially in fixed-price contracts.
  • Product Mix Shift: If the Company is forced to compete more aggressively in price-sensitive markets (e.g., certain emerging economies or domestic China tenders), the average selling price (ASP) could drop, compressing margins.
• Impact: A 1-2% drop in gross margin could significantly impact net profit given the large revenue base of the ESS segment.

2. Overseas Trade Policy & Geopolitical Risks

• Risk Description: Sungrow derives a substantial and growing portion of its profits from overseas markets (especially Europe and potentially the US via indirect channels or non-restricted segments).
• Drivers:
  • Tariffs & Trade Barriers: The EU’s potential anti-subsidy investigations, the US’s Inflation Reduction Act (IRA) sourcing requirements, or other protectionist measures in key markets could restrict access or increase costs.
  • Geopolitical Tensions: Escalating tensions between China and Western nations could lead to stricter scrutiny of Chinese technology in critical infrastructure (grid-connected storage), potentially delaying projects or banning certain components.
  • Local Content Requirements: Increasing demands for local manufacturing in Europe and the US could force Sungrow to accelerate overseas capacity building, increasing capital expenditure and operational complexity before economies of scale are achieved.
• Impact: Could lead to lost market share, increased compliance costs, or supply chain disruptions.

3. Execution Risk in AIDC Business

• Risk Description: The AIDC power supply business is a new venture with high technical barriers and established incumbents.
• Drivers:
  • Technology Validation: Failure to meet the stringent reliability and efficiency requirements of hyperscale data center operators could delay adoption.
  • Customer Concentration: Dependence on a few large cloud providers for initial orders creates concentration risk.
  • Competition: Established power supply giants (e.g., Delta Electronics, Vertiv) have deep relationships in the data center space. Sungrow must prove its competitive advantage convincingly.
• Impact: If the 2026/2027 launch targets are missed, the anticipated valuation re-rating from the "AI theme" will not materialize, and R&D costs will weigh on earnings without corresponding revenue.

4. Macro-Economic & Interest Rate Environment

• Risk Description: Renewable energy and storage projects are capital-intensive and sensitive to financing costs.
• Drivers:
  • High Interest Rates: If global interest rates remain higher for longer, the internal rate of return (IRR) for storage projects declines, potentially dampening demand from project developers.
  • Currency Fluctuations: As a global exporter, Sungrow is exposed to FX risks. Significant appreciation of the CNY against the USD or EUR could erode reported revenues and margins.

5. Inventory & Working Capital Management

• Risk Description: The balance sheet shows significant inventory levels (CNY 27.26 billion in 2025A).
• Drivers:
  • Obsolescence: Rapid technological changes in battery chemistry or inverter topology could render existing inventory obsolete, requiring write-downs.
  • Demand Slowdown: If global demand slows unexpectedly, high inventory levels could tie up cash and lead to distress selling.
• Impact: Potential asset impairment losses and negative impact on operating cash flow.

Rating / Sector Outlook

Sector Outlook: Overweight

The global energy transition is entering a new phase characterized by the integration of storage. While PV installation growth may moderate in mature markets, the attach rate of storage to new renewable projects is rising rapidly. Furthermore, grid modernization and the need for ancillary services are creating standalone storage opportunities.

• Global Storage Market: Expected to grow at a CAGR of 30-50% through 2030. This is a structural tailwind that benefits market leaders like Sungrow.
• Consolidation Trend: The industry is likely to see consolidation, with smaller players exiting due to margin pressure. Sungrow’s scale, brand, and financial strength position it to gain market share during this shakeout.
• Technological Moat: The shift towards grid-forming inverters and advanced thermal management in storage creates higher barriers to entry, favoring established R&D leaders.

Company Rating: BUY (Maintained)

We maintain our BUY rating on Sungrow Power Supply.

Rationale:
1. Market Leadership: Sungrow is a undisputed global leader in both inverters and storage, with a proven track record of execution.
2. Strategic Pivot Success: The successful shift towards high-margin overseas storage markets demonstrates agile management.
3. Valuation Safety Margin: The current P/E of 18x (2026E) offers a reasonable entry point for a company with double-digit earnings growth visibility. The Q4 miss has been priced in.
4. Optionality: The AIDC business provides a valuable call option on the AI infrastructure boom, which is not fully reflected in the current valuation.

Target Price Consideration:
While a specific target price is not explicitly recalculated in this update, the implied valuation based on peer averages and historical premiums suggests upside potential. Applying a 20-25x P/E to the 2027 EPS of CNY 9.33 would imply a share price range of CNY 186 - CNY 233, representing significant upside from the current CNY 134.45. However, investors should use this as a reference framework rather than a precise prediction, acknowledging the inherent volatility in growth stocks.

Investment View

1. Core Investment Logic: From "Solar Pure Play" to "Energy Infrastructure Giant"

Sungrow is no longer just a solar inverter company. It has successfully transformed into a comprehensive smart energy infrastructure provider. The investment thesis rests on three pillars:

1. The Storage Supercycle: We are in the early innings of the global energy storage supercycle. Sungrow is one of the few companies with the scale, technology, and global channel depth to capitalize on this. The 90% growth in overseas ESS shipments is a leading indicator of sustained profitability. Investors should view Sungrow as a primary proxy for global storage growth.
2. Quality of Earnings Improvement: The Company’s focus on overseas markets and high-value products is structurally improving its margin profile. The Q4 dip was an anomaly driven by project timing and cost lags, not a deterioration of the business model. The 40% surge in operating cash flow confirms that earnings are backed by real cash, reducing the risk of accounting irregularities or bad debt.
3. Technological Diversification (AIDC): The move into AIDC power supplies is a smart leveraging of core competencies. It diversifies revenue streams away from the cyclical renewable energy sector into the secular growth AI sector. Even if AIDC contributes only 5-10% of revenue by 2028, it could command a higher valuation multiple, lifting the entire stock.

2. Strategic Recommendations for Institutional Investors

• Accumulate on Weakness: The Q4 earnings miss has created a dislocation between price and intrinsic value. Long-term investors should view the current price level as an attractive accumulation zone.
• Monitor Quarterly Margins: Key metrics to watch in upcoming quarters are ESS gross margins and overseas revenue mix. A sequential improvement in Q1/Q2 2026 margins will confirm the recovery thesis.
• Track AIDC Milestones: Pay close attention to announcements regarding customer wins or pilot projects in the AIDC space in H2 2026. Positive news flow here could trigger a re-rating.
• Hedge Geopolitical Risk: Given the exposure to overseas markets, investors should be aware of macro-political developments. However, Sungrow’s global manufacturing footprint (if expanded) and localized service teams may mitigate some of these risks over time.

3. Comparative Advantage vs. Peers

Sungrow offers a unique combination of scale, technological depth, and valuation attractiveness compared to its peers.

4. Long-Term Catalysts

1. Grid Parity & Storage Parity: As storage costs continue to fall, standalone storage projects will become economically viable without subsidies, expanding the TAM.
2. Emerging Markets Boom: Countries in Southeast Asia, the Middle East, and Latin America are beginning to invest heavily in grid infrastructure and renewables, offering new growth frontiers where Sungrow has a first-mover advantage.
3. Hydrogen Economy: Although not detailed in this report, Sungrow’s hydrogen electrolyzer business remains a long-term optionality that could unlock significant value in the 2030s as green hydrogen demand scales.

5. Conclusion

Sungrow Power Supply stands at a pivotal juncture. The short-term noise of Q4 2025 should not obscure the long-term signal of robust structural growth. The Company has demonstrated resilience, strategic discipline, and technological innovation. With the energy storage market poised for exponential growth and the Company’s successful expansion into high-value AI power solutions, Sungrow is well-equipped to deliver sustainable shareholder value.

We recommend institutional investors maintain or initiate positions in Sungrow, utilizing the current valuation dip as an opportunity to gain exposure to a high-quality leader in the global energy transition. The risk-reward profile is favorable, with limited downside supported by strong cash flows and significant upside driven by earnings growth and multiple expansion potential.

Appendix: Detailed Financial Analysis

A. Balance Sheet Strength

Sungrow’s balance sheet remains robust, providing the financial flexibility needed to navigate volatile markets and invest in new opportunities.

• Liquidity: Cash and cash equivalents stood at CNY 22.83 billion in 2025, up from CNY 19.80 billion in 2024. This strong cash position allows the Company to self-fund R&D and capacity expansion without excessive reliance on debt.
• Working Capital: Accounts receivable decreased to CNY 24.73 billion from CNY 28.49 billion, indicating improved collection efficiency. Inventory remained manageable at CNY 27.26 billion, though investors should monitor this for any signs of buildup.
• Debt Levels: The Company maintains a healthy debt structure. Short-term borrowings were reduced to CNY 2.42 billion, and long-term borrowings to CNY 3.07 billion. The net debt position is negative (net cash), which is a significant strength in a rising interest rate environment.
• Asset-Liability Ratio: Decreased to 58.1% in 2025 from 65.1% in 2024, reflecting a stronger equity base and reduced leverage.

B. Cash Flow Dynamics

The improvement in operating cash flow is a standout feature of the 2025 results.

• Operating Cash Flow (OCF): CNY 16.92 billion, significantly higher than the net profit of CNY 13.46 billion. This "cash profit" ratio >1 is a hallmark of high-quality earnings. It suggests that the Company is effectively managing its working capital cycle, possibly by extending payables or accelerating receivables.
• Investing Cash Flow: Net outflow of CNY 3.27 billion, primarily for capital expenditures and long-term investments. This level of investment is necessary to maintain technological leadership and expand production capacity for ESS and new products.
• Financing Cash Flow: Net outflow of CNY 9.29 billion, largely due to dividend payments and repayment of borrowings. This demonstrates a commitment to returning capital to shareholders and deleveraging.

C. Profitability Metrics Trend

Note: 2023A figures are estimated based on prior trends for context.

The consistent improvement in ROIC (Return on Invested Capital) to 24.1% indicates that the Company is generating excellent returns on its capital investments, validating its strategic allocation towards high-margin ESS and overseas markets.

D. Sensitivity Analysis

To understand the potential range of outcomes, we perform a simple sensitivity analysis on the 2026 Net Profit based on Gross Margin and Revenue Growth assumptions.

Base Case: Revenue CNY 108.5B, GM 29.4%, Net Profit CNY 15.47B.

• Bear Case Drivers: Severe trade tariffs, prolonged lithium price spike, aggressive price war in ESS.
• Bull Case Drivers: Faster-than-expected AIDC adoption, sustained high margins in overseas ESS, favorable FX movements.

Even in the Bear Case, the Company remains profitable and cash-generative, suggesting a resilient floor to the investment thesis.

Final Remarks

Sungrow Power Supply represents a compelling investment opportunity in the renewable energy sector. The Company has successfully navigated the transition from a solar-centric business to a diversified energy storage and power electronics leader. While Q4 2025 presented temporary challenges, the underlying fundamentals—strong cash flow, growing overseas presence, and technological innovation—remain robust.

For institutional investors, the key is to look through the short-term volatility and focus on the long-term structural trends: the electrification of the global economy, the necessity of energy storage, and the increasing power demands of AI. Sungrow is strategically positioned to benefit from all three. We reaffirm our BUY rating and encourage investors to consider accumulating shares at current levels for a long-term horizon.

Disclaimer:
This report is prepared by Kaiyuan Securities Research Institute for professional investors and ordinary investors with risk tolerance levels C4/C5. It is based on information believed to be reliable but does not guarantee accuracy or completeness. The opinions expressed are subject to change without notice. Past performance is not indicative of future results. Investors should make their own independent decisions and consult with independent financial advisors. Kaiyuan Securities may hold positions in the securities mentioned and may provide investment banking services to the company.

Contact Information:
* Shanghai: 3rd Floor, Building 1, Lujiazui Financial Control Plaza, 1788 Century Avenue, Pudong New Area, Shanghai.
* Beijing: 9th Floor, Block C2, Jinmao Tower, 18 Xizhimen Outer Street, Xicheng District, Beijing.
* Shenzhen: 45th Floor, Building 1, Zhuoyue Century Center, 2030 Jintian Road, Futian District, Shenzhen.
* Xi'an: 5th Floor, Block B, Urban Gate, No. 1 Jinye Road, High-tech Zone, Xi'an.
* Email: research@kysec.cn