JPMorgan maintains Deye - A at Overweight, viewing emerging-market energy storage demand as resilient

Overview

This JPMorgan company research report, based on a fireside chat with Deye's board secretary, updates the company's 1H26 earnings guidance, regional demand, margins, channel inventory, and Hong Kong IPO progress. The report maintains its Overweight rating on Deye - A, viewing the company as a distributed energy storage system manufacturer with a first-mover advantage in emerging markets and a beneficiary of rising solar-plus-storage adoption.

Core views

The core view is that Deye's demand outlook remains resilient. Strong 1H26 results were driven by a recovery in residential and commercial and industrial energy storage demand, partly due to energy supply disruptions. Revenue has reached approximately half of the full-year Rmb20bn target, and management may raise its full-year revenue target at the 2Q26 results meeting. Emerging markets are the primary growth source, with strong demand in Eastern Europe, Southeast Asia, the Middle East, India, Pakistan, and Africa. The report also believes channel inventory is healthy and that the company can mitigate cost pressures in 2H through new products.

Analysis framework

The report supports its investment view through management interviews, regional revenue breakdowns, cost and margin pressure analysis, channel inventory assessment, evaluation of capital expenditures and IPO use of proceeds, and a relative valuation framework. The Jun-27 target price of Rmb154.00 is based on 25x P/E using the average FY27E/28E EPS.

Methodology notes

• Valuation methodsP/E multiple valuation

  Derive the Jun-27 target price by applying 25x P/E to the average FY27E/28E EPS.

  The target multiple reflects the company's high growth, first-mover advantage in emerging markets, and earnings momentum. However, it is slightly below the historical average because average 2026E/27E earnings growth of approximately 50% is below the 55% earnings CAGR for 2021-25.

• Fundamental researchManagement interview

  Validate demand, inventory, margins, and IPO plans through a fireside chat with Deye's board secretary.

  The report uses management's comments on regional growth, cost pressures, channel inventory, and the use of proceeds as important bases for its short- to medium-term assessment.

• Industry demand analysisRegional demand breakdown

  Assess energy storage demand resilience across markets including Europe, Asia, Africa, Australia, and the United States.

  Low penetration, energy supply disruptions, and rising electricity demand in emerging markets are the main drivers. Australia may slow due to policy changes, while the United States accounts for only 2-3% of revenue but could be affected by geopolitical factors.

Asset mapping & comparison

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

• Deye - A (605117.SS)

  The report's covered stock; the Overweight rating is maintained.

  Strengths

  First-mover advantage in emerging-market distributed energy storage, cost leadership, diversified regional demand, resilient supply chain, and high 1H26 earnings growth.

  Weaknesses

  Rising battery cell and power electronics costs are pressuring margins; some markets, such as Australia, may be affected by policy changes.

  Comparison

  The 25x P/E target multiple is supported by high growth and earnings momentum but is slightly below the company's historical average because estimated 2026E/27E earnings growth is expected to be slightly below the 2021-25 CAGR.

  Risks

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

• Emerging-market solar-plus-storage demand

  A key external driver of Deye's growth.

  Strengths

  Low penetration, energy supply disruptions, rising electricity demand, and renewable energy policy support are jointly driving higher adoption.

  Weaknesses

  Policies, energy prices, and geopolitical conditions vary significantly across regions.

  Comparison

  Growth is strong in Eastern Europe, Southeast Asia, the Middle East, India, Pakistan, and Africa; Australian growth may slow in 2H; U.S. revenue exposure is limited.

  Risks

  Changes in policy subsidies, trade restrictions, geopolitical conflicts, and fluctuations in end-market demand.

Key data

• 1H26 preliminary profitapproximately Rmb2.7bnUp more than 75% year on year, driven by a recovery in residential and commercial and industrial energy storage demand.
• Full-year revenue targetRmb20bn1H26 revenue has reached approximately 50% of this target, and the report sees a possibility of a target increase at the 2Q26 results meeting.
• Europe revenue shareapproximately 40%Growth is particularly strong in Eastern Europe, including Romania, Bulgaria, Poland, and Ukraine.
• Asia revenue shareapproximately 40%Demand is strong in Southeast Asia, the Middle East, India, and Pakistan.
• Africa revenue share12-13%Management remains positive on the market because of low solar and energy storage penetration.
• U.S. revenue exposure2-3%The share is low, but geopolitical tensions could affect the market outlook.
• Target marginapproximately 30%Rising battery cell and power electronics costs are creating pressure, which the company plans to mitigate through inventory and new products.
• Malaysia factory capital expenditureapproximately Rmb1bnIntended to mitigate future policy risks and support capacity expansion in China and Malaysia.
• Current priceRmb79.40The report specifies a price date of 2026-07-20.
• Target priceRmb154.00Jun-27 target price based on a 25x P/E valuation.

Impact & implications

For investors, the implication is that Deye's near-term earnings and order demand are supported, while emerging-market distributed energy storage growth could continue to provide medium-term upside momentum. If the company raises its full-year revenue target at the 2Q26 results meeting, this could strengthen market confidence in earnings growth. Successful progress on the Hong Kong IPO would support capacity expansion, R&D, and channel development, although investors should also monitor regulatory approval and the issuance timeline.

Risks

• Weakening distributed energy storage demand, particularly if a rapid decline in fossil fuel prices or slower emerging-market growth causes demand to fall short of expectations.
• Lithium and other upstream costs rising faster than Deye's ability to raise prices, resulting in margin compression.
• Intensifying competition creating pricing pressure.
• Trade or policy restrictions, such as exclusion of China-manufactured inverters from subsidies, potentially limiting access to key end markets.
• Australian market growth potentially slowing in 2H due to policy changes.
• The U.S. market potentially being affected by geopolitical tensions.
• The Hong Kong IPO still awaiting regulatory filing approval, creating uncertainty over the issuance timing and realization of proceeds.

What to watch

• Whether the full-year Rmb20bn revenue target is raised at the 2Q26 results meeting.
• Whether new products launched in 2H can mitigate pressure from battery cell and power electronics costs.
• Whether channel inventory remains healthy, particularly the trend in off-season shipments after July.
• Whether energy storage demand remains strong in Eastern Europe, Southeast Asia, the Middle East, India, Pakistan, and Africa.
• The actual impact of Australian policy changes on 2H growth.
• Hong Kong IPO filing approval, issuance timing, and implementation of the use of proceeds.
• Progress in Malaysia capacity construction and its effectiveness in mitigating policy risks.