Analysis of the Counter-Trend Growth in Sungrow (300274) Energy Storage Business Gross Margin

First, it should be noted that based on data from multiple brokerage research reports and company announcements I obtained,

; instead, it has shown a continuous upward trend:

Time Period	Gross Margin of Energy Storage Business	Trend
2022	21.3%	Base Period Level
2023	32.5%	↑ YoY Increase
2024	36.7%	↑ YoY Increase
H1 2025	39.9%	↑ YoY Increase
Q3 2025	39.8%	→ Remain Basically Flat

As can be seen from the data, the gross margin of Sungrow’s energy storage business increased from 21.3% to nearly 40% in three years,

[0][1][2].

Unlike market rumors,

, not Sungrow:

• 2022: 44.84% (Phase High)
• 2024: 26.9%
• H1 2025: 22.41%
• Decline: 4.49 Percentage Points

The price of LFP (lithium iron phosphate) battery cells dropped from RMB 0.85/Wh in 2022 to RMB 0.29/Wh in H1 2025, a decline of over 65%[1]:

Year	Average Battery Cell Price (RMB/Wh)	Gross Margin of Sungrow’s Energy Storage Business
2022	0.85	21.3%
2023	0.67	32.5%
2024	0.38	36.7%
H1 2025	0.29	39.9%

The decline in battery cell costs directly expanded the profit margin of system integrators.

Sungrow has reduced its reliance on a single supplier through a diversified procurement strategy[4]:

• The proportion of battery cell procurement from CATL dropped from 13.6% in 2022 to 5.1% in H1 2025
• Increased procurement from second-tier manufacturers such as Sunwoda, EVE Energy, and CALB
• Obtained more favorable procurement prices through supplier competition

Market Region	Gross Margin Level	Sungrow’s Proportion
U.S. Market	30%+	20-30%
European Market	30%+	20-30%
Emerging Markets such as the Middle East	~25%	20-30%

In the first three quarters of 2025, the proportion of overseas energy storage orders increased from 63% to 83%, with an average selling price up 21% YoY[5].

As a system integrator with a background in power electronics, Sungrow has the following competitive advantages:

• In-House PCS Capability
  : Deep understanding of power grids, and innovatively launched the “Stem Cell Grid Technology”
• System Integration Capability
  : The liquid-cooled energy storage system PowerTitan enables direct green power distribution, reducing PUE by 0.2-0.3
• Brand Premium
  : In July 2024, it beat Tesla, Huawei, and BYD to win a 7.8GWh large-scale energy storage order in the Middle East[6]

Rank	Enterprise	Market Share	Business Characteristics
1	Sungrow	18%	Focus on large-scale energy storage, high overseas proportion
2	Tesla	12%	Balanced focus on residential and large-scale energy storage
3	Fluence	10%	Focus on large-scale energy storage
4	BYD	9%	In-house battery cell development
5	Huawei	8%	Focus on large-scale energy storage

Despite Sungrow’s excellent current gross margin performance, the following potential risks should be noted:

1. Price War Risk
   : Competitors such as CATL and BYD are increasing their investment in the energy storage sector, which may trigger an industry price war
2. Policy Risk
   : The U.S. BBB Act’s restrictions on the proportion of energy storage subsidies may affect overseas demand
3. Inventory Risk
   : The company’s inventory scale reaches RMB 29.7 billion, with an inventory turnover period of 181.3 days; inventory overstock should be watched out for
4. Technological Iteration Risk
   : New technologies such as solid-state batteries may change the existing competitive landscape

The gross margin of Sungrow’s energy storage business

; in fact, its performance is better than the industry average. Its counter-trend growth is mainly due to: falling raw material costs, enhanced supply chain bargaining power, increased high-margin overseas orders, and technological differentiation advantages. It is upstream battery manufacturers (such as CATL) that are facing gross margin pressure, not Sungrow in the system integration segment.

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[0] Soochow Securities - Sungrow (300274) 2025 Q3 Earnings Report Commentary (https://pdf.dfcfw.com/pdf/H3_AP202510301771518510_1.pdf)

[1] 21st Century Business Herald - Launching an Overseas Breakout War: Will Sungrow Achieve a Second Takeoff? (https://www.21jingji.com/article/20251121/herald/9b4fb6af7c269c2b3f421c4e6b2e3796.html)

[2] Haitong International - Sungrow Power Supply (300274 CH) Initiation Coverage Report (https://pdf.dfcfw.com/pdf/H3_AP202601161817882114_1.pdf)

[3] Futu News - CATL vs. BYD: A Battle is Inevitable! (https://news.futunn.com/post/60300801)

[4] Securities Times - Becoming the Richest Person in Anhui! Stock Price Surges 48x, Energy Storage Business Surpasses Tesla (https://www.stcn.com/article/detail/3428092.html)

[5] Xueqiu - Decoding Sungrow’s 2025 Q3 Report: Main Business Growth Catalysts Ignite Net Profit Surge (https://xueqiu.com/9057196330/366483249)

[6] Soochow Securities - Sungrow (300274) Deeply Engaged in PV and Energy Storage with Solid Accumulation (https://pdf.dfcfw.com/pdf/H3_AP202409091639804271_1.pdf)

[7] Wood Mackenzie, CNESA - Market Share Data of Global Energy Storage System Integrators