ESS毛利率下调风险缓解，新产品带来积极催化剂

Sungrow Power Supply (300274.Sz) ESSMargin CutRiskMitigated;PositiveCatalyst fromNewProduct Wereiterateour Buyrating onSungrowafterhostinganinvestorconference calltoday.Our2026-28Enetprofitsareraised10-11%mainlyforhigherGPmarginofits EsS sales(29%,vs.26%previously)as thecompany guidessatisfactory Ess shipment volumeand marginyear-to-date,mitigatinginvestmentrisk.OurDCFTPis+10%toRmb185/share.Wealsoopena30-daypositivecatalystwatchexpecting itssharepricetoreactpositivelyto itsnewSSTproductlaunchforAIDCinJuly2026.Its16.7x2027EPERlooksinexpensive for being one of theglobal Ess leading suppliers with17%2025-28EEPSCAGR. StrongEsSshipmentvolumegrowthSungrowguidesitsESSshipmentvolumestrongin2026Esofar.IthastargeteditsESSshipmentvolumetoriseatleast50%yoyin2026E.Its1Q26ESSshipmentswerearound35%toEurope,30%totheUS,10%toChina and 25%to otheroverseas countries.The company is alsooptimisticabout itsESSshipmentvolumegrowth in2027Eamidrisingglobalelectricitydemand. SatisfactoryGPmarginofESSsalesin2Q26E—SungrowguidesitsGPmarginofESS sales satisfactorilyyear-to-date.The GPmargin was cut from41% in9M25to24%in4Q25 (dragged by somelow marginlarge-distributed projects in theUS)androseto30% in1Q26 (withmorediversifiedgeographical salesmix).Themargincouldbehighat40-50%foroverseassales (withASPofRmb1/kWh intheUS)butbelow10%forthoseinChina.ItsbatteryunitcostsarewithinRmb0.3-O.4/kWh Positivecatalyst inJuly-Sungrowwill launchitsSSTforAIDCinJuly2026Orders are expected to start receiving after product launch. Samples could bedeliveredfortestingandpreliminaryassessmentslaterthisyearaftertheproductlaunch.The company expects strong product demand for this category aheadendorsedby its over1Oyearsof experience inmaking ESS.Thisproduct linewouldhavesubstantialproductdeliveryin2027E Invertersales:morefromoverseasbutlessfromChinaSungrowassumesitsinverter sales to export to+10%yoyin2026E when its domestic sales could beloweredassumingPRCsolarinstallationstolowerfrom317GWin2025toaround200GW in2026E.Its2025invertershipmentvolumeand revenuewere>70%and>80%respectivelyfromoverseas. China ESS&Solar Sector Pierre Lau, CFAAC+852-2501-2716pierre.lau@citi.com Air Maair.ma@citi.com PositiveTakeawaysfromCompanySungrowguidesmarketEsSdemandstrongyeartodate,inparticularfrom Europeup40-50%yoywithmorehouseholddistributedprojects.ThecompanyhastargeteditsESSshipmentvolumetoriseatleast50%yoyin2026E;weexpectthistobemet.Its1Q26ESSshipmentswerearound35%toEurope,30%totheUS,10%toChinaand25%tootheroverseascountries.Domesticmarketdemandshouldbebetween200-300GWhthisyear.ThereturnsoflocalnewESSaregenerallynothigh,manyofthembelow3%.ThoseinsuchprovincesasGansuandInnerMongoliaareentitledto capacitytariffswhereasthoseinHebeiandcompanyisoptimisticaboutitsESSshipmentvolumegrowthin2027Eamidrisingglobalelectricitydemand. 2026Esofar,thoughnospecifiednumberhasbeenmentioned.Thecompany'sGPmarginofESSwasloweredfrom41%in9M25to24%in4Q25(draggedbysomelow-marginlarge,distributedprojectsintheUS)andreboundedto30%in1Q26(with morediversified geographical sales mix).The overseas margin could be ashighas40-50%whereasthatinChinacouldbebelow10%.ItsbatteryunitcostsarewithinRmb0.3-0.4/kWh. SungrowguidesBESSdemandfromdatacentersintheUStorisefrom1O-20GWh in2026Etomorethandoubleyoyin2027E.Thecompany signedsomecontracts for BESS sales to bothUS renewable projects and data centers in 1Q26.Sungrowhas10-20%marketshareofEssintheUSandexpectsitsmarketsharetobehigherforBESSfordatacenterswithhigherPCSrequirements.Sungrowisconfidentofitsproductqualitywithover1OyearsofexperienceinmakingEsS.TheBESSdemandatUSdatacentersisoftenmorethan3hours.AnditsASPofESSsalestotheUSisaroundRmb1/W. SungrowwilllaunchitsSsTforAiDCinJuly2026.Ordersareexpectedtostartbeingreceivedafterproductlaunch.Samplescouldbedeliveredfortestingandpreliminary assessments after product launch. Product demand could be strongahead.Thecompanyassumestohavesubstantialproductdeliveryin2o27E Sungrowassumesitsinvertersalestoexportto+10%yoyin2026EwhenitsdomesticsalescouldbeloweredassumingPRC solarinstallationstolowerfrom317GWin2025toaround200GWin2026E.Its2025invertershipmentvolumeandrevenuewere>70%and>80%respectivelyfromoverseas. Source: Citi Research, SMM Source:CitiResearch,SMM 2026-26ENetProfitsRaised10-11% marginassumedour2027-28Enetprofitsare2-3%aboveconsensuslikelyforhigher EsS shipment volume assumed. DCFValuation,KeyAssumptionsandRatios FinancialStatements Adding Upside 3O-Day Catalyst Watch on Sungrow Power Supply(300274.SZ) Within30DaysNewSSTProductLaunchinJuly Catalyst: transformer('SsT') product launch for AiDCin July2o26.According to the company,orders areexpected to start beingreceivedafterproductlaunch.Samplescouldbedeliveredfortestingandpreliminaryassessmentslaterthisyearaftertheproduct launch.The company expects strong product demand of this category ahead endorsed by its more than 1o years ofstrong demand from data center buildout the US. Sungrow is also one of the two biggest EsS suppliers in the Us henceshouldhavestr