Citigroup believes news that the US may restrict foreign inverters is likely to be only a short-term disruption for Sungrow Power Supply.

Overview

This report focuses on the potential impact of a possible US ban on imported foreign inverters on Sungrow Power Supply. Citigroup believes the policy news is more likely to be a short-term disruption than a major fundamental risk: the company says its products exported to the US do not have remote communications capabilities, and previous US Department of Energy testing found no clear evidence of malicious wireless capabilities. Meanwhile, large US projects are highly dependent on non-US inverter supplies, and directly banning Chinese inverters would create a supply shortfall. The report maintains its Buy rating on Sungrow Power Supply and its Rmb185.0 target price.

Core views

The core view is that the earnings impact of a potential US inverter ban on Sungrow Power Supply may be lower than the market fears. First, the policy is still in the drafting stage and may not be implemented or may include a very long grace period. Second, the company's inverters exported to the US are described as lacking remote communications capabilities and performing only inversion functions. Third, although Sungrow Power Supply has exposure to US inverter gross profit, it is not dominant: the exposure was estimated at 11.4%-15.2% of total gross profit in 2025 and is expected to decline in 2026E. Fourth, faster growth in energy storage systems should help reduce the volatility impact of relying on a single inverter business.

Analysis framework

The report combines an event-driven approach with a fundamental business breakdown: it first reviews the US policy risk disclosed by Reuters, then assesses the actual impact on earnings and valuation based on company feedback, Citigroup's US renewable energy team's view of US inverter supply and demand, historical US Department of Energy verification information, and Sungrow Power Supply's revenue and gross profit structure by business segment.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  The Rmb185.0 target price is based on DCF valuation. The model incorporates earnings forecasts through 2035E, a 4% perpetual growth rate, and a 10.2% WACC, corresponding to 20.2x 2027E PE and 5.3x PB.

• Scenario AnalysisBull/Bear

  Multi-scenario risk-reward assessment

  The report assesses the actual probability and impact of the downside scenario based on potential policy implementation, the grace period, the US supply shortfall, and business gross profit exposure.

• Event CatalystCatalyst Watch

  Short-term share price catalyst monitoring

  Citigroup assigns Catalyst Watch: Upside, indicating relatively high analyst confidence that short-term catalysts could drive share price appreciation; the current expiry date is 2026-07-26.

Asset mapping & comparison

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

• 300274.SZ

  Covered security

  Strengths

  Buy rating and target price above the current price; rapid growth in energy storage system revenue and gross profit; US ban risk may be lower than the market fears.

  Weaknesses

  The inverter business still contributes a relatively high level of gross profit, while the US market faces policy uncertainty.

  Comparison

  Energy storage system revenue and gross profit growth in 2025 were significantly higher than those of PV inverters, and the business growth center is shifting toward energy storage.

  Risks

  Escalation of US trade and security reviews, restrictions on overseas exports, and solar installation or energy storage demand falling short of expectations.

• US utility-scale solar and energy storage projects

  Market transmitting demand and policy risks

  Strengths

  US projects are highly dependent on non-US inverter supplies, and a direct ban could cause supply shortages.

  Weaknesses

  Policy making may be influenced by national security and supply chain localization considerations.

  Comparison

  The report says approximately 90% of inverters for US utility-scale projects come from non-US companies, particularly including Chinese imports.

  Risks

  If the ban is implemented with a short grace period, project delivery, equipment procurement, and export revenue from Chinese suppliers may come under pressure.

Key data

• Target priceRmb185.0Based on DCF valuation.
• Current priceRmb159.020As of 2026-06-30 15:00.
• Expected total return17.5%Includes a 16.3% expected share price return and a 1.1% expected dividend yield.
• 2025 inverter gross profitRmb10,792mUp 19.9% year on year, accounting for 38% of total company gross profit.
• 2025 US inverter gross profit exposure11.4%-15.2%Estimated based on 30%-40% of inverter gross profit coming from the US.
• 2025 energy storage system revenueRmb37,287mUp 49.4% year on year.
• 2025 energy storage system gross profitRmb13,606mUp 48.6% year on year, with a gross margin of 36.5%.
• 2026E PV inverter shipments146GWMentioned in the report summary as 2026E PV inverter shipment.
• 2026E energy storage shipment growth>50% yoyThe report says this is significantly higher than the approximately +2% yoy growth in inverter shipments over the same period.

Impact & implications

For investment implications, the report views US policy risk as a disruption that should be monitored but not over-priced. If the ban is not implemented or has a long grace period, market concerns about Sungrow Power Supply's US inverter exposure may ease. If policy tightening exceeds expectations, exports, overseas trade friction, and supply chains for US projects will become the main risks. Strong growth and greater gross profit scale in the energy storage business should help diversify the policy impact on the inverter business.

Risks

• Solar installations growing more slowly than expected, affecting PV inverter and EPC business growth.
• Chinese and overseas demand for energy storage systems falling below expectations.
• Escalating overseas trade tensions, weakening Sungrow Power Supply's product exports.
• If US regulatory policies targeting foreign or Chinese inverters are implemented more aggressively than expected, US market revenue and gross profit could be compressed.
• Foreign exchange, overseas securities liquidity, and regulatory risks related to non-US stocks may affect investment returns.

What to watch

• Whether a draft US FCC-related inverter import ban is issued and its specific scope of application.
• If the policy is introduced, whether it includes exemptions for existing projects, new model definitions, a grace period, and certification requirements.
• Changes in Sungrow Power Supply's US inverter orders, shipments, and proportion of gross profit.
• Further disclosures from the US Department of Energy or other regulators regarding inverter communications capabilities, security verification, and compliance standards.
• Whether energy storage system shipments maintain year-on-year growth of more than 50% and whether gross margins remain stable.
• The share price reaction to policy news and company feedback before the Catalyst Watch expiry.