Nomura maintains a Buy rating on Deye Technology on strong 1Q26 guidance and a positive view on storage growth

Overview

This report focuses on Ningbo Deye Technology 605117.SS. Its core conclusion is that although 2025 results came in below Nomura's expectations, the company's 1Q26 net profit guidance is markedly strong, and demand for energy storage inverters and energy storage battery packs, driven by global energy security, subsidies, and price volatility, is likely to become the main growth theme for future revenue and profit.

Core views

Nomura believes Deye Technology's 2025 performance was under short-term pressure mainly from price competition in PV inverters and the contraction of its home-appliance business, but the sharp growth in storage-related sales shows the company's exposure to global storage demand. Even if tensions in the Middle East ease and oil and gas prices fall, distributed PV-plus-storage solutions may still retain priority in an energy-security-driven demand cycle. On the back of stronger demand, higher earnings forecasts, and a sector valuation rerating, the report maintains a Buy rating and materially raises the target price.

Analysis framework

The report starts from the company's annual report and management's 1Q26 earnings guidance, analyzes 2025 revenue, net profit, sales volumes and gross margin performance across business lines, and then combines global residential and commercial storage demand, overseas subsidies, upstream lithium carbonate prices, and industry competition to update 2026-2028F revenue and net profit forecasts, deriving the target price through a P/E relative valuation approach.

Methodology notes

• Valuation methodsP/E relative valuation

  Calculate target price based on 2026F EPS and target P/E

  Nomura applies a 32x target P/E and 2026F EPS of CNY5.58 to derive a target price of CNY178.56; the target multiple is broadly in line with the 2026E average P/E of peers.

• Earnings forecastUpward revision of revenue and net profit forecasts

  Adjust 2026-2028F forecasts based on business demand and price assumptions

  The report raises 2026F/2027F revenue and net profit forecasts and introduces 2028F forecasts. Key assumptions include stronger storage demand, possible price increases for energy storage battery packs due to rising lithium carbonate prices, and a potential price pullback in 2027 due to competition.

• Rating framework12-month relative performance rating

  Buy means expected to outperform over the next 12 months

  In Nomura's rating definition, Buy means the analyst expects the stock to outperform the benchmark over the next 12 months; for A-shares, the benchmark is the CSI 300.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Ningbo Deye Technology 605117.SS

  The covered company; an A-share electrical equipment and renewables company

  Strengths

  Fast sales growth in energy storage inverters and energy storage battery packs, strong 1Q26 net profit guidance, supported by global energy security and subsidy-driven demand.

  Weaknesses

  2025 PV inverter profitability was weighed down by industry pricing pressure, while dehumidifier and heat exchanger revenue declined and home-appliance-related products were actively reduced.

  Comparison

  The target P/E of 32x is broadly in line with the 2026E average P/E of peers; although 2025-2027F earnings CAGR is expected to be above the peer average, the stock is not assigned a significant valuation premium.

  Risks

  Overseas policy volatility, intensifying industry competition, and weaker-than-expected downstream demand.

• Energy storage inverters

  One of Deye Technology's core growth businesses

  Strengths

  2025 sales rose 42.7% y/y, and the report expects 2026-2028F revenue CAGR of 31%.

  Weaknesses

  Demand is affected by overseas policy, subsidies, energy prices, and competition dynamics.

  Comparison

  Compared with traditional PV inverters, energy storage inverters are more directly supported by global energy security demand.

  Risks

  Price competition, barriers to entering overseas markets, and changes in downstream demand.

• Energy storage battery packs

  One of Deye Technology's core growth businesses

  Strengths

  2025 sales rose 67.2% y/y, and the report expects 2026-2028F revenue CAGR of 83%.

  Weaknesses

  Margins and pricing may be affected by upstream lithium carbonate prices and industry competition.

  Comparison

  The report believes 2026F may benefit from price increases driven by higher lithium prices, but 2027F prices may decline due to competition.

  Risks

  Raw material price swings, price cuts caused by competition, and subsidy rollbacks.

Key data

• 2025 revenue/net profitCNY12.22bn/CNY3.17bnUp 9.1%/7.1% y/y, respectively, and below Nomura's expectations.
• 1Q26 net profit guidanceCNY1.10bn-CNY1.20bnUp 55.9%-70.1% y/y, mainly driven by global energy shortages, price volatility, and stronger storage subsidies.
• 2025 energy storage inverter sales772k unitsUp 42.7% y/y.
• 2025 energy storage battery pack sales777k unitsUp 67.2% y/y.
• 2026-2028F energy storage inverter revenue CAGR31%Nomura forecast.
• 2026-2028F energy storage battery pack revenue CAGR83%Nomura forecast.
• 2026F/2027F revenue forecastCNY20,221mn/CNY26,802mnRaised by 17.4%/25.5%, respectively.
• 2026F/2027F net profit forecastCNY5.07bn/CNY6.39bnRaised by 21.3%/20.0%, respectively.
• 2028F revenue/net profit forecastCNY36,938mn/CNY8,409mnNew forecast introduced in the report.
• Target P/E32xRaised from the previous 22x, broadly in line with the 2026E average P/E of peers.
• 2026F EPSCNY5.58Previously CNY4.60.
• Current valuation26.4x 2026F P/EBased on the share price at the report date.

Impact & implications

If storage demand continues as the report expects, Deye Technology may shift from a phase of profitability pressure in PV inverters to a stage of earnings expansion driven by the storage business. The higher target price and earnings forecasts reflect a sector valuation rerating and improved visibility into the company's growth, but its overseas residential storage expansion is moving into higher-barrier markets such as Japan and the United States, where stronger competition may limit valuation premium.

Risks

• Overseas policy volatility, especially changes in energy storage subsidies and energy policy.
• Intensifying industry competition could compress prices and margins for energy storage inverters and battery packs.
• Downstream demand may be weaker than expected, affecting revenue and earnings delivery.
• The expansion of overseas residential storage into high-barrier markets such as Japan and the United States may face stronger competition.
• If pricing pressure in the PV inverter industry persists, it may continue to drag on profitability.

What to watch

• Whether actual 1Q26 net profit falls within the CNY1.10bn-CNY1.20bn guidance range.
• The sustainability of residential and commercial storage demand in Europe, the Middle East, and Southeast Asia.
• Changes in overseas storage subsidy policies and energy price volatility.
• The impact of lithium carbonate prices on energy storage battery pack pricing and margins.
• The pace of expansion into high-barrier markets such as Japan and the United States, and the intensity of competition.
• Whether gross margin for PV inverters stabilizes.