Ac t i o n | 02 Nov 2025 22:09:41 ET │ 17 pages Jinko Solar (688223.SS) Upgrade to Buy on Earnings Improvement and Upside from ESS CITI'S TAKE We upgrade Jinko from Sell to Buy after seeing its reduced losses with improved cash flow in 3Q25, plus positive outlook delivered at the results call on 31 Oct, including: (i) Jinko expects further earnings improvement from module sales in 2026E on anti- involution measures and rising sales mix of high-efficiency products at premium prices; and (ii) margin rise from ...

Summary of Global Energy Storage Conference Call Industry Overview - The conference call focused on the **Energy Storage System (ESS)** industry, particularly in **China**. - The demand for ESS is experiencing significant growth, driven by various factors including declining battery prices and supportive government policies [1][13][9]. Key Points and Arguments 1. **Battery Price Decline**: - China's ESS battery prices have decreased by **50%** since 2023, reaching **RMB0.54/Wh (USD76/kWh)** year-to-date. Recent prices have further dropped to **RMB0.47/Wh (USD66/kWh)**, or **RMB1.00 (USD140/kWh)** including EPC costs [1][14]. - This reduction in battery prices is a primary driver for the growth of ESS [13]. 2. **Levelized Cost of Electricity (LCOE)**: - The LCOE for solar and storage (4-hour) has fallen by **25%** to **$68/MWh** since 2023. A modeled 1GW/4GWh solar plus storage project in Xinjiang shows an estimated LCOE of **$68/MWh** at an IRR of **8%** [2][60]. - With local government capacity compensation schemes, the LCOE can be reduced to **$60/MWh** [3][61]. 3. **Competitive Economics**: - Solar plus storage projects are economically attractive, with costs around **$43/MWh** for a 2-hour storage system and **$57/MWh** for a 4-hour system, compared to coal-fired power generation prices ranging from **USD35-65/MWh** [4][65]. - The cost advantage of solar plus storage highlights significant growth potential in the sector [4]. 4. **Forecast for ESS Demand**: - Global ESS demand is projected to increase by **93%** to **581GWh** in 2025 and reach **1588GWh** by 2030, representing a **23% CAGR** [6]. - The integration of large-scale solar and wind power systems will necessitate more storage to maintain grid stability [6]. 5. **Government Policies and Incentives**: - Local governments are enhancing returns on ESS investments through capacity compensation schemes, with nearly **20 provinces** expected to adopt such policies by the end of the year [3][20]. - Capacity compensation rates vary by region, with Inner Mongolia offering **RMB0.35/kWh** for projects commissioned in 2025 or earlier [20]. 6. **Key Players**: - **CATL** and **Sungrow** are identified as key beneficiaries of the ESS demand boom, with CATL being the top pick in the battery sector [7][9]. 7. **Market Dynamics**: - Despite concerns over policy changes, ESS tenders in China grew by **167%** year-on-year, indicating robust demand [10][12]. - The Inner Mongolia market showed particularly strong demand, completing **18.5GWh** of ESS project procurement [10]. Additional Important Insights - The ESS market is expected to evolve with the increasing penetration of renewables, which will require more storage solutions to manage supply and demand effectively [6][76]. - The growth trajectory of ESS is anticipated to follow that of developed economies, with ongoing installations and tender volumes expected to translate into new installations in the coming years [27]. - The analysis indicates that the ESS share will rise to **23%** of renewable capacity by 2030, up from **1%** four years ago [76]. This summary encapsulates the critical insights and projections regarding the ESS industry, emphasizing the significant growth potential and the factors driving this trend.

Investment Rating - The report assigns a Neutral rating to Sungrow with a price target of Rmb63.00 [3][7]. Core Insights - Management is optimistic about the demand outlook for energy storage systems (ESS) in Europe and the Middle East, while the US market faces uncertainties due to tariff hikes and potential changes to the Inflation Reduction Act (IRA) [2][4]. - Sungrow has resumed shipments of ESS to the US after tariffs dropped to approximately 41%, and management is confident in meeting its full-year shipment targets [2][4]. - Global solar demand is expected to grow by around 10% year-over-year in 2025, although uncertainties remain in the US market [2][4]. - The company anticipates a decline in engineering, procurement, and construction (EPC) revenue in 2025 due to regulatory changes, but limited impairment risks are expected [2][4]. Summary by Sections Demand Outlook - Europe: Management expects over 20 GWh of utility-scale ESS installations in 2025, up from 10 GWh in 2024, with potential growth exceeding 60% year-over-year into 2026 [4]. - US: Demand may decline significantly due to recent tariff hikes and uncertainties surrounding the IRA [4]. - China: Utility-scale ESS installations are expected to trend down in 2025 due to regulatory changes, while commercial and industrial (C&I) ESS installations may increase from 7 GWh in 2024 to 15 GWh in 2025 [4]. - Middle East: Optimism remains regarding ESS demand driven by government initiatives for data center deployment [4]. Financial Performance - Sungrow aims to meet a US ESS shipment target of 8 GWh in 2025, having already completed 4 GWh in the first quarter [4]. - The gross profit margin (GPM) for US ESS is expected to decrease from over 40% to around 30% due to cost pass-downs from tariff hikes [4][5]. - The inverter business is projected to grow by approximately 10% year-over-year, with a stable competitive landscape in the Middle East [6]. Revenue Projections - The report anticipates declining EPC revenue in 2025 due to reduced distributed generation solar demand [6]. - Management expects lower capital expenditures in the EPC segment and plans to expand overseas EPC business [6]. Valuation - The June 2026 price target of Rmb63 corresponds to a 12-month forward target price-to-earnings (P/E) ratio of 10.0x, using sum-of-the-parts (SOTP) valuations for different segments [8][9].