China Securities Co., Ltd.: Energy storage sector has high investment value, optimistic about the basic fundamentals of household storage sector picking up after the holiday.

China Securities Co., Ltd. released a research report stating that energy storage is one of the fastest growing and most cost-effective sectors in the new energy industry, but the recent market performance has been average. The company believes that the main reason for the difference in expectations is as follows: in terms of quantity, the market believes that the rapid release of projects in the Middle East and other areas cannot be sustained, and the slowing down of global photovoltaic installations this year will also affect the growth of energy storage. However, the company believes that with the increase in duration and the rise of independent energy storage, energy storage has surpassed its growth curve and will still exceed expectations. In terms of profit, the market believes that there is fierce competition in the Middle East and other areas, and there are no excess profits, but the company believes that with projects like PCS in Saudi Arabia, advantageous sectors will still have excess profits. The household energy storage sector has entered the off-season, with demand expected to decline in the fourth quarter, but recent increases in European electricity prices and a recovery in shipments to Asia, Africa, and Latin America indicate a positive outlook for the fundamentals of the household energy storage sector post-holidays. Overall, in terms of industry space and valuation, energy storage is one of the most valuable sectors in the new energy industry, deserving of special attention. Key points from China Securities Co., Ltd. are as follows: Energy storage is one of the most cost-effective sectors for investment: The company ranks various sectors of the new energy industry based on expected growth rates and sector valuations, concluding that the energy storage industry (especially large-scale storage) is one of the most valuable sectors for investment, with an expected growth rate of over 400% from 2024 to 2030, while the valuation in 2025 is only around 16 times. The global explosion of large-scale storage is already confirmed: Regardless of individual project bids being successful or not, several 10GWh projects in the Middle East will continue to be released, with Southeast Asia, Africa, and other regions seeing Gigawatt-level projects where large-scale storage projects did not exist before. Chinese companies have frequently won large projects in European, Latin American, and Australian markets. One should pay attention to how much demand exceeds expectations and not overly focus on whether a particular company wins a bid. PCS is the most beneficial link: The EPC/integrator + third-party independent PCS supplier model is favored by customers because it does not affect their subsidies (primarily in the US) and gives end customers full decision-making power (mainly in the Middle East). Although the value of PCS in terms of quantity is low, its role is crucial, with high barriers, rapid iterations, and a good structure, making it the most favorable link in the energy storage industry chain, with profits per watt reaching 2-3 times or higher than that of the market for photovoltaic inverters. Areas with a good structure are expected to continue to enjoy excess profits: Currently, there are only two domestic suppliers of energy storage PCS in the Middle East market, which is better structured than other links. Profitability in the early stages of market growth is determined by the structure, indicating a likelihood of excess profits. Household energy storage enters the off-season, with Asia, Africa, and Latin America leading the recovery: Inverter export amounts have seen monthly declines since Q4 due to difficulties in winter installations in Europe and low electricity and gas prices. However, recent closures of natural gas transit pipelines in Ukraine have led to increases in European electricity and gas prices. In the Asia, Africa, and Latin America markets, India and Pakistan have already shown signs of recovery, with household energy storage expected to rebound in Q1, which is promising. Risk warning: Changes in national infrastructure policies leading to investment in power sources falling short of expectations; slower progress in localization; rapid alleviation of energy crises and quick declines in energy prices; deepening international trade barriers, among others.