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On Monday, Bernstein SocGen Group initiated coverage on Sungrow Power Supply Company (300274:CH). The firm assigned a Market Perform rating and set a price target of RMB65.00, citing a balance between the company’s market leadership and an expected moderation in growth.
In their initiation note, Bernstein SocGen Group analysts provided their detailed reasoning. "We initiate on Sungrow, the world-leading solar inverter manufacturer and energy storage systems (ESS) integrator, with a Market-Perform rating. Despite our cautious view on nearterm headwinds, Sungrow stands out as the best pure-play solar and storage company globally, currently trading at trough multiples. Sungrow is well-positioned to benefit from the electrification megatrend. The company’s diversified revenue mix comprising solar PV inverters (35%), ESS (32%), and new energy development (27%), are directly aligned with key growth drivers in the power sector. Sungrow has delivered robust revenue growth of 48% CAGR from 2021-24 and currently leads the solar inverter market with a 24% M/S globally. Additionally, Sungrow is the secondlargest ESS integrator worldwide, trailing only Tesla (NASDAQ:TSLA). The company’s strong R&D, superior quality, and global reach underpin its industry-leading GPM of 30% and ROACE of 20% in the last five years. While Sungrow retains key strengths, earnings growth is set to moderate to 5% amid rising competition."
The firm’s analysis highlights Sungrow’s position as the leading global solar inverter provider with a 24% market share and its place as the second-largest energy storage systems integrator. The report also points to rising competition as a factor expected to slow earnings growth to 5%, despite the company’s strong historical revenue growth, margins, and returns on capital.
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