Sunshine Power's Bright Spots and Hidden Concerns: Double Growth Throughout the Year, Net Profit Halved in the Fourth Quarter

Ask AI · Why did Sungrow’s net profit halve in Q4, and why is the cost transmission of energy storage business lagging?

On the evening of March 31, Sungrow Power Supply Co., Ltd. (300274.SZ) released its 2025 annual report, achieving an operating revenue of 89.18B yuan for the year, up 14.55% year-on-year, and a net profit attributable to the parent of 13.46B yuan, up 21.97% year-on-year, setting new records in both revenue and profit.

Behind the impressive full-year performance, Sungrow’s Q4 results significantly underperformed market expectations, with net profit attributable to the parent dropping 54% year-on-year in the quarter, and gross margin plunging by 13 percentage points to 23% month-on-month.

The company’s performance slowdown was mainly due to declining gross margins in the energy storage business, delayed cost transmission, and other factors, which also triggered sell-offs in the secondary market. On April 1, Sungrow’s stock price closed down over 10%, hitting a new low since October 2025. Amid the overall downward cycle in the photovoltaic industry, overseas energy storage shipment growth and profit recovery will be the key variables influencing Sungrow’s 2026 performance.

Q4 Profitability Faced Significant Pressure

Photovoltaic inverters and energy storage systems are the main contributors to Sungrow’s net profit in 2025. During the reporting period, the company’s photovoltaic industry revenue was 44.55 billion yuan, down 7% year-on-year, accounting for 49.95% of total revenue, down from 61.53%. Looking at products, photovoltaic inverters and other power electronic conversion devices achieved revenue of 31.14B yuan, up 6.9%, with a gross margin of 34.66%, up 3.76 percentage points year-on-year.

Focusing on inverters alone, in 2025, Sungrow’s inverter revenue was 26.6 billion yuan, up 4%, with a gross margin around 37%. The company’s global inverter shipments totaled 143 GW, a decrease from the previous year, mainly due to domestic shipments dropping from 70 GW in 2024 to 57 GW. Sungrow explained that, facing shrinking domestic residential PV markets, it strategically abandoned projects with negative margins.

Regarding energy storage, while overall revenue continued to grow, the growth rates of domestic and overseas shipments diverged significantly. During the period, the company’s energy storage revenue reached 37.29B yuan, up 49.39% year-on-year, with gross margin decreasing slightly by 0.2 percentage points to 36.49%.

Additionally, Sungrow’s new energy investment and development business saw a noticeable contraction, with full-year revenue of 16.56B yuan, down 21.16% year-on-year, and gross margin falling 4.9 percentage points to 14.5%, mainly due to the impact of full market trading of new energy grid-connected electricity and industry deep adjustments.

Contrasting with the steady full-year performance, the company’s Q4 2025 results showed a clear decline. Quarterly revenue was 22.78B yuan, down 18.37% year-on-year, with net profit attributable to the parent at 1.58 billion yuan, dropping 54.02% year-on-year and 51.9% quarter-on-quarter, with overall gross margin falling from around 36% in Q3 to 23%.

Looking at the reasons for the decline, firstly, the change in revenue structure played a role: large projects in the lower-margin new energy investment and development business were delivered mainly in Q4 last year, causing that business’s quarterly revenue share to increase by 10 percentage points, dragging down overall profitability. Secondly, the gross margin of energy storage in Q4 dropped to around 24%, a decline of about 17 percentage points. On one hand, high-margin overseas projects in the UK and other markets recognized revenue in Q3 2024, boosting the base; on the other hand, rising lithium carbonate prices in Q4 increased costs, and the price transmission was not timely in existing projects. Additionally, the proportion of low-margin domestic and South American market revenues increased in Q4, further squeezing profit margins in energy storage.

Furthermore, Sungrow made provisions for impairment of costs related to the Gia Lai project in Vietnam and long-unstarted power stations in Q4 last year. Coupled with increased inventory write-downs due to product iteration, total asset impairment losses for the year reached 1.38 billion yuan, up 600 million yuan from the previous year, amplifying seasonal profit fluctuations.

Overseas Energy Storage Becomes the Core Growth Driver for 2026

On April 1, affected by the underperformance in Q4 last year, Sungrow’s stock price fell 10.82%, closing at 134.45 yuan, hitting a new low since October 2025, with a year-to-date decline of 21.4%.

From the institutional holdings changes in Q4 2025, there were mixed attitudes among insurance funds, mainland stock connect, and public funds. Index funds generally reduced holdings of Sungrow, with E Fund’s ChiNext ETF selling 2.8865 million shares, and Huatai Bairui CSI 300 ETF, E Fund CSI 300 ETF, and Huaxia CSI 300 ETF all net selling.

Meanwhile, northbound funds and long-term institutional investors maintained overall stable holdings during the stock price correction. The Stock Connect bought 11.5045 million shares net in Q4, becoming the second-largest shareholder with 163 million shares, increasing holdings for two consecutive quarters; China Life’s traditional insurance products also slightly increased their holdings.

Market attention is focused on whether some short-term funds, worried about intensified industry “involution” and slowing profit growth, took profits, leading to valuation declines that might create a long-term investment window. For Sungrow, amid the photovoltaic industry entering a down cycle and domestic energy storage “involution,” overseas energy storage growth will be key to the company’s fundamentals.

On March 31, Sungrow held a survey with over a thousand investors, mainly asking about the reasons for the business decline in Q4 last year and the outlook for energy storage shipments.

In the survey, Sungrow explained the reasons for the differences in domestic and overseas energy storage shipments in 2025. The company’s total energy storage shipments reached 43 GWh, up 54% year-on-year, but the overall growth rate lagged behind the global installed capacity growth of 74%.

Specifically, overseas shipments increased from 19 GWh in 2024 to 36 GWh, up 90%, significantly higher than the 65% growth in overseas market installations, while domestic shipments were 7 GWh, down 2 GWh from 2024. Notably, in Q4 last year, energy storage shipments were 14 GWh, with overseas shipments accounting for 12 GWh, over 80%.

Sungrow stated that the decline in domestic energy storage shipments was due to strategic withdrawal, as domestic gross margins are only single digits and are loss-making. However, overseas energy storage demand remains strong, with the market structure shifting from point-based markets in China, the US, the UK, and Australia to a more widespread global landscape.

Regarding the 2026 energy storage shipment targets and plans, Sungrow said it will continue to focus resources on serving high-quality customers. The company expects the global energy storage market to grow by 30%–50% in 2026, aiming for over 60 GWh of energy storage shipments, roughly a 40% increase compared to 2025. Regarding the impact of lithium carbonate price hikes on demand, Sungrow stated: “Rising raw material prices have caused some projects to be on hold; these demands are still there, just delayed.”

(This article is from First Financial)