21st Century Business Herald Intern Journalist Cares to Report from Shanghai

Inverter manufacturers are rushing towards the super trend, and the energy storage business is soaring collectively.

As the mid year reports of A-share listed companies come to an end, six inverter listed companies, namely Sunshine Power (300274. SZ), Jinlang Technology (300763. SZ), Goodway (688390. SH), Deye Corporation (605117. SH), Hemai Corporation (688032. SH), and Yuneng Technology (688348. SH), have all announced their operating conditions for the first half of the year.

Although there are ups and downs in the details of performance, it can also be seen that top manufacturers have started the "second curve" of the energy storage track, and second tier enterprises that have found new market growth are already gearing up and ready to take off. However, behind the collective expansion of inverter manufacturers into the energy storage industry, there are new challenges in terms of channel and commercial layout.

Valuation premium, gross profit hit

The suppliers of energy storage batteries and energy storage inverters, which are the two highest value and barrier links in the energy storage industry chain, are facing the dual dividends of doubled market space and valuation premium.

Since the beginning of this year, micro inverters have attracted a lot of attention, not only giving birth to two stocks with extremely high stock prices - Hemei Shares and Yuneng Technology, but also recently a ten fold bull stock was born.

Since its listing on the Shanghai Stock Exchange on April 20, 2021, DeYe Corporation's stock price has surged rapidly, from an issue price of 32.74 yuan per share to a peak of 448 yuan per share. However, there has been a recent decline, with a market value of less than 90 billion yuan, closing at 367.95 yuan per share as of August 31.

The high valuation given to DeYe Stock by the market is actually inseparable from the shift of its business focus. By the first half of this year, the company had completed its business transformation from traditional household appliances to the photovoltaic inverter industry, with the inverter business accounting for a larger proportion of revenue than the traditional household electric heat exchanger business, becoming the company's largest business.

DeYe Corporation, which has successfully transformed, is building its own moat and focusing on the business of micro grid connected inverters, energy storage inverters, and string connected grid connected inverters. In the first half of the year, the revenue of these three businesses increased significantly, with growth rates of 462.02%, 241.63%, and 91.1% respectively compared to the same period last year.

Sunshine Power has also opened a "second curve" in its energy storage business. The energy storage system business generated a revenue of 2.385 billion yuan in the first half of the year, a year-on-year increase of 159.33%, accounting for 19.42% of the total revenue, an increase of 8.22 percentage points year-on-year. The development of energy storage systems has also become the second growth pole of solar power.

Despite the accelerated transformation of energy in Europe and factors such as rising electricity prices and energy storage subsidies, which have led to a sudden increase in demand in overseas markets, the fluctuation of the epidemic, as well as the tight supply and rising prices of core raw materials such as IGBT, battery cells, and components, are also hindering the pace of domestic manufacturers going global.

Gudewei, whose performance was under pressure in the first half of the year and whose net profit shrank by more than 60%, stated that due to the significant increase in costs of semiconductors, commodities, international logistics, and other industries, coupled with the company's long-term strategic layout, employee growth, equity incentive plans, etc., the growth rate of expenses during the period was much higher than that of operating income, resulting in a significant decline in net profit compared to the same period last year.

Sunshine Power is also troubled by the decline in gross profit margin. The company pointed out at the mid year performance meeting that the epidemic in April and May affected the company's shipping pace, and it was only in June that it basically returned to normal. And some shipments in June will be recognized as revenue in the third quarter, which will have a certain impact on the company's performance in the second quarter.

For the energy storage business, Sunac Power stated that from the second half of last year to the first half of this year, the battery cells were basically on the rise, which put certain pressure on the gross profit margin and profitability of the company's energy storage system business. The gross profit margin of the energy storage system business in the second quarter also decreased compared to the first quarter.

At present, the new energy storage orders are basically based on formula based pricing contracts, which can ensure the gross profit margin of our energy storage system business. In addition, the shipment volume of household storage will increase in the second half of the year, so we believe that the profitability of energy storage should improve in the second half of the year, "said the management of Sunshine Power at the mid year performance meeting.

Coincidentally, Jinlang Technology also has some "sweet troubles". Although the stock price in the capital market has been rising all the way, even reaching a high market value of billions, it is facing the problems of accumulated orders and declining gross profit margins.

In the past few months, the number of newly generated orders per month has far exceeded the number of orders that can be shipped. The problem of order backlog has not been resolved yet, and it is the key direction for the company to address in the future, "said the management of Jinlang Technology at the mid year performance meeting.

In fact, in the first half of this year, Jinlang Technology's energy storage inverter business grew rapidly, with 50000 to 60000 units shipped, corresponding to over 30000 units shipped for the entire year of 2021. The revenue of this part of the business reached 298 million yuan, a year-on-year increase of 348.72%, and the proportion of revenue increased from 4.57% last year to 12.21%.

Value added products, building high barriers

Jinlang Technology timely chose to expand production, stating that the third and fourth quarters of 2022 will be a period of rapid increase in inverter production capacity. The company expects that if the supply guarantee capacity is sufficient and the order demand is sufficient, the shipment for the whole year of 2023 will be optimistic.

Gudewei previously announced a private placement plan to raise no more than 2.54 billion yuan, mainly for the construction of 30GW grid connected inverters, 10GW energy storage inverters, and 4.5GWh energy storage battery production capacity, which will further increase the effective supply of grid connected inverters and energy storage products.

The latest research report from Huaxin Securities points out that the main players in energy storage batteries are power battery manufacturers, and the main participants in energy storage inverters are photovoltaic inverter manufacturers. Chinese companies occupy a relatively high market share with advantages in technology, production capacity, and channels, and are expected to continue to improve in the future.

Due to the high degree of overlap among suppliers of photovoltaic inverters and energy storage inverters, for manufacturers whose main business is photovoltaic inverters, developing energy storage inverter business can share channels and brand resources. And in terms of technical capabilities, energy storage inverters can achieve product value-added by upgrading and transforming the production line of photovoltaic inverters.

Under the promotion of photovoltaic grid parity, the cost of photovoltaic inverters is constantly being compressed, while energy storage inverters can bring higher premiums to manufacturers. Therefore, established inverter companies that started with photovoltaic inverters have gradually penetrated into higher profit energy storage inverters in recent years.

Hemai Corporation, one of the leading companies in micro inverters, has also announced that it has started small-scale trial production of energy storage inverters in the first half of the year and plans to launch them in the second half of 2022 to further enhance its product competitiveness in the market.

However, for mature inverter manufacturers, market positioning also needs to be considered.

Jinlang Technology believes that it is optimistic about the domestic distributed system business and believes that this market has great prospects in the future. However, for large-scale energy storage equipment, the current profitability of ground power station business in China is weak, and the company plans to enter the market when the timing is right.

However, Sunac Power has been blunt in stating that the gross profit margin of domestic energy storage projects is relatively low. The company will maintain a basic installed capacity of energy storage in China and focus on overseas markets. The company's goal is to achieve a global energy storage market share of over 20%. In the first half of this year, Sunshine Power's inverters shipped 12GW domestically and approximately 19GW overseas.

It is worth mentioning that inverter manufacturers are trying to provide integrated solutions and package products for sale. Sunshine Power has launched two household energy storage lithium batteries that can be used in conjunction with bidirectional energy storage inverters to form a "photovoltaic+energy storage" system, achieving spontaneous self use of household electricity. In addition to supplying energy storage inverters, Jinlang Technology also offers integrated machine casings for sales in the European market. Customers can choose different brands of energy storage batteries to assemble according to their needs.

According to a research report by global consulting firm IHS Markit, the scale of grid connected energy storage inverters will increase to 7GW by 2022. The global energy storage inverter market is expected to grow rapidly at 63GW from 2018 to 2022.

Under the trend of new energy, will the helmsmen of Chinese inverter manufacturers who collectively sail out to sea be replaced? Worth looking forward to.

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