Invest in the construction of a production capacity base in Malaysia to achieve production capacity overseas

The company issued the “Notice on Foreign Investment and Establishment of Overseas Subsidiaries” and plans to invest no more than 0.15 billion US dollars to establish an overseas wholly-owned subsidiary, Deye Malaysia, in Malaysia (provisional name, final subject to actual registration) and to invest in the construction of a Malaysian production base to engage in business related to photovoltaic equipment and energy storage batteries.

The establishment of overseas production capacity bases is a necessary choice for the company to cope with the current complex international situation and potential changes in the trade environment. Through the layout of Malaysia's overseas production capacity base, the company can respond more flexibly to the potential adverse effects of changes in overseas trade policies on the company and enhance its resilience to risks. We maintain the company's previous profit forecast for 2024-2026. We expect the company's net profit to be 3.192/4.106/5.392 billion yuan for 2024-2026 and EPS of 4.95/6.36/8.36 yuan, corresponding to the current PE price of 17.4/13.5/10.3 times, maintaining a “buy” rating.

The share of export sales revenue is on the rise. Potential trade frictions prompted the company's production capacity to go overseas. According to the company's 2023 annual report, the company's overseas revenue in 2021-2023 accounted for 30.5%, 58.2% and 58.2% of total revenue, respectively. The past three years showed an overall upward trend. Among them, for the company's inverters and energy storage battery pack products, most of the revenue came from overseas, and trade protection policies may have a certain impact on the company's product exports. Take the US inverter and energy storage market as an example. This market has additional tariffs on inverter products. According to the US 301 Tariff Act, the US government imposes an additional 25% tariff on inverter products exported from China. Furthermore, it is not ruled out that trade disputes may expand further after the Trump administration takes office in 2025. Therefore, as far as the company's business is concerned from the perspective of risk avoidance, going overseas to build production capacity is an inevitable choice for the company.

Overseas markets have been further expanded, and overseas production capacity has helped the company further expand overseas markets since 2024. In addition to traditional markets such as Europe, America, and South Africa, optical storage demand in regions including Pakistan and India has achieved a “0-1” breakthrough. In the future, demand from developing countries including Nigeria and Southeast Asia is expected to continue to be released. With overseas production capacity layout companies can also keenly capture local demand and achieve a continuous expansion of their sales scale.

Risk warning: There is uncertainty about the implementation of overseas production capacity; there are certain operating risks in foreign investment.