2025-09-25 05:58Summary of Key Points from the Equity Research Report on China Energy Storage Equities Industry Overview - The report focuses on the Energy Storage System (ESS) industry, particularly in China and the US. - Global ESS installation forecasts for 2026 and 2027 have been raised from 399 GWh to 401 GWh and from 483 GWh to 487 GWh respectively, reflecting stronger-than-expected battery shipments in the first half of 2025, which increased by 109% year-on-year [2][15][16]. Core Insights and Arguments - Policy Impact: New policies from the National Development and Reform Commission (NDRC) in China encourage power users to reduce grid dependence, which is expected to boost ESS demand [2][17]. - US Market Dynamics: The One Big Beautiful Bill Act (OBBBA) has set a ceiling on the ratio of China-made content in ESS projects eligible for Investment Tax Credit (ITC), but projects started in 2025 are exempt from these restrictions, leading to a projected rush of ESS project starts in the US [2][18]. - Market Positioning: - Sungrow is a top 3 ESS integrator globally with a 16% market share in 2024, while Eve Energy is the second-largest ESS battery supplier, also with a 16% market share [3][19]. - The report favors Eve Energy over Sungrow due to anticipated price increases in ESS batteries, which would benefit Eve but negatively impact Sungrow, which relies on battery procurement [3][19]. Financial Estimates and Valuations - Sungrow: Earnings estimates for 2025, 2026, and 2027 have been raised by 30%, 21%, and 16% respectively, with a target price increased to RMB 168.00 from RMB 110.00 [4][6]. - Eve Energy: Earnings estimates for 2025 have been cut by 26% due to stock incentive expenses, but estimates for 2026 and 2027 have been raised by 0.2% and 6.8% respectively, with a target price increased to RMB 100.00 from RMB 70.00 [4][6]. Additional Insights - Battery Shipment Growth: Global ESS battery shipments grew by 109% year-on-year in the first half of 2025, indicating strong demand and restocking in the US due to tariff concerns [16]. - Cost Competitiveness: The levelized cost of electricity (LCOE) for solar plus ESS in China is now below peak-hour tariffs, making it an attractive option for solar operators [17][35]. - Market Trends: The removal of mandatory installation requirements in China is expected to lead to better pricing for high-quality ESS products, as the market shifts towards quality over quantity [35]. Conclusion - The ESS market is poised for significant growth driven by favorable policies, strong demand, and competitive pricing dynamics. Companies like Eve Energy and Sungrow are well-positioned to capitalize on these trends, with updated financial estimates reflecting a positive outlook for their respective businesses [19][32][33].