Citi reiterates Buy rating on Deye: EU energy storage commitment could amplify commercial and industrial energy storage demand benefits

Overview

This report focuses on the investment opportunity in Ningbo Deye Technology (605117.SS) as a beneficiary of the EU’s commitment to energy storage deployment. On June 26, 2026, the European Commission reached the EU’s first trilateral energy storage agreement with member-state ministers, energy storage developers and manufacturers, renewable energy developers, energy-consuming industries, and financial institutions. The agreement aims to promote approximately 45GW of energy storage capacity additions in 2026-2028 and significantly increase commercial and industrial energy storage penetration. Citi believes Deye, with relatively high revenue exposure to the European market and commercial and industrial energy storage products, will benefit from this demand expansion.

Core views

The core view is that accelerated energy storage deployment driven by the EU’s policy commitment will directly improve commercial and industrial battery storage demand, while Deye’s energy storage inverter and battery pack businesses already have substantial exposure to Europe. Europe accounted for approximately 42% of the company’s 1Q26 revenue, and the share of commercial and industrial energy storage inverter sales increased significantly. Citi expects energy storage inverter shipments to continue growing rapidly in 2Q26E while margins remain high. From a valuation perspective, 22.7x 2026E PE is considered not expensive relative to 69.8% 2026E EPS growth.

Analysis framework

The report combines policy event analysis, breakdowns of the company’s revenue and product mix, earnings forecasts, and DCF valuation. It first assesses the incremental impact of the EU energy storage agreement on European commercial and industrial energy storage demand, then maps this to Deye’s European revenue, commercial and industrial energy storage inverter, and battery pack exposure, and finally evaluates the risk-reward profile through 2026E-2028E earnings forecasts and the DCF-derived target price.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  The target price of Rmb142.857/share is based on a DCF model, with cash flows forecast through 2035E, a terminal growth rate of 3.0%, and a WACC of 8.4%, including a risk-free rate of 1.6%, a market risk premium of 8.9%, and an equity beta of 0.9x.

• ratingCiti Research Investment Rating

  Expected total return rating framework

  Citi’s Buy rating is based on expected total return over the next 12 months, and the target price is also measured over a 12-month horizon. The report estimates Deye’s expected share price return at 48.1% and expected total return at 50.3%.

Asset mapping & comparison

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

• Ningbo Deye Technology (605117.SS)

  Direct beneficiary

  Strengths

  High proportion of revenue from Europe, rising share of commercial and industrial energy storage inverters, European exposure in both battery packs and energy storage inverters, and high 2026E EPS growth.

  Weaknesses

  Earnings are sensitive to overseas energy storage demand, inverter price competition, and trade policies.

  Comparison

  The report believes that 22.7x 2026E PE is not expensive relative to 69.8% 2026E EPS growth.

  Risks

  Lower-than-expected residential and commercial and industrial energy storage demand in emerging markets, intensified price competition among inverter peers, and higher trade tariffs imposed by overseas markets on Chinese inverter products.

Key data

• EU energy storage additions target for 2026-2028Approximately 45GWFrom the EU’s first trilateral energy storage agreement; the target represents at least a 20% increase over approximately 12GW of annual installations in 2025.
• Estimated European energy storage demand in 2030200GWThe European Commission estimates that this storage capacity is required to meet energy system demand, compared with approximately 55GW installed at the beginning of 2026.
• Commercial and industrial battery installation targetIncrease from 9GWh in 2026 to 24GWh in 2028This implies average annual installations of approximately 5GWh in 2027-2028, about twice the 2.3GWh in 2025.
• Deye’s European revenue share in 1Q26Approximately 42%More than 40% of inverter revenue and more than 50% of battery pack sales came from Europe.
• Commercial and industrial energy storage inverter sales share28.0% in 1Q26 versus 19.4% in 2024The share of Deye’s total energy storage inverter sales increased by 8.6 percentage points.
• 2Q26E energy storage inverter shipment forecast379,000-406,000 unitsCiti assumes quarter-over-quarter growth of 40%-50% and year-over-year growth of 106%-121%.
• 2026E net profitRmb5,416MCorresponding diluted EPS is Rmb4.257, EPS growth is 69.8%, and P/E is 22.7x.
• 2027E net profitRmb6,792MCorresponding diluted EPS is Rmb5.339, EPS growth is 25.4%, and P/E is 18.1x.
• Target priceRmb142.857/shareCorresponding 2027E P/E is 26.8x and P/B is 10.0x.

Impact & implications

The investment implications of the report are positive: stronger EU energy storage policy reinforces the medium-term certainty of European commercial and industrial energy storage demand, while Deye already has substantial exposure to European revenue and commercial and industrial energy storage products. The company may benefit from shipment growth, product mix upgrades, and sustained high margins. If 2Q26E results and the July production schedule continue to validate strong demand, the market may further raise its confidence in earnings growth for 2026 and beyond.

Risks

• Lower-than-expected residential and commercial and industrial energy storage demand in emerging markets could weaken growth in energy storage inverter and battery pack shipments.
• More intense-than-expected price competition among inverter peers could compress energy storage inverter gross margins.
• Higher-than-expected trade tariffs on Chinese inverter products in overseas markets could affect sales in Europe and other overseas markets.
• If implementation of the EU energy storage agreement falls short of its targets, the release of commercial and industrial energy storage demand could be delayed.

What to watch

• Actual progress toward fulfilling the EU trilateral energy storage agreement’s installation targets in 2026-2028.
• Whether European commercial and industrial battery storage installations increase from 9GWh in 2026 to 24GWh in 2028 as targeted.
• Whether Deye’s 2Q26E energy storage inverter shipments reach the range of 379,000-406,000 units.
• Whether Deye’s commercial and industrial energy storage inverter sales share and European revenue share continue to increase.
• Whether energy storage inverter gross margins can remain high and whether price competition among peers intensifies.
• Changes in overseas tariffs and trade policies targeting Chinese inverter products.