Equity Research: Mingyang Smart Energy (601615.SH)

Date: January 28, 2026
Rating: BUY
Current Price: CNY 25.20
Target Price: Implied Upside based on 2026E Valuation Multiples
Sector: Renewable Energy / Wind Power Equipment
Analysts: Yao Yao (S1130512080001), Liu Gaochang (S1130525120005)
Source: Guojin Securities Research Institute

Executive Summary

Mingyang Smart Energy (MYSE) stands at a pivotal inflection point, transitioning from a period of margin compression driven by domestic land-based wind deflation and offshore delays to a robust growth trajectory underpinned by a "Short-Medium-Long" term triple logic. As the undisputed leader in China’s offshore wind turbine market, MYSE is uniquely positioned to capitalize on three converging macro and micro trends:

1. Short-Term Profitability Rebound (Land Wind): The domestic land-based wind turbine market has shifted from severe price wars to a value-driven recovery. With average bid prices (excluding towers) rising over 10% year-on-year in 2025, and high-margin orders scheduled for delivery in 2026-2027, manufacturing margins are set to expand significantly.
2. Medium-Term Volume Growth (Domestic Offshore Wind): After a three-year adjustment period, China’s offshore wind sector is entering a super-cycle. Driven by policy support for deep-sea projects and the upcoming "15th Five-Year Plan" (2026-2030), we forecast annual domestic offshore installations to double from the 8GW average of the "14th Five-Year Plan" to 15-20GW. MYSE, holding the #1 market share in domestic offshore hoisting for two consecutive years, is the primary beneficiary.
3. Long-Term Global Expansion (European Offshore & Space PV): The European offshore wind market faces a critical supply-demand imbalance, with local large-turbine capacity (4GW) far insufficient to meet the >15GW annual demand projected post-2030. MYSE’s strategic investment in a GBP 1.5 billion manufacturing base in Scotland positions it to bypass trade barriers and capture this high-value market. Concurrently, the proposed acquisition of Zhongshan Dehua Chip anchors MYSE’s long-term diversification into space-based photovoltaics (PV), leveraging synergies between its existing HJT/Perovskite capabilities and Dehua’s gallium arsenide (GaAs) technology.

We project MYSE’s revenue to reach CNY 37.4bn/42.7bn/46.4bn in 2025/2026/2027, with net profit attributable to shareholders surging to CNY 1.02bn/2.21bn/3.14bn, representing YoY growth of +195.4%/+116.2%/+42.2%. The current valuation does not fully reflect the certainty of short-term margin repair nor the optionality of the European and space energy ventures. We maintain a BUY rating.

Key Takeaways

1. Short-Term Catalyst: Land-Based Wind Turbine Price Inflation & Margin Repair

The era of "race to the bottom" pricing in China’s land-based wind sector is ending. Following years of aggressive downsizing and price cuts that led to increased accident rates and quality concerns, the industry is pivoting towards quality and value.

• Price Recovery: Our proprietary data indicates that the average winning bid price for land-based wind turbines (excluding towers) in 2025 has increased by over 10% year-on-year. Specifically, models in the 5.X MW to ≥10 MW ranges have seen price hikes ranging from 10% to 19%.
• Cost Optimization via Technology: While prices rise, costs are stabilizing or declining due to technological iterations. The shift from traditional "three-point support" drivetrains to compact "front-integrated" drivetrains reduces the total cost of a 10MW turbine by over 2% (approx. CNY 250k per unit). Furthermore, the pace of radical upsizing has slowed, with industry focus consolidating around efficient 6.25MW and 10MW platforms, improving production efficiency.
• Profit Lag Effect: Due to the typical 2-year delivery cycle for wind orders, the low-price orders from 2023-2024 are still being delivered in early 2026. However, as higher-priced orders from late 2024 and 2025 begin to constitute a larger share of revenue in late 2026 and 2027, we expect a pronounced release of earnings elasticity in the manufacturing segment.

(Source: China Bidding Public Service Platform, Guojin Securities Estimates)

2. Medium-Term Driver: Domestic Offshore Wind Renaissance

China’s offshore wind sector is emerging from a regulatory and planning hiatus into a phase of accelerated development, particularly in deep-sea and far-offshore zones.

• Policy Tailwinds: The 2025 Government Work Report explicitly mentioned "developing offshore wind power" for the first time. The National Energy Administration has signaled that the "15th Five-Year Plan" will prioritize offshore wind, with specific regulations for deep-sea projects imminent.
• Project Pipeline: There is a substantial reserve of approved but uncommenced projects. As of December 2025, approximately 10GW is under construction, and 33GW is approved but not yet started. Pilot projects in Zhejiang, Shanghai, and Shandong are moving rapidly through bidding and exploration phases, with construction expected to start in 2026.
• Market Leadership: MYSE has maintained the #1 market share in domestic offshore wind turbine hoisting for 2023 and 2024. Despite a temporary dip in sales volume due to sector-wide delays, the company is best positioned to capture the rebound. We forecast domestic offshore installations to grow from 8GW in 2025 to 12GW in 2026 (+50%), with the "15th Five-Year Plan" average annual installation reaching 15-20GW, double that of the previous plan.

3. Long-Term Growth Engine: European Market Breakthrough

Europe represents the most significant long-term growth opportunity for MYSE, driven by a structural supply deficit and the urgent need for cost reduction among European developers.

• Supply-Demand Mismatch: Europe aims to install 9GW of offshore wind by 2030 and 16GW by 2031/2032. However, current local manufacturing capacity for large turbines (>10MW) is only 4GW. Major markets like the UK currently have zero operational large-turbine manufacturing capacity.
• Cost Competitiveness: European offshore wind CAPEX has soared to €3,800-4,000/kW due to inflation. Chinese turbines offer a ~30% price advantage over Western counterparts. Moreover, MYSE’s technological lead in large-scale turbines (18-20MW operational, 50MW floating platform announced) offers superior Levelized Cost of Energy (LCOE) reductions through economies of scale in foundations, cabling, and installation.
• Strategic Localization: To mitigate political and trade risks, MYSE plans to invest GBP 1.5 billion in a three-phase manufacturing facility in Scotland. This move aligns with the EU’s Net-Zero Industry Act and local content requirements. The recent UK AR7 auction result (8.4GW awarded) creates immediate demand that MYSE’s future Scottish factory can fulfill, potentially securing orders as early as 2028-2029.
• Developer Sentiment Shift: Leading European developers (e.g., RWE, Ørsted) are increasingly open to sourcing Chinese turbines due to financing improvements and cost pressures. Recent visits and preliminary procurement considerations by top-tier developers validate this trend.

4. Strategic Diversification: Entry into Space Photovoltaics

On January 22, 2026, MYSE announced a plan to acquire 100% equity of Zhongshan Dehua Chip via share issuance and cash payment. This marks a decisive entry into the high-barrier space energy sector.

• Target Profile: Dehua Chip specializes in flexible space solar cells, GaAs components, and satellite power systems. Led by former Blue Arrow Aerospace VP Yang Wenyi, Dehua has demonstrated technical superiority, including the successful launch of the world’s lightest, most compact, and efficient fully flexible roll-out solar array on a commercial satellite in September 2025.
• Technological Synergy:
  • GaAs Dominance: Gallium Arsenide remains the gold standard for space PV due to high efficiency (>30% for triple-junction), radiation resistance, and temperature stability. Dehua provides component-level supply capabilities.
  • HJT & Perovskite Integration: MYSE already possesses 5GW of Heterojunction (HJT) production capacity and a 100MW Perovskite pilot line. The combination of HJT/Perovskite tandem cells with Dehua’s GaAs expertise creates a comprehensive portfolio for next-generation space power systems. Perovskite’s high power-to-weight ratio and radiation tolerance make it an ideal candidate for future large-scale commercial satellite constellations.
• Market Potential: As low-earth orbit (LEO) satellite constellations expand, the demand for lightweight, high-efficiency, and low-cost power systems is exploding. Dehua’s flexible roll-out technology reduces weight by 25-35% and stowed volume by 90% compared to traditional rigid panels, offering a distinct competitive edge.

Detailed Analysis

I. Core Business: Wind Power Manufacturing Turnaround

1.1 Market Position and Historical Context

Mingyang Smart Energy is a top-tier player in China’s wind turbine market, consistently ranking in the top four for total installed capacity and #1 for offshore wind since 2023. The company’s revenue structure is heavily skewed towards turbine manufacturing (~80%).

From 2022 to 2024, the company faced headwinds from two main sources:
1. Land Wind Deflation: Intense competition drove land-based turbine prices down from ~CNY 3,600/kW in 2020 to ~CNY 1,440/kW in 2024.
2. Offshore Delays: Regulatory hurdles and grid connection issues stalled offshore projects, leading to underutilization of high-margin offshore capacity.

This resulted in a decline in both revenue and profitability, with net profit dropping to CNY 346 million in 2024. However, the landscape has fundamentally shifted in 2025.

1.2 The Land Wind Price Recovery Mechanism

The reversal in land-based wind pricing is not merely cyclical but structural, driven by a correction in industry behavior.

• Quality over Price: The aggressive push for larger turbines and lower prices in 2023-2024 led to a noticeable increase in failure rates and accidents in 2024. This triggered a response from downstream developers and central government policies against "involution" (destructive competition). Developers are now prioritizing reliability and lifecycle value over initial capex savings.
• Bid Price Data: Our tracking of public bids shows a consistent upward trend in 2025. For instance, the average price for 6.X MW turbines rose from CNY 1,526/kW in FY2024 to CNY 1,679/kW in FY2025 (+10%). For larger 8.X MW units, the increase was even more pronounced at +19%.
• Margin Expansion Logic:
  • Revenue Side: Higher selling prices directly boost gross margins.
  • Cost Side: Technological innovations such as the "front-integrated" drivetrain reduce material usage and weight. Additionally, the stabilization of turbine sizes (convergence on 6.25MW and 10MW) allows for standardized, mass-production efficiencies, further lowering unit costs.
  • Timing: Given the 2-year order-to-delivery lag, the financial statements of 2026 and 2027 will reflect the higher prices secured in late 2024 and throughout 2025. This creates a high degree of visibility for profit growth in the near term.

1.3 Offshore Wind: The Domestic Super-Cycle

The medium-term outlook for MYSE is anchored in the resurgence of China’s offshore wind industry.

• Policy Clarity: The inclusion of offshore wind in the 2025 Government Work Report and subsequent directives from the National Energy Administration provide clear policy visibility. The focus is shifting towards deep-sea and far-offshore projects, which require advanced technology and larger turbines—areas where MYSE holds a technological moat.
• Project Pipeline Visibility:
  • Zhejiang: The Cangnan Z15 project (2GW) has completed turbine and cable bidding, with construction slated for 2026.
  • Shanghai: The Deep Sea Phase I demo project (4.3GW) is in the sea area exploration phase.
  • Shandong: Multiple projects including the Three Gorges Qingdao Phase I (3GW) are advancing through feasibility studies and subsidiary establishment.
• Capacity Utilization: As these projects commence construction in 2026-2027, MYSE’s order book will fill with high-margin offshore contracts. The company’s dominant market share ensures it captures a disproportionate share of this growth. We estimate offshore installations will jump from 8GW in 2025 to 12GW in 2026, driving a significant uptick in revenue mix towards higher-margin products.

II. International Expansion: The European Opportunity

2.1 The European Supply Crunch

Europe’s ambition to achieve energy independence and net-zero targets has collided with reality: a lack of domestic manufacturing capacity.

• Demand Surge: Electrification of transport, industry, and the rise of data centers are pushing European electricity demand back into growth territory (estimated +1.5-2% annually from 2026). Offshore wind is identified as the optimal source due to its high capacity factor, low carbon footprint, and scalability.
• Capacity Gap: By 2030, Europe needs to install ~9GW annually, rising to ~16GW by 2031. Current local capacity for >10MW turbines is merely ~4GW. Building new factories takes 3-5 years. This creates an unavoidable gap that must be filled by imports or rapid localization by foreign players.
• Floating Wind Emergence: Europe is also pioneering floating offshore wind. Approximately 1.5GW of floating projects have already signed Contracts for Difference (CfD) in the UK and France, with commissioning expected between 2029-2031. MYSE’s leadership in floating technology (50MW platform) positions it perfectly for this niche.

2.2 Economic Imperative for Chinese Turbines

European developers are under immense pressure to restore project economics.

• Cost Disparity: Post-2022 inflation pushed European offshore wind CAPEX to €3,800-4,000/kW. Chinese turbines are priced ~30% lower. Even with potential tariffs or localization costs, Chinese OEMs offer a compelling value proposition.
• LCOE Advantage: MYSE’s larger turbines (18-20MW vs. European 12-15MW) significantly reduce Balance of Plant (BOP) costs. Larger turbines mean fewer foundations, less cabling, and fewer installation vessels required per GW. This systemic cost reduction is critical for developers aiming to meet strike price targets.

2.3 Localization Strategy: The Scotland Investment

To navigate political sensitivities and meet local content requirements, MYSE is pursuing a "Glocal" strategy.

• Scotland Factory Plan: The proposed GBP 1.5 billion investment in Scotland is structured in three phases:
  1. Phase 1: Nacelle and blade manufacturing facility (GBP 750m), targeting first production by end-2028.
  2. Phase 2: Expansion for floating wind support.
  3. Phase 3: Supply chain ecosystem development (controls, electronics).
• Strategic Fit: The UK’s AR7 auction awarded 8.4GW, with major projects like Dogger Bank South and Norfolk Vanguard scheduled for 2029-2032 completion. These timelines align perfectly with the commissioning of MYSE’s Scottish factory. By producing locally, MYSE mitigates trade risk and qualifies for local subsidies, effectively becoming a "European" supplier for European projects.
• Competitive Moat: No other major Chinese OEM has announced such a comprehensive, large-scale manufacturing footprint in Europe. This first-mover advantage in localization could secure MYSE’s position as the preferred non-European supplier for the next decade.

III. New Growth Curve: Space Photovoltaics via Dehua Chip Acquisition

3.1 Transaction Overview

• Deal Structure: MYSE plans to acquire 100% of Zhongshan Dehua Chip via share issuance (price: CNY 14.46/share) and cash.
• Strategic Rationale: This acquisition is not just financial; it is a technological bridge into the space economy. It leverages MYSE’s existing PV manufacturing prowess into the high-margin, high-growth satellite power market.

3.2 Technology Deep Dive: Why GaAs and Flexible Arrays?

Space environments present unique challenges: high radiation, extreme temperature swings, and strict weight/volume constraints for launch.

• Gallium Arsenide (GaAs) Superiority:
  • Efficiency: Triple-junction GaAs cells achieve >30% efficiency in space spectra (AM0), far exceeding silicon (~15-18% in space).
  • Radiation Hardness: GaAs has a direct bandgap and strong atomic bonds, making it highly resistant to displacement damage from cosmic rays. Data shows <10% current degradation after 10 years in medium-high orbits.
  • Temperature Coefficient: GaAs performs better than silicon at high temperatures, common in space operations.
• Flexible Roll-Out Solar Arrays (ROSA):
  • Weight & Volume: Dehua’s flexible arrays use ultra-thin PI film carriers and super-elastic composite booms. This reduces weight by 25-35% and stowed volume to 1/10th of rigid panels.
  • Reliability: The passive deployment mechanism (no motors/gears) reduces failure points. The successful launch in Sept 2025 validated this technology on a commercial internet test satellite.
  • Cost: Simplified structure and materials lead to lower manufacturing costs and shorter production cycles, crucial for the burgeoning LEO satellite constellation market (e.g., Starlink competitors).

3.3 Synergies with Existing PV Business

MYSE is not starting from scratch in advanced PV.
* HJT Leadership: MYSE has 5GW of HJT capacity with cell efficiencies of 26.5%. HJT technology shares process similarities with some thin-film technologies and offers high bifaciality and low-temperature processing benefits.
* Perovskite Tandem Potential: Perovskite-silicon tandem cells are the next frontier for terrestrial efficiency (>30%). In space, Perovskite’s high power-to-weight ratio (~30W/g vs <1W/g for Si/GaAs) and radiation tolerance make it a disruptive technology.
* Cross-Pollination: Dehua’s experience with space-grade encapsulation and GaAs integration can accelerate MYSE’s R&D in perovskite stability. Conversely, MYSE’s large-scale manufacturing expertise can help Dehua scale up production for the growing commercial satellite market. The acquisition provides Dehua with a listed platform for capital and access to MYSE’s established customer channels in the broader energy sector.

Financial Analysis & Forecasts

1. Revenue and Profit Projections

We forecast a strong recovery in both top-line and bottom-line performance, driven by the volume-price mix improvement in wind and the gradual contribution of new businesses.

(Source: Company Reports, Guojin Securities Estimates)

Key Assumptions:
1. Wind Manufacturing Margins: Gross margins expand from 8.1% in 2024 to 15.7% in 2027, reflecting the delivery of higher-priced land wind orders and increased mix of high-margin offshore wind sales.
2. Volume Growth: Offshore wind shipments recover in 2026, supporting revenue growth even as land wind volume growth moderates.
3. Expense Control: SG&A and R&D expenses grow at a slower rate than revenue, benefiting from operating leverage.
4. Exclusion of Dehua: These forecasts do not include the consolidated financial impact of Zhongshan Dehua Chip, as the acquisition is still in progress. This implies our estimates are conservative regarding the long-term upside.

2. Cash Flow and Balance Sheet Health

• Operating Cash Flow: We project a significant turnaround in operating cash flow, moving from negative CNY 2.4bn in 2024 to positive CNY 6.1bn in 2025. This is driven by improved working capital management and stronger cash generation from profitable operations.
• CapEx: Capital expenditures remain elevated (CNY 3.7bn in 2025E) due to investments in the Scotland facility and domestic PV/offshore expansion. However, these are strategic investments for long-term growth.
• Leverage: The debt-to-asset ratio is expected to stabilize around 71%, manageable given the improving interest coverage ratio (EBIT/Interest Expense rising from -1.0x in 2024 to 7.9x in 2027).

3. Valuation

At the current price of CNY 25.20, MYSE trades at:
* 2025E P/E: ~55.8x
* 2026E P/E: ~25.8x
* 2027E P/E: ~18.1x

While the 2025 P/E appears high, it reflects the trough earnings of the transition year. The forward P/E of 25.8x for 2026 is reasonable for a company with >100% earnings growth and dominant market position in a high-growth sector. Compared to peers like Goldwind (2026E P/E 18.8x) and Sany Heavy Energy (2026E P/E 13.4x), MYSE commands a premium due to its superior offshore exposure, international growth optionality, and the nascent space PV business. Given the higher growth trajectory (CAGR of net profit >100% for 2025-2026), the valuation is justified.

Risks / Headwinds

Investors should be aware of the following risks that could impact the investment thesis:

1. Acquisition Regulatory Risk: The acquisition of Zhongshan Dehua Chip is subject to board, shareholder, and regulatory approvals. Failure to complete the transaction would remove the immediate catalyst for space PV diversification and could negatively impact sentiment regarding the company’s long-term tech roadmap.
2. European Market Execution Risk: The success of the European strategy hinges on the approval of the Scotland manufacturing plant by the UK government. Political shifts, national security concerns, or protectionist policies could delay or block the project, limiting MYSE’s ability to capture the European offshore market.
3. Offshore Wind Project Delays: Domestic offshore wind projects are sensitive to policy changes, military zoning issues, and grid connectivity approvals. Any significant delay in the commencement of the 33GW approved pipeline would push revenue recognition further out, impacting 2026-2027 forecasts.
4. Competitive Intensity: While land wind prices have recovered, the industry remains competitive. If rivals engage in renewed price wars to gain market share, margin expansion could be capped. Similarly, in Europe, if Western governments impose prohibitive tariffs on Chinese components despite local assembly, cost advantages could be eroded.
5. Technology Risk in Space PV: While GaAs and Perovskite show promise, space qualification is rigorous. Any failures in orbit or delays in commercial adoption of new satellite power standards could slow the monetization of the Dehua acquisition.

Rating / Sector Outlook

Sector Outlook: Positive
The global renewable energy sector, particularly offshore wind, is entering a phase of sustainable growth supported by policy mandates and economic competitiveness. In China, the correction in land wind pricing and the unlocking of offshore potential create a favorable domestic environment. Globally, the supply crunch in Europe offers a unique window for competitive manufacturers with localization strategies.

Company Rating: BUY
We maintain our BUY rating on Mingyang Smart Energy. The company offers a rare combination of:
1. Certainty: Short-term earnings recovery is backed by visible order books and rising prices.
2. Growth: Medium-term volume growth is secured by its leadership in the booming domestic offshore sector.
3. Optionality: Long-term value creation is unlocked by its pioneering move into European manufacturing and space-based energy systems.

The market has yet to fully price in the magnitude of the margin recovery in 2026-2027 and the strategic value of the Dehua acquisition. As these catalysts materialize, we expect significant multiple re-rating and share price appreciation.

Investment View

Why Buy Now?

1. Inflection Point Confirmed: The data from 2025 confirms that the worst of the land wind price war is over. The 10%+ price increase is a tangible signal of margin repair. Investors often hesitate at the start of a turnaround, but the lag effect means the financial proof will be strongest in 2026. Entering now allows capturing the full upswing of the earnings cycle.
2. Offshore Wind Monopoly-Like Position: In the domestic offshore sector, MYSE’s #1 ranking is not just a statistic; it translates to pricing power and preferential access to the best projects. As the sector doubles in size, MYSE’s revenue from this high-margin segment will disproportionately grow.
3. Undervalued International Option: The market currently values MYSE primarily as a domestic Chinese manufacturer. This ignores the massive TAM (Total Addressable Market) in Europe. The Scotland factory is a game-changer that transforms MYSE into a global player. If successful, this alone could double the company’s addressable market.
4. Tech Premium from Space PV: The Dehua acquisition adds a "tech stock" element to a traditional industrial company. Space infrastructure is a high-growth, high-margin niche. Even if this business remains small in the near term, it enhances the company’s valuation multiple by associating it with cutting-edge aerospace technology.

Strategic Recommendations for Institutional Investors

• Accumulate on Weakness: Given the volatility associated with acquisition news and macro policy shifts, any pullback in share price provides an attractive entry point.
• Monitor Key Milestones:
  • Q3/Q4 2026: Watch for gross margin expansion in quarterly reports as high-price orders hit the P&L.
  • Late 2026/Early 2027: Track the approval status of the Scotland factory and any initial order announcements from European developers.
  • Completion of Dehua Acquisition: Monitor the regulatory progress and subsequent integration plans.
• Long-Term Hold: This is not a short-term trade. The thesis plays out over 3-5 years as the offshore cycle peaks and the European factory comes online. Institutional investors with a longer horizon will benefit most from the compounding growth.

Conclusion

Mingyang Smart Energy is executing a sophisticated multi-pronged strategy that addresses immediate profitability concerns while building formidable long-term moats. The convergence of domestic price recovery, offshore volume growth, European localization, and space technology diversification creates a compelling investment case. The risks are real but manageable, and the potential rewards significantly outweigh them. We believe MYSE is poised to outperform the broader renewable energy sector and deliver substantial alpha to shareholders in the coming years.

Appendix: Detailed Financial Tables

Income Statement Forecast (CNY Million)

Balance Sheet Highlights (CNY Million)

Cash Flow Forecast (CNY Million)

Key Ratios

(Note: P/E and P/B calculated based on closing price of CNY 25.20 as of Jan 27, 2026)

Analyst Certification & Disclosures

Analyst Certification:
The analysts, Yao Yao and Liu Gaochang, hereby certify that all of the views expressed in this research report accurately reflect their personal views about the subject securities or issuers. They also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.

Important Disclosures:
* Guojin Securities may have an investment banking relationship with Mingyang Smart Energy.
* Guojin Securities may hold positions in the securities mentioned in this report and may trade them in ways different from those discussed in this report.
* This report is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities.
* Past performance is not indicative of future results.

Rating Definition:
* BUY: Expected return of >15% over the next 6-12 months.
* OUTPERFORM: Expected return of 5-15% over the next 6-12 months.
* NEUTRAL: Expected return of -5% to 5% over the next 6-12 months.
* UNDERPERFORM: Expected return of <-5% over the next 6-12 months.

Contact Information:
* Shanghai: 5th Floor, Zizhu International Building, 1088 Fangdian Road, Pudong New Area, Shanghai. Tel: 021-80234211
* Beijing: 8th Floor South, News Building, 26 Jianguomennei Avenue, Dongcheng District, Beijing. Tel: 010-85950438
* Shenzhen: Room 1806, 18th Floor, Huanggang Business Center, 2028 Jintian Road, Futian District, Shenzhen. Tel: 0755-86695353

Deep Dive: Technical & Market Context

A. The Physics of Offshore Wind Cost Reduction

To understand why MYSE’s large turbines are a competitive advantage in Europe, one must understand the physics of Levelized Cost of Energy (LCOE) in offshore environments.

$$ LCOE = \frac{\sum_{t=1}^{n} \frac{I_t + M_t + F_t}{(1+r)^t}}{\sum_{t=1}^{n} \frac{E_t}{(1+r)^t}} $$

Where:
* $I_t$ = Investment expenditures (CAPEX)
* $M_t$ = Operations and maintenance expenditures
* $F_t$ = Fuel expenditures (Zero for wind)
* $E_t$ = Electricity generation
* $r$ = Discount rate
* $n$ = Economic life of the system

Impact of Turbine Size (Upsizing):
1. CAPEX Reduction per MW: While a larger turbine costs more in absolute terms, the cost per MW decreases. Foundations, substations, and export cables are shared across fewer units for the same total capacity. For example, a 15MW farm needs 20 turbines, while a 20MW farm needs only 15 turbines for the same 300MW capacity. This means 25% fewer foundations and 25% fewer installation operations.
2. O&M Reduction: Fewer turbines mean fewer components to maintain. Offshore O&M is extremely expensive due to vessel costs and weather windows. Reducing the number of access events by 25% significantly lowers $M_t$.
3. Capacity Factor Increase: Larger turbines can capture wind at higher altitudes where winds are stronger and more consistent, increasing $E_t$.

MYSE’s 18-20MW turbines, and the upcoming 50MW floating platform, maximize these efficiencies. European competitors, lagging in the 12-15MW range, cannot offer the same LCOE reduction, making MYSE’s technology economically irresistible despite potential political headwinds.

B. Space PV: The Radiation Environment Challenge

Space is a harsh environment for electronics. The primary threat to solar cells is displacement damage caused by high-energy protons and electrons trapped in the Van Allen belts or originating from solar flares.

• Silicon Vulnerability: Silicon is an indirect bandgap semiconductor. Radiation creates defects in the crystal lattice that act as recombination centers. This drastically reduces the minority carrier lifetime, leading to rapid efficiency degradation. N-type silicon is particularly vulnerable compared to P-type.
• GaAs Resilience: Gallium Arsenide is a direct bandgap semiconductor with stronger atomic bonds (mixed covalent-ionic).
  1. Higher Displacement Threshold: It takes more energy to displace a Ga or As atom from its lattice site than a Si atom.
  2. Annealing Effect: GaAs exhibits a natural "annealing" property at operating temperatures, where some radiation-induced defects self-repair over time.
  3. Direct Bandgap Efficiency: Even with some degradation, the high initial efficiency and superior spectral response ensure that GaAs cells remain productive for 10-15 years, the typical lifespan of a satellite.

Dehua Chip’s mastery of GaAs epitaxy and cell design allows them to produce cells that withstand this environment better than almost any alternative. This technical moat is difficult for new entrants to replicate, providing MYSE with a durable competitive advantage in the space sector.

C. Regulatory Landscape: EU Net-Zero Industry Act (NZIA)

The EU’s NZIA aims to boost the manufacturing of net-zero technologies within Europe. Key provisions include:
* Sustainability and Resilience Criteria: Public auctions for renewable projects must consider criteria beyond price, including supply chain resilience and environmental sustainability.
* Local Content: While explicit local content quotas are tricky under WTO rules, the NZIA encourages member states to favor projects with higher European added value.

MYSE’s Response:
By building a factory in Scotland, MYSE directly addresses the "European added value" criterion. The turbines will be assembled in the UK, creating jobs and contributing to the local economy. This strategy effectively neutralizes the primary political argument against Chinese imports. It transforms MYSE from a "Chinese importer" to a "European manufacturer," aligning its interests with those of the UK and EU governments. This strategic foresight is a key reason for our bullish outlook.

Final Thoughts

Mingyang Smart Energy is navigating a complex global landscape with agility and strategic vision. The company is not merely riding the wave of renewable energy growth; it is shaping it through technological innovation (large offshore turbines, space PV) and smart geopolitical positioning (localization in Europe).

For institutional investors, MYSE offers a differentiated exposure to the renewable energy theme. It combines the stability of a market-leading domestic business with the high-growth potential of international expansion and new technology verticals. The financial turnaround is already underway, evidenced by rising bid prices and improving margins. The long-term optionality in Europe and Space provides the upside surprise potential.

We recommend investors accumulate positions in MYSE, viewing the current valuation as an attractive entry point before the full realization of the 2026-2027 earnings surge and the strategic milestones in Europe and Space PV.

End of Report