As Europe's backlog is gradually digested, manufacturers' production capacity and operating expenses are reduced accordingly. It is expected that inverter inventories will return to normal in the second half of 2024. Slightly negative demand resonates at multiple levels and regions, and domestic manufacturers may benefit first.
The Zhitong Finance App learned that GF Securities released a research report stating that with falling electricity prices, rising interest rates, policy changes, and intense bidding, household storage demand tends to be steady, with large storage volumes. Looking at the subregion, the share of countries mainly based on household storage has declined. It is expected that 30.5 GWh of energy storage will be added in 2024, an increase of 53% over the previous year; America's large storage economy is high and profit models are diverse. It is expected that 48.9 GWh of energy storage will be added in 2024, an increase of 30% year on year; the Middle East and Africa have clear planning and subsidy policies. It is expected that 9.6 GWh of energy storage will be added in 2024, an increase of 62% year on year. As Europe's backlog is gradually digested, manufacturers' production capacity and operating costs are reduced accordingly. It is expected that inverter inventories will return to normal in the second half of 2024. Demand resonates slightly at multiple levels and regions, and domestic manufacturers may benefit first.
It is recommended to focus on the target:
(1) Ground power station inverter+large storage faucet: Sunshine Power (300274.SZ), Hewang Electric (603063.SH), Shangneng Electric (300827.SZ), Tongrun Equipment (002150.SZ).
(2) A leading household storage leader with strong cost management capabilities and advantages in Europe, Africa, and Latin America emerging markets: Deye Shares (605117.SH).
(3) European marginal improvement and new market layout: Goodway (688390.SH), Jinlang Technology (300763.SZ).
(4) Balcony photovoltaics opens up room for growth, and H1 European shipments have improved markedly, leading micro-inverters: Hemai Co., Ltd. (688032.SH), Yuneng Technology (688348.SH), etc.
The main views of GF Securities are as follows:
Driven by installed demand and localization of IGBTs drive the development of the industrial chain
Downstream: The installation of new photovoltaic power plants and the replacement of photovoltaic inverters drive the demand for inverters. With the increase in electricity consumption and the liberalization of consumption rates, the transformation of thermal power flexibility, and the construction of energy storage, it is estimated that in 2024, the number of new PV installations will reach 270 GW in China and 520 GW globally. Upstream: Currently, the localization rate of IGBTs is still relatively low. It is expected that in the future, as the degree of autonomy increases, the cost of power devices will decrease.
The inverter's leading advantage is stable, and the competitive pattern is stable in the short to medium term
Domestic suppliers lead the industry in photovoltaic production capacity. In 2022, Huawei's market share was 29%, an increase of 6pct over the previous year. The market share of Sunshine Power was 23%, an increase of 2 pct over the previous year. The central enterprises in the first tier are strong. GF Securities expects a stable competitive pattern in the short to medium term. It is recommended to focus on the subsequent struggle points of inverter manufacturers: (1) They have price advantages, product differentiation, conform to local usage habits, and cooperate closely with distributors to form stable and leading overseas sales channels and brand recognition. (2) Performance growth feeds back innovative research and development, transforming high gross profit into high R&D, improving product lines and introducing new functions and products; (3) Continuously expanding new growth curves and expanding the “second growth curve” of energy storage business.
Build a “moat” for distribution channels and build the competitiveness of brands going overseas
The decline in inverter exports narrowed at the end of 2023. As Europe's backlog is gradually digested and manufacturers' production capacity and operating expenses are reduced accordingly, inverter inventories are expected to return to normal in the second half of 2024. Affected by capital and inventory risks, the integrated characteristics of overseas distribution channels are obvious, and large and medium-sized integrators have significant advantages. Various factors affect the distributors' business conditions, such as downstream demand, inventory management capabilities, and loan interest rates. How to build strong partnerships with local distributors is the key to unleash channel potential and build brand competitiveness.
Risk warning
PV installations and policy implementation have fallen short of expectations; raw material prices fluctuate; exchange rates fluctuate.