Has the bad news been fully priced in?

Export growth of solar PV invertor has been decelerating since April and starting entered negative territory from July (Exhibit 8). US competitors SolarEdge and Enphase guided down demand, bringing inventory correction in Europe to surface. The headwind also showed in Sungrow’s C3Q23 as inventory days spiked up. But overall we consider Sungrow to manage its earning well by acquiring solar station operations in China, achieving higher gross margins and managing OPEX well.

 

Two major positives to consider

We expect Huawei to make a great impact across the renewable supply chain as the company leverages its full-digital, full-supply-chain capability. We suspect Huawei may even play a role in energy storage. But in solar PV inverter this impact has already happened. Further, China’s electricity regime is about to undergo reform to allow more granular match of supply and demand and independent pricing. We believe Sungrow can participate to benefit.

 

Solar PV invertor’s strategic position in renewable is still valid

Solar PV inverter connects solar PV panels to the power grid by converting DC current generated from solar to AC current for use. As renewable energy evolving from a peripheral solution to the mainstay, grid connection rises in importance, which gives inverter makers great product expandability.

 

Solar PV invertor has barriers to entry

Entry barriers are mainly three: (1) efficiency, (2) safety and (3) system. Solar PV inverter has brands as Huawei and Sungrow both show. Inverter faces fragmented upstream and partially fragmented downstream.