Deye Shares' demand outlook remains resilient; JPMorgan maintains Overweight

Overview

This report is based on JPMorgan's online exchange with Deye Shares' board secretary. The core conclusion is that the company's demand outlook remains resilient. Strong 1H26 performance was mainly driven by a recovery in demand for residential and commercial & industrial energy storage, supported by power supply disruptions, rising electricity demand in emerging markets, and increasing penetration of solar+storage.

Core views

JPMorgan maintains its Overweight rating on Deye Shares, believing the company is an early mover and cost leader in distributed energy storage systems in emerging markets. The company's 1H26 revenue has already reached about half of its full-year Rmb20bn target, and management's past guidance has tended to be conservative, so there is a possibility of an upward revision to the full-year revenue target at the 2Q26 earnings meeting. Emerging markets remain the main growth driver, especially Eastern Europe, Southeast Asia, the Middle East, India, Pakistan, and Africa.

Analysis framework

The report combines management commentary, 1H26 earnings guidance, regional revenue mix, cost and margin pressure, channel inventory, Hong Kong IPO progress, and a relative valuation framework to assess the company's earnings momentum and the reasonableness of its target price.

Methodology notes

• FundamentalsInterpretation of management communication and earnings guidance

  Assess demand, revenue targets, and margin trends through discussion with the board secretary and the 1H26 guidance.

  The report mainly cites management's comments on energy storage demand, regional growth, inventory, and cost pressure to form a view on short- to medium-term operating resilience.

• Valuation methodsP/E valuation method

  The Jun-27 target price of Rmb154 is based on 25x P/E using the average of FY27E/28E EPS.

  The target multiple is supported by high growth, first-mover advantages in emerging markets, and strong earnings momentum, but is slightly below the historical average to reflect that average earnings growth of about 50% in 2026E/27E is lower than the 55% earnings CAGR in 2021-25.

• Regional demand analysisRevenue mix and emerging-market penetration analysis

  Assess growth resilience and policy risk through exposure to Europe, Asia, Africa, Australia, and the United States.

  Europe and Asia each contribute about 40% of revenue, while Africa contributes 12-13%; Australia may slow due to policy changes, and the United States faces geopolitical risk with revenue exposure of only 2-3%.

Asset mapping & comparison

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

• 605117.SS

  Covered stock in the report; JPMorgan maintains an Overweight rating.

  Strengths

  First-mover advantage in distributed energy storage in emerging markets, cost leadership, vertical integration, diversified regional revenue, resilient supply chain, and healthy channel inventory.

  Weaknesses

  Rising prices for battery cells and power electronics are putting pressure on margins, and policy changes in Australia may drag on 2H growth.

  Comparison

  The target multiple is slightly below the historical average, but is supported by high growth, earnings momentum, and emerging-market advantages; average earnings growth of about 50% in 2026E/27E is slightly below the 55% earnings CAGR in 2021-25.

  Risks

  Weakening demand for distributed energy storage, a rapid decline in fossil fuel prices, slower growth in emerging markets, rising upstream costs, intensified competition, and trade or policy restrictions.

Key data

• 1H26 guided net profitabout Rmb2.7bn, up more than 75% year-over-yearGrowth came from a recovery in demand for residential and commercial & industrial energy storage.
• Progress toward full-year revenue target1H26 revenue has reached about 50% of the full-year Rmb20bn targetThe report believes management may raise the full-year revenue target at the 2Q26 earnings meeting.
• Europe revenue shareabout 40%Growth in Eastern Europe was particularly strong, including Romania, Bulgaria, Poland and Ukraine.
• Asia revenue shareabout 40%Growth was strong in Southeast Asia, the Middle East, India and Pakistan.
• Africa revenue share12-13%Solar and energy storage penetration remains low, and management remains positive on future demand.
• U.S. revenue exposure2-3%Geopolitical tensions may affect the outlook for the U.S. market, but the company's exposure is low.
• Target marginabout 30%Management hopes to maintain a stable margin amid rising costs for battery cells and power electronics.
• Current priceRmb79.40As of July 20, 2026.
• Target priceRmb154.00Jun-27 target price, based on 25x P/E.
• Malaysia plant capexabout Rmb1bnUsed to mitigate future policy risk.

Impact & implications

If demand for distributed energy storage in emerging markets continues to expand, Deye Shares is expected to continue benefiting from its first-mover advantage, cost leadership, and channel capabilities. If the Hong Kong IPO proceeds smoothly, it will provide funding support for capacity expansion in China and Malaysia, R&D, and brand/channel development, and may strengthen the company's ability to cope with policy risks.

Risks

• If demand for distributed energy storage weakens, especially due to a rapid decline in fossil fuel prices or slower growth in emerging markets, the rating and target price will come under pressure.
• If lithium and other upstream costs rise faster than the company's ability to reprice, margins may be compressed.
• Intensifying competition may force the company to cut prices.
• Trade or policy restrictions, such as subsidy exclusions for China-made inverters, may limit the company's access to key end markets.
• Policy changes in Australia may lead to slower 2H growth.
• The U.S. market may be affected by geopolitical tensions.

What to watch

• Whether the 2Q26 earnings meeting raises the full-year Rmb20bn revenue target.
• The sustainability of residential and commercial & industrial energy storage demand in Eastern Europe, Southeast Asia, the Middle East, India, Pakistan and Africa.
• Changes in battery cell and power electronics prices, and whether new products can ease cost pressure in 2H.
• Whether channel inventory and shipment trends after July remain healthy.
• Progress of the CSRC filing approval for the Hong Kong IPO and the issuance timeline.
• Execution of capacity expansion in China and Malaysia, R&D investment, and brand/channel development.