Equity Research: Deye Shares (605117.SH)

Date: August 28, 2025
Rating: BUY (Maintained)
Current Price: CNY 60.55
Target Price: Implied Upside via Valuation Re-rating
Market Cap: CNY 54.76 Billion
Analyst: Institutional Research Team

Executive Summary

Deye Shares (605117.SH) reported its first-half (H1) 2025 financial results on August 27, 2025, delivering performance that largely aligned with market expectations while highlighting a significant structural shift in its revenue mix toward high-growth Commercial and Industrial (C&I) energy storage solutions. The company demonstrated resilience in profitability despite moderate top-line growth in the second quarter (Q2), underpinned by robust demand in emerging markets and a successful product synergy strategy between inverters and battery packs.

In H1 2025, Deye Shares achieved total operating revenue of CNY 5.535 billion, representing a year-over-year (YoY) increase of 16.58%. Net profit attributable to shareholders of the parent company reached CNY 1.522 billion, up 23.18% YoY. The overall gross margin stood at a healthy 37.48%. Specifically for Q2 2025, revenue amounted to CNY 2.969 billion (YoY +3.65%, Quarter-over-Quarter [QoQ] +15.70%), with net profit reaching CNY 817 million (YoY +1.72%, QoQ +15.74%). The Q2 gross margin improved slightly to 37.71%, indicating effective cost management and a favorable product mix shift despite pricing pressures in the residential storage sector.

The core investment thesis for Deye Shares remains intact, driven by three pivotal factors:
1. Explosive Growth in C&I Storage: The company is capitalizing on the nascent but rapidly expanding global C&I storage market, particularly in Europe (driven by subsidy policies and Feed-in Tariff phase-outs) and emerging economies like Pakistan, Myanmar, Nigeria, and the Middle East (driven by high electricity prices and grid instability). C&I inverter shipments surged by over 200% YoY in H1 2025.
2. Successful Battery Pack Integration: The strategic bundling of storage batteries with flagship inverters has accelerated battery pack adoption, generating CNY 1.422 billion in revenue (YoY +85.80%) and contributing significantly to the overall gross profit pool with a margin of 35.01%.
3. Strong Cash Flow and Balance Sheet Health: The company maintains a robust liquidity position with substantial cash reserves, supporting ongoing R&D and capacity expansion, including the newly established manufacturing base in Malaysia.

However, acknowledging the downward pressure on residential storage inverter prices due to intensifying competition, we have adjusted our earnings forecasts. We lower our estimated net profits for 2025 and 2026 to CNY 3.60 billion and CNY 4.25 billion respectively (previously CNY 4.10 billion and CNY 5.39 billion), and introduce a 2027 estimate of CNY 5.01 billion. This translates to Earnings Per Share (EPS) of CNY 3.98, CNY 4.70, and CNY 5.54 for 2025-2027. At the current share price of CNY 60.55, the stock trades at forward P/E multiples of 15.2x, 12.9x, and 10.9x for 2025, 2026, and 2027, respectively.

Given the company’s dominant position in hybrid inverters, the rapid scaling of its C&I and battery businesses, and the attractive valuation relative to its growth trajectory, we maintain our "BUY" rating. The recent announcement of an Employee Stock Ownership Plan (ESOP) with achievable performance targets further aligns management interests with shareholders, reinforcing our positive outlook.

Key Takeaways

1. Financial Performance: Resilient Profitability Amidst Market Transition

Deye Shares’ H1 2025 results reflect a company successfully navigating a transitional period in the global energy storage market. While the hyper-growth phase of post-pandemic residential demand has normalized, Deye has effectively pivoted to sustain momentum through diversification into C&I segments and vertical integration into battery packs.

H1 2025 Top-Line and Bottom-Line Analysis

Source: Company Reports, Kaiyuan Securities Research Institute

The divergence between revenue growth (+16.58%) and net profit growth (+23.18%) is a critical positive signal. It suggests that Deye is not merely engaging in volume-driven, low-margin sales but is optimizing its product mix. The higher-margin C&I inverters and the synergistic battery pack business are offsetting the margin compression seen in the mature residential inverter market.

Q2 2025 Sequential Momentum

The second-quarter data provides insight into the immediate trend leading into the second half of the year.

Note: Q1 2025 Revenue was approx. CNY 2.566 Billion; Q1 Net Profit was approx. CNY 705 Million.

The QoQ growth of ~15.7% in both revenue and profit is particularly encouraging. It dispels concerns about a potential mid-year slump and suggests that the company’s sales channels in key regions (Asia, Africa, Latin America, and parts of Europe) are gaining traction. The slight expansion in gross margin from H1 average (37.48%) to Q2 (37.71%) implies that the higher-margin battery and C&I products contributed more significantly in the second quarter than in the first.

2. Strategic Pivot: The Rise of Commercial & Industrial (C&I) Storage

The most compelling aspect of Deye’s H1 2025 report is the explosive growth in its C&I storage inverter segment. This marks a successful diversification away from pure reliance on residential users, positioning Deye to capture value in the next wave of global energy storage adoption.

Global C&I Demand Drivers

The report identifies distinct catalysts driving C&I demand in different geographies:

• Europe: The transition from residential to C&I storage is being accelerated by policy shifts. As Feed-in Tariffs (FIT) for solar PV decline or expire, commercial entities are increasingly incentivized to store self-generated energy for self-consumption rather than exporting it to the grid at low rates. Additionally, new subsidies specifically targeting commercial energy storage systems are coming into effect, creating a "0-to-1" market expansion opportunity.
• Emerging Markets (Pakistan, Myanmar, Nigeria, Middle East): In these regions, the primary driver is not just economic arbitrage but energy security. Frequent power outages, grid instability, and soaring electricity prices have made C&I storage a critical infrastructure investment for businesses. Unlike mature markets where storage is an optimization tool, in these regions, it is often a necessity for business continuity.

Shipment Data Breakdown

Deye’s shipment data for H1 2025 underscores this strategic shift:

• Total Storage Inverters Sold: 315,600 units (YoY +47.41%).
• Residential Storage Inverters: 272,700 units.
  • While still the bulk of volume, the growth rate here is moderating compared to the C&I segment.
• C&I Storage Inverters: 42,900 units (YoY >200%).
  • This tripling of volume demonstrates Deye’s ability to penetrate the commercial segment. The absolute number (42.9k) may seem small compared to residential, but the revenue per unit is significantly higher, and the growth trajectory is exponential.

Analyst Insight: The >200% growth in C&I inverters is a key de-risking factor for Deye. The residential market is becoming increasingly commoditized with intense price competition from Chinese peers. The C&I segment, requiring more sophisticated technical solutions, grid-forming capabilities, and after-sales support, offers higher barriers to entry and stickier customer relationships. Deye’s early mover advantage here could secure long-term market share.

3. Vertical Integration: Battery Pack Business as a Growth Engine

Deye has aggressively expanded its battery pack business, leveraging its strong brand equity in inverters. This "Inverter + Battery" bundled strategy is proving highly effective.

Financial Contribution of Battery Packs

• H1 2025 Revenue: CNY 1.422 billion (YoY +85.80%).
• Revenue Share: Accounts for 25.78% of total principal business revenue.
• Gross Margin: 35.01%.

The battery business is no longer a peripheral accessory but a core pillar of Deye’s revenue structure, contributing nearly one-quarter of total sales. The YoY growth of 85.80% significantly outpaces the overall company revenue growth (16.58%), indicating that batteries are becoming the primary growth driver.

Synergy and Margin Profile

The gross margin of 35.01% for battery packs is respectable and closely aligns with the company’s overall margin profile. More importantly, the synergy with inverters creates a competitive moat:
1. Seamless Integration: Customers benefit from optimized communication protocols, easier installation, and unified warranty/support channels when purchasing both inverter and battery from Deye.
2. Channel Leverage: Deye’s extensive distributor network, originally built for inverters, is now efficiently cross-selling batteries, reducing customer acquisition costs.
3. Brand Trust: In the storage sector, safety and reliability are paramount. Deye’s established reputation in inverters transfers trust to its battery products, accelerating adoption among risk-averse commercial and residential clients.

4. Traditional Business Segments: Mixed Trends

While storage is the star performer, Deye’s traditional businesses—String/Micro Inverters and Heat Exchangers—show mixed trends, reflecting broader industry dynamics.

Grid-Tied Inverters (String & Micro)

• Total Sales Volume: 448,200 units (String: 308,800; Micro: 139,400).
• YoY Change: -9.93%.

The decline in grid-tied inverter sales is consistent with the broader slowdown in new solar installations in certain key markets, particularly Europe, where inventory digestion and policy uncertainty have tempered demand. Additionally, the saturation of the micro-inverter market in some regions may be contributing to the volume contraction. However, this segment remains a stable cash cow, providing baseline revenue even as growth stagnates.

Heat Exchangers

• Revenue: CNY 868 million (YoY -17.83%).
• Revenue Share: 15.68% of total principal business.
• Gross Margin: 12.60% (YoY +1.68 percentage points).

The heat exchanger business, Deye’s legacy segment, continues to face headwinds in terms of volume/revenue, likely due to slower growth in the traditional HVAC appliance market. However, the 1.68 ppt improvement in gross margin is noteworthy. This suggests that Deye is actively managing this legacy business to prioritize profitability over volume, possibly by exiting low-margin contracts or improving manufacturing efficiency. While not a growth engine, this segment contributes steady cash flow with improving margins.

5. Corporate Governance: Employee Stock Ownership Plan (ESOP)

On August 25, 2025, Deye Shares announced a draft Employee Stock Ownership Plan (ESOP), signaling confidence in future performance and a commitment to aligning employee interests with shareholder value.

ESOP Details

• Participants: Up to 800 employees.
• Shares Allocated: Up to 1.9072 million shares.
• Percentage of Total Share Capital: 0.21%.
• Purchase Price: CNY 30.19 per share.
• Performance Target: Deducted non-net profit attributable to shareholders for 2025 must be no less than CNY 3.1 billion.

Implications for Investors

1. Price Discount as Incentive: The purchase price of CNY 30.19 represents a significant discount to the current market price of ~CNY 60.55. This provides a substantial safety margin and upside potential for employees, serving as a powerful retention and motivation tool.
2. Achievable Targets: The performance target of CNY 3.1 billion in deducted non-net profit for 2025 is notably lower than our revised forecast of CNY 3.60 billion. This suggests the target is designed to be easily achievable, ensuring that the majority of participating employees will vest their shares. While conservative targets can sometimes be viewed negatively (as lacking ambition), in this context, they serve to boost morale and ensure broad-based employee engagement without imposing excessive risk.
3. Signal of Stability: The implementation of an ESOP during a period of market volatility demonstrates management’s belief in the company’s intrinsic value and long-term prospects. It reduces the likelihood of key talent departure during a competitive hiring environment.

Risks / Headwinds

While Deye Shares presents a compelling investment case, institutional investors must carefully weigh the following risks, which could impact future performance and valuation.

1. Intensifying Competition and Price Wars

The energy storage inverter market, particularly in the residential segment, has become increasingly crowded. Numerous Chinese manufacturers are expanding capacity and competing aggressively on price to gain market share.

• Margin Compression Risk: Although Deye has maintained margins so far, sustained price wars could force further reductions in selling prices, potentially eroding gross margins below the current ~37% level.
• Market Share Defense: Maintaining market share in the face of cheaper alternatives requires continuous innovation and brand building, which entails higher R&D and marketing expenses.

2. Industry Demand Volatility

Global demand for energy storage is subject to macroeconomic and policy-driven fluctuations.

• European Market Uncertainty: Changes in subsidy policies, interest rate environments, and energy prices in Europe can significantly impact installation rates. A slowdown in European demand would disproportionately affect Deye, given the region’s historical importance.
• Emerging Market Instability: While emerging markets offer high growth, they also carry political and economic risks. Currency fluctuations, import restrictions, or political instability in key markets like Pakistan, Nigeria, or Myanmar could disrupt supply chains or payment collections.

3. Overseas Trade Policy and Geopolitical Risks

As a heavily export-oriented company, Deye is vulnerable to changes in international trade policies.

• Tariffs and Trade Barriers: Potential increases in tariffs by the US, EU, or other major markets could reduce the competitiveness of Deye’s products. The company’s establishment of a production base in Malaysia is a strategic move to mitigate this risk, but the effectiveness of this strategy depends on the specific rules of origin and trade agreements in place.
• Geopolitical Tensions: Escalating geopolitical tensions between China and Western nations could lead to non-tariff barriers, such as stricter certification requirements or security reviews, which could delay product launches or increase compliance costs.

4. Technology Disruption and Innovation Lag

The energy storage industry is technologically dynamic. Rapid advancements in battery chemistry (e.g., solid-state batteries), inverter topology, or grid-management software could render existing products obsolete.

• R&D Execution Risk: Deye must continue to invest heavily in R&D to stay ahead of competitors. Failure to innovate or slow adoption of new technologies could result in loss of market leadership.
• Product Quality and Safety: Any significant product failure or safety incident (e.g., battery fires) could severely damage the company’s brand reputation and lead to costly recalls or litigation.

5. Foreign Exchange Fluctuations

Deye generates a significant portion of its revenue in foreign currencies (USD, EUR, etc.), while a large part of its costs are incurred in CNY.

• Currency Volatility: Appreciation of the CNY against major export currencies could reduce the value of overseas revenue when converted back to CNY, impacting reported earnings. Conversely, depreciation could boost earnings but might make products more expensive in local markets if prices are not adjusted. The company uses financial instruments to hedge some of this risk, but hedging is not always perfect or cost-free.

Rating / Sector Outlook

Investment Rating: BUY (Maintained)

We maintain our BUY rating on Deye Shares (605117.SH). Despite lowering our near-term earnings estimates to reflect pricing pressures in the residential sector, we believe the market has not fully priced in the transformative potential of the company’s C&I storage growth and battery pack integration. The current valuation offers an attractive entry point for long-term investors seeking exposure to the global energy transition.

Valuation Analysis

Based on our revised earnings forecasts, Deye Shares trades at compelling multiples relative to its growth profile and industry peers.

Source: Kaiyuan Securities Research Institute Estimates

• Relative Valuation: Compared to global peers in the inverter and storage space, Deye’s forward P/E of 15.2x for 2025 is reasonable, especially considering its superior growth rate in the C&I segment (>200%) and battery segment (+85%). Many pure-play residential inverter companies trade at similar or higher multiples despite slower growth.
• PEG Ratio: With a projected net profit CAGR of ~18-22% over the next three years, the PEG ratio (P/E divided by Growth Rate) is approximately 0.7-0.8x, which is well below the threshold of 1.0x typically considered fair value for growth stocks. This suggests the stock is undervalued relative to its growth potential.
• Dividend Yield: While not explicitly detailed in the summary, Deye has a history of returning cash to shareholders. Combined with capital appreciation potential, the total return profile is attractive.

Sector Outlook: Positive with Structural Shifts

The global energy storage sector is transitioning from a niche, subsidy-driven market to a mainstream, economically viable component of the power grid.

1. From Residential to C&I/Utility: The initial boom in residential storage is maturing. The next leg of growth will come from C&I and utility-scale projects, where economics are driven by peak shaving, arbitrage, and grid services. Deye is well-positioned for this shift.
2. Integration is Key: Standalone inverters are becoming commoditized. The value is shifting towards integrated systems (Inverter + Battery + EMS). Companies that can offer seamless, reliable, and cost-effective integrated solutions will win market share. Deye’s vertical integration strategy aligns perfectly with this trend.
3. Emerging Markets as Growth Engines: As grid instability and energy costs rise in developing nations, these markets will become increasingly important. Deye’s early presence and strong distribution network in Asia, Africa, and Latin America provide a competitive advantage over rivals focused primarily on Europe and North America.

Investment View

Core Investment Logic

Our bullish stance on Deye Shares is anchored in three fundamental pillars:

1. Successful Diversification into High-Growth C&I Segment

Deye is no longer just a residential inverter company. The >200% YoY growth in C&I inverter shipments demonstrates a successful pivot into a higher-value, less commoditized segment. This diversification reduces reliance on the volatile residential market and opens up a larger total addressable market (TAM). The catalysts in Europe (policy-driven) and emerging markets (necessity-driven) provide durable demand visibility for the next 3-5 years.

2. Vertical Integration Driving Margin Resilience

The rapid scaling of the battery pack business (Revenue +85.8%, Margin 35.01%) is a testament to Deye’s ability to leverage its brand and channel strength. By capturing value across the inverter-battery value chain, Deye enhances customer stickiness and protects margins against component price fluctuations. The synergy between inverters and batteries creates a "flywheel effect," where success in one segment drives growth in the other.

3. Attractive Valuation with Strong Cash Generation

Trading at ~15x 2025E P/E, Deye offers a compelling risk-reward profile. The company generates robust operating cash flows (CNY 3.755 billion estimated for 2025), allowing it to fund R&D, expand capacity (e.g., Malaysia plant), and return capital to shareholders without relying on external financing. The strong balance sheet (low debt-to-equity, high cash reserves) provides a cushion against macroeconomic shocks.

Recent Performance and Trends

• Q2 Momentum: The sequential growth in Q2 (Revenue +15.7%, Profit +15.7%) signals that the company has navigated the mid-year lull effectively. This momentum is expected to continue into H2, traditionally a stronger season for installations in Europe and emerging markets.
• Margin Stability: Despite price declines in residential inverters, the overall gross margin remained stable at ~37.5%. This indicates that the higher-margin C&I and battery products are effectively offsetting pressure in the legacy segment.
• Operational Efficiency: The improvement in heat exchanger margins and the controlled growth in operating expenses suggest that management is focused on operational efficiency and profitability, not just top-line growth.

Business Segment Drivers

Earnings Forecast and Valuation

We have revised our earnings forecasts to reflect a more realistic view of the residential market pricing environment while incorporating the upside from C&I and battery growth.

Revised Forecasts:

• 2025E Revenue: CNY 13.378 Billion (+19.4% YoY)
• 2025E Net Profit: CNY 3.602 Billion (+21.7% YoY)
• 2025E EPS: CNY 3.98
• 2026E Net Profit: CNY 4.253 Billion (+18.1% YoY)
• 2027E Net Profit: CNY 5.013 Billion (+17.9% YoY)

Valuation Metrics:

• Current Price: CNY 60.55
• 2025E P/E: 15.2x
• 2026E P/E: 12.9x
• 2027E P/E: 10.9x
• PB (2025E): 4.8x
• ROE (2025E): 31.7%

The company maintains a high Return on Equity (ROE) of over 30%, indicative of its efficient use of capital and strong competitive position. The declining P/E multiple over the forecast period, coupled with steady earnings growth, suggests that the stock is currently undervalued.

Catalysts for Re-rating

1. Continued C&I Growth: If C&I inverter shipments continue to grow at >100% YoY in H2 2025 and 2026, the market may re-rate Deye as a high-growth C&I player rather than a mature residential inverter company.
2. Battery Margin Expansion: If the battery pack business achieves economies of scale and margins expand above 35%, it will significantly boost overall profitability.
3. Malaysia Plant Ramp-up: Successful commissioning and utilization of the Malaysia production facility could mitigate trade risks and open up new markets (e.g., US, if rules of origin allow), acting as a positive catalyst.
4. Policy Support in Europe: Further announcements of subsidies or favorable regulations for C&I storage in major European markets could drive sentiment.

Core Risks to Monitor

Investors should closely monitor the following indicators:

1. Gross Margin Trends: Any sustained decline in gross margin below 35% would signal intense pricing pressure or cost inflation, warranting a reassessment of the investment thesis.
2. Inventory Levels: Rising inventory levels, particularly in finished goods, could indicate demand slowdown or channel stuffing.
3. Trade Policy Developments: Any new tariffs or trade restrictions imposed by the EU or US on Chinese energy storage products.
4. Competitor Actions: Aggressive pricing or new product launches by key competitors (e.g., Huawei, Sungrow, GoodWe) in the C&I segment.

Conclusion

Deye Shares stands at a pivotal juncture, successfully transitioning from a residential-focused inverter manufacturer to a diversified energy storage solutions provider with strong footholds in C&I and battery packs. The H1 2025 results confirm that this strategy is working, with robust profit growth and accelerating momentum in high-value segments.

While the residential market faces headwinds, the company’s ability to maintain margins and grow profits demonstrates its operational excellence and strategic agility. The current valuation of ~15x 2025E P/E does not fully reflect the long-term growth potential of the C&I and battery businesses. Coupled with a strong balance sheet, robust cash flows, and aligned management incentives via the ESOP, Deye Shares presents a compelling investment opportunity.

We recommend investors accumulate positions on any market weakness, with a medium-to-long-term horizon, to capitalize on the structural growth trends in global energy storage. The risk-reward profile is favorable, with significant upside potential driven by execution in the C&I segment and vertical integration benefits.

Appendix: Detailed Financial Analysis

1. Income Statement Analysis

The income statement reveals a company that is growing its top line while effectively managing costs to expand bottom-line profitability.

Revenue Composition Shift:
The shift in revenue composition is evident. While specific segment revenue breakdowns for the entire year are not provided in the summary, the H1 data indicates that Storage Batteries now contribute ~25.8% of revenue, up from a lower base in previous years. This diversification reduces the company's exposure to any single product line's cyclicality.

Cost of Goods Sold (COGS):
COGS for H1 2025 was approximately CNY 3.46 billion (derived from Revenue 5.535B * (1-37.48%)). The ability to keep COGS growth in check despite inflationary pressures on raw materials (lithium, copper, semiconductors) is a testament to Deye’s supply chain management and scale advantages.

Operating Expenses:
* R&D Expenses: Continued investment in R&D is crucial for maintaining technological leadership. The report highlights R&D expenses of CNY 488 million for 2025E, indicating a commitment to innovation.
* Selling & Administrative Expenses: These are managed efficiently, with selling expenses estimated at CNY 298 million for 2025E. The ratio of operating expenses to revenue remains stable, indicating no significant inefficiencies in scaling the business.

Net Profit Margin:
The net profit margin improved from 26.4% in 2024A to an estimated 26.9% in 2025E. This expansion is driven by the higher-margin product mix (C&I and Batteries) and operational leverage.

2. Balance Sheet Strength

Deye’s balance sheet is characterized by strong liquidity and low leverage, providing financial flexibility.

Assets:
* Cash and Equivalents: Estimated at CNY 5.956 billion for 2025E, up from CNY 3.554 billion in 2024A. This substantial cash pile allows the company to fund expansion, weather downturns, and pursue M&A opportunities if desired.
* Accounts Receivable: Estimated at CNY 1.643 billion for 2025E. The receivables turnover ratio is healthy, indicating efficient collection processes.
* Inventory: Estimated at CNY 1.217 billion for 2025E. Inventory levels are managed prudently, avoiding excessive buildup that could lead to write-downs.

Liabilities:
* Short-term Borrowings: Estimated at CNY 1.545 billion for 2025E. While this represents an increase from 2024A (CNY 1.01 billion), it is manageable given the cash position.
* Accounts Payable: Estimated at CNY 3.541 billion for 2025E. The company leverages its supplier relationships effectively, using payables as a source of working capital.
* Debt-to-Equity Ratio: The net debt ratio is negative (-37.3% for 2025E), meaning the company has more cash than debt. This is a very strong financial position.

Equity:
* Retained Earnings: Growing steadily, reflecting consistent profitability. Estimated at CNY 6.947 billion for 2025E.
* Shareholder Equity: Estimated at CNY 11.379 billion for 2025E, providing a solid base for future growth.

3. Cash Flow Dynamics

Cash flow is the lifeblood of any manufacturing business, and Deye demonstrates strong cash generation capabilities.

Operating Cash Flow (OCF):
* 2025E OCF: Estimated at CNY 3.755 billion.
* OCF to Net Profit Ratio: >1.0x, indicating high quality of earnings. The company converts its accounting profits into actual cash efficiently.
* Drivers: Strong working capital management (collections, inventory turnover) and profitable operations drive OCF.

Investing Cash Flow:
* Capital Expenditures (CapEx): Estimated at CNY 469 million for 2025E. This includes investments in the Malaysia plant and other capacity expansions. The level of CapEx is appropriate for a growth-stage company, balancing expansion with cash preservation.

Financing Cash Flow:
* Dividends and Share Buybacks: The company returns cash to shareholders through dividends and potentially share buybacks (though not explicitly detailed, the ESOP involves share issuance).
* Debt Management: The company manages its debt levels prudently, borrowing when necessary for expansion but maintaining a net cash position.

4. Key Financial Ratios

Source: Kaiyuan Securities Research Institute Estimates

The stability of ROE and ROIC above 25-30% is exceptional and highlights Deye’s competitive moat. The slight decline in gross margin is a concern but is mitigated by the stability in net margin, suggesting effective expense control. The improving liquidity ratios (Current and Quick) provide a buffer against unforeseen shocks.

5. Sensitivity Analysis

To understand the potential range of outcomes, we perform a simple sensitivity analysis on the 2025 EPS based on variations in Gross Margin and Revenue Growth.

Base Case: Revenue CNY 13.378B, GM 37.5%, EPS CNY 3.98.

Note: This is a simplified illustrative analysis. Actual results may vary based on tax rates, minority interests, and other factors.

Even in the Bear Case, where margins compress significantly and growth slows, the P/E multiple expands to 17.3x, which is still reasonable for a company with Deye’s market position. In the Bull Case, the P/E contracts to 13.5x, offering significant upside potential. This asymmetry favors the investor.

6. Comparative Peer Analysis

While a detailed peer comparison is beyond the scope of this specific report update, broadly speaking, Deye compares favorably to its peers in terms of:

• Growth Rate: Higher C&I and Battery growth rates than many pure-play residential inverter peers.
• Profitability: Higher ROE and Net Margins than the industry average.
• Valuation: Trading at a discount to some high-growth peers, despite comparable or superior growth prospects in key segments.

Key peers include Huawei (private, but a major competitor), Sungrow (300274.SZ), GoodWe (688390.SH), and Ginlong Technologies (300763.SZ). Deye’s unique advantage lies in its strong brand in emerging markets and its successful vertical integration into batteries.

Final Remarks

Deye Shares (605117.SH) has demonstrated remarkable adaptability and strategic foresight in a rapidly evolving industry. The H1 2025 results are not just a confirmation of past success but a blueprint for future growth. The pivot to C&I storage and the integration of battery packs are not mere tactical moves but strategic imperatives that position Deye for long-term leadership in the global energy storage market.

For institutional investors, the combination of strong fundamentals, clear growth drivers, attractive valuation, and robust risk management makes Deye Shares a compelling addition to any portfolio focused on the energy transition theme. We reiterate our BUY rating and encourage investors to monitor the company’s progress in the C&I segment and its ability to maintain margins in the face of competition.

Disclaimer: This report is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with financial advisors before making investment decisions. The views expressed herein are subject to change without notice.