Rising U.S. and EU Compliance Costs; Sungrow Power Supply Maintained at Neutral

Overview

Nomura believes Sungrow Power Supply's main challenges in the United States and Europe are rising compliance costs, recertification cycles, and supply-chain localization requirements. The company is mitigating the impact through product adjustments, customer audits, order scheduling, and capacity deployment in Thailand, Poland, and Mexico, but these measures cannot fully eliminate policy and cost risks.

Core views

U.S. FCC-related restrictions are currently more likely to increase certification and compliance burdens than to immediately interrupt market access; however, AIDC PowerTitan 3.0 products requiring renewed radio-frequency certification face greater exposure. In Europe, China-manufactured inverters lose eligibility for certain public financing, while localized Polish capacity can address EIB tender demand, albeit at significantly higher costs than Chinese supply. The company is also seeking overseas battery-cell supply arrangements of approximately 10GWh to reduce reliance on China's supply chain.

Analysis framework

The report analyzes policy rules, industry research, supply-chain and capacity routes, project costs, and valuation multiples, and values the target price using a 2027 forecast P/E approach.

Methodology notes

• Valuation methodsP/E Method

  2027 forecast P/E valuation

  The CNY 120 target price is based on 14x 2027 forecast P/E, 0.2 standard deviations below its historical average of 17x, reflecting expectations of gross-margin declines from 2026 to 2028.

• Policy and Supply-Chain AnalysisCompliance Scenario Analysis

  FCC, tariffs, safe harbor, and EU localization requirements

  Assesses the impact of certification requirements, tariff sharing, overseas assembly, and localized production on market access, delivery timing, and costs.

Asset mapping & comparison

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

• Sungrow Power Supply（300274.SS）

  Covered company equity

  Strengths

  Has capacity and assembly buffer solutions in Thailand, Poland, and Mexico; the Polish project can support European EIB tenders; safe-harbor rules reduce traceability pressure in the near term.

  Weaknesses

  Overseas compliance and localized manufacturing costs are higher than Chinese supply; AIDC products require new radio-frequency certification; the company must bear part of the tariff costs.

  Comparison

  Manufacturing costs in Poland are 12% to 18% higher than in China, but the gap may narrow to 4% to 5% after customers secure low-interest financing.

  Risks

  If final FCC rules adopt a “Buy American” test, hedging benefits from Thailand and Mexico may become ineffective; after 2028, the company will need to rely on non-China battery cells and more substantive local manufacturing in Mexico.

Key data

• RatingNeutral, maintainedNomura maintains its Neutral rating on Sungrow Power Supply.
• Target PriceCNY 120.00Based on 14x 2027 forecast P/E.
• Closing PriceCNY 116.72August 14, 2026.
• Total Export Tariff Burden via Thailand34.8%Customers bear approximately half through an approximately 17% increase in pre-tax quotations, with Sungrow bearing the remainder.
• Expected U.S. Tariff Refund Recovery Rate25%Refund applications were submitted in the second quarter of 2026, and the report expects clarity only in the third quarter of 2026.
• Safe-Harbor Shipment DeadlineThrough the second quarter of 2027The Thailand assembly export route can continue to be used during this period.
• Poland Cost Premium versus China12% to 18%If customers obtain low-interest financing, the cost gap could narrow to 4% to 5%.
• Potential Impact on European Operations10% of forecast 2026 European revenueThe report estimates that the relevant restrictions affect approximately 3% of energy-storage shipments and 4% of inverter shipments.
• Overseas Battery-Cell Supply Arrangementapproximately 10GWhBased on analyst estimates, this may extend further into the residential business.

Impact & implications

In the short term, overseas assembly, safe-harbor rules, and already authorized models can support continuity of U.S. operations; over the medium to long term, this will depend on the final scope of FCC rules, non-China battery-cell supply, and Mexico's local manufacturing capability. European public-financing projects will favor Polish capacity that meets localization requirements, potentially improving order accessibility but compressing margins or requiring customers to absorb part of the cost.

Risks

• The final scope of U.S. FCC rules expands or adopts a stricter “Buy American” test.
• Tight recertification capacity causes delays in product launches or deliveries.
• Adverse changes in the progress or recovery rate of U.S. tariff refunds, or in safe-harbor rules.
• European localization requirements increase, and cost pressure at Polish capacity is difficult to pass on to customers.
• Non-China battery-cell supply arrangements fail to materialize as planned.
• Policy headwinds in the energy-storage business or weaker demand for large utility-scale projects.
• Battery-price volatility and declining gross margins.

What to watch

• FCC rule consultations, commission votes, and final scope of application.
• Review results and cash recovery from U.S. tariff refunds in the third quarter of 2026.
• Order and delivery execution during the safe-harbor shipment period through the second quarter of 2027.
• Capacity ramp-up, localization ratio, and EIB tender wins for the Polish project.
• Implementation progress of overseas battery-cell supply partnerships totaling approximately 10GWh.
• Local manufacturing, materials procurement, and PCS authorization arrangements in Mexico.
• Energy-storage data-center customer demand and changes in the company's gross margin.