U.S. and EU compliance requirements raise costs; Nomura maintains Neutral rating on Sungrow

Overview

This report updates the implications for Sungrow of U.S. FCC policy, tariff routes, EU localization rules, the Poland project, and non-China battery-cell procurement. Nomura believes regulatory changes will increase compliance, certification, and supply-chain costs, but the company can mitigate the impact in the near term through product modifications, third-party certification, overseas assembly, and localized capacity.

Core views

U.S. FCC restrictions remain at the rule-finalization stage, and models already authorized can still be imported, sold, and used; the main risk is concentrated in data-center energy-storage products that require RF recertification. U.S. tariffs and localization requirements for EU publicly funded projects will pressure margins and raise manufacturing costs. The company is responding with capacity in Thailand, Poland, and Mexico, as well as overseas battery-cell procurement, but final Buy American rules, the 2028 non-China cell requirement, and changes in European demand remain key uncertainties.

Analysis framework

The report combines industry research, policy-rule interpretation, supply-chain and capacity-route analysis, and a 2027 forecast P/E valuation methodology to determine the target price.

Methodology notes

• Valuation methodsP/E valuation method

  Valuation based on 2027 forecast P/E

  The CNY 120.00 target price corresponds to 14x 2027 forecast P/E, 0.2 standard deviations below the historical average of 17x, reflecting projected gross-margin declines from 2026 to 2028.

• Policy and supply-chain analysisMulti-layer mitigation framework

  Four-layer response across products, customers, orders, and capacity

  Policy impacts are mitigated by disabling non-essential communication modules and retesting, accepting customer security audits, prioritizing delivery of compliant backlog orders, and allocating capacity in Thailand, Poland, and Mexico.

Asset mapping & comparison

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

• Sungrow Power Supply (300274.SS)

  Direct coverage target

  Strengths

  Has overseas capacity in Thailand, Poland, and Mexico, and can mitigate near-term policy impacts through overseas assembly, compliant order scheduling, and supplier certification.

  Weaknesses

  Overseas manufacturing and compliant battery-cell procurement cost more than Chinese supply; recertification and localization requirements may compress gross margins.

  Comparison

  Manufacturing in Poland costs 12% to 18% more than in China, but the cost gap can narrow to 4% to 5% after customers obtain low-interest financing.

  Risks

  Final FCC rules broaden the scope of application, Buy American testing invalidates the Thailand and Mexico routes, EU localization thresholds rise, and project demand weakens.

Key data

• RatingNeutralMaintained unchanged.
• Target priceCNY 120.00Based on 14x 2027 forecast P/E.
• Closing priceCNY 116.72August 14, 2026.
• Aggregate tariff on Thailand exports34.8%Customers bear approximately half through a roughly 17% increase in pre-tax quotations.
• Realized selling priceUSD 0.15-0.155/WhPreviously approximately USD 0.135-0.14/Wh.
• Expected tariff refund recovery rate25%The application was submitted in the second quarter of 2026 and is expected to become clearer only in the third quarter of 2026.
• EU policy impact3% of 2026 forecast energy-storage shipments, 4% of inverter shipments, and 10% of European revenueThe report's estimate of the impact of the Net-Zero Industry Act.
• Poland cost premium relative to China12%-18%Can decline to 4%-5% after customers obtain low-interest financing.
• Overseas battery-cell supply arrangementApproximately 10GWhBased on Nomura estimates.

Impact & implications

For investors, the near-term focus is not an immediate exit from the U.S. market, but rather recertification progress, allocation of compliance costs, tariff refunds, and execution of overseas capacity. Medium-term profitability will depend on non-China battery-cell supply, localized manufacturing in Mexico, and whether Polish capacity can win orders in EU publicly funded projects. As the share price is close to the target price, the report maintains a Neutral view.

Risks

• The energy-storage business faces further policy headwinds.
• Utility-scale project demand weakens.
• Final FCC rules may expand to more products and project types, resulting in recertification delays or higher costs.
• If Buy American standards are ultimately adopted, the avoidance effect of Thailand and Mexico capacity may weaken.
• Non-China battery-cell and local-material requirements from 2028 may raise supply-chain costs and execution difficulty.
• Localization requirements for EU publicly funded projects may restrict the eligibility of China-manufactured products.

What to watch

• FCC rule consultations, commission votes, and final boundaries of applicability.
• U.S. tariff refund review results and cash recovery in the third quarter of 2026.
• Supply-chain arrangements after safe-harbor shipments continue through the second quarter of 2027.
• Progress in Thailand SKD/CKD assembly, Mexican local manufacturing, and licensed PCS capabilities.
• Commencement of Poland project operations, localization ratio, and conversion of EIB-related tenders.
• Implementation of the approximately 10GWh overseas battery-cell supply arrangement and its cost impact.
• Data-center customer energy-storage demand and the company's gross-margin trend.