The Zhitong Finance App learned that BOC International released a research report stating that inverters are the only devices with highly intelligent processing functions in photovoltaic power generation systems, and their performance has a great impact on power generation. Compared to other aspects of photovoltaic manufacturing, the bank believes that homogenization of inverters is low and can maintain high profit margins. At the same time, with the rapid increase in the share of new energy generation and a sharp drop in energy storage costs, energy storage demand rapidly explodes. Inverters also have a second growth curve for energy storage. Growth is higher, and there are no technical route risks. Therefore, it is a rare and definitive long-term growth track. Despite future competition or intensification, leading companies can still achieve continuous growth in performance. Prefer Sunshine Power (300274.SZ), optimistic about Goodway (688390.SH).

BOC International's views are as follows:

When the second energy storage curve explodes, the growth rate of inverters is higher than other aspects of photovoltaics and the certainty is high: inverters are the only devices with highly intelligent processing functions in photovoltaic power generation systems, and their performance has a great impact on power generation. Compared to other aspects of photovoltaic manufacturing, the bank believes that homogenization of inverters is low and can maintain high profit margins. At the same time, with the rapid increase in the share of new energy generation and a sharp drop in energy storage costs, energy storage demand rapidly explodes. Inverters also have a second growth curve for energy storage. Growth is higher, and there are no technical route risks. Therefore, it is a rare and definitive long-term growth track. Despite future competition or intensification, leading companies can still achieve continuous growth in performance.

The explosion of optical storage has driven the rapid growth in demand for inverters, and the increase in the share of energy storage boosts unit gross profit: Driven by the triple demand for new PV installations, stock project replacement, and energy storage, the bank expects global inverter demand to reach 463/568 GW in 2023/24, with a growth rate of 64%/23%. After that, the growth rate of energy storage inverters reached 121%/56%, partially compensating for the impact of the slowdown in PV growth. The share of demand increased from 7% in 2022 to 10%/10%/12%. The unit price and gross margin of energy storage inverters are much higher than those of grid-connected inverters, and the increase in their share will clearly boost the unit gross profit.

Competitive landscape: Mainland enterprises have obvious advantages and continue to seize global share: Due to obvious cost performance advantages, mainland enterprises continue to seize the share of overseas companies. The global market share will reach 7-80% in 2022, and the bank is expected to continue to rise to 90%. Among the top ten inverter manufacturers in the world, Chinese manufacturers occupy 8 seats, Sunshine Power and Huawei rank in the top 2, and other leading companies occupy household market segments.

High inventories have led to a short-term decline in exports, but the inflection point is already here. Under geopolitical factors, European panic imports far exceed actual installed demand, leading to high inventories (particularly serious for household use). Since April 2023, the monthly inverter export value has declined continuously, down 53% from the peak in March in October, and 35% year-on-year in the second half of the year, but it rebounded 1%/7% month-on-month in November/December, and the inflection point is already present. Actual demand for installed equipment in Europe is still strong. The bank expects to complete inventory removal in the first quarter of 2024, improve sequentially in the first quarter, return to normal in the second quarter, and return to rapid year-on-year growth in the second half of the year.

Competition will intensify under high profit margins, but there is limited room for overall decline: Currently, grid-connected inverters only account for 3-4% of the investment cost of photovoltaic projects, but their performance has a big impact on power generation, so the pressure to reduce prices is relatively small. The bank expects competition for inverters to intensify in the future, and the industry's profit margin may fall from the current high level, but there is limited room for overall decline.

The undervaluation of the sector has room for repair. Sunshine Power is preferred: After 2 consecutive years of falling stock prices and a sharp increase in performance, the sector's price-earnings ratio in 2024 fell to only 15.7 times, 38% of the long-term price-earnings ratio before China announced its dual-carbon target in September 2020. The bank believes that there is room for valuation repair, preferred the leading undervalued solar power supply with a high proportion of high-power products, and is optimistic about Goodway, a leading consumer market.