New stock outlook | Revenue continues to decline, cash flow is in urgent need: Acer's "abandoned light storage" transformation period questions the growth quality and sustainability

Against the grand background of accelerating global energy transition and explosive growth in the energy storage track, smart energy enterprises are ushering in a new round of capital market scrutiny. On May 27th, the Hong Kong Stock Exchange disclosed that the leading global smart energy solutions provider, Esware Technology Co., Ltd. (hereinafter referred to as "Esware"), officially submitted its application for listing on the main board of the Hong Kong Stock Exchange, with China Securities Co., Ltd. International and Industrial Bank International serving as joint sponsors. As a "hidden champion" ranking third in the world in household energy storage system and photovoltaic inverter shipments by 2025, Esware is attempting to deepen its global layout centered around the AI Mode smart energy management system with the help of capital power. However, behind the impressive global rankings, Esware's financial reality of continuous revenue decline, drastic fluctuations in net profit, and sustained pressure on operating cash flow in the past three years have raised concerns in the market about its IPO prospects. Profit Quality Transformation and Cash Flow Concerns behind Strategic Contraction The prospectus shows that although Esware faced objective pressure from declining traditional business revenues between 2023 and 2025, through significant restructuring of its business structure and global expansion, it significantly improved the quality of its profits, reshaping its financial fundamentals for the second half of the new energy industry competition. Firstly, from the revenue perspective, the company is showing a strategic contraction trend. Data shows that Esware's total revenue decreased from RMB 2.89 billion in 2023 to RMB 2.485 billion in 2025, with a compound annual growth rate of negative. This indicator is not simply due to market share loss, but rather reflects the company's proactive adjustment in the face of industry changes. On one hand, the revenue from the traditional core business of photovoltaic inverters decreased by 41.0% in three years, partly due to the short-term demand fluctuations caused by the product iteration gap of core customers in 2024, and also due to the restructuring impact of the domestic electricity price market reform on the traditional photovoltaic business logic. However, this contraction has a clear feature of "creative destruction": the energy storage system business has experienced explosive growth, with revenue soaring from RMB 113 million in 2023 to RMB 861 million in 2025, and its revenue share jumping from 3.9% to 34.6%. This indicates that Esware did not stick to its original track but resolutely tilted its resources towards the high-growth and high-value energy storage field, successfully establishing a dual-core driving mode of "photovoltaics + energy storage." The profit side of the picture is even more dramatic, yet it best reflects the intertwining pains and achievements of transformation. The company recorded a net profit of RMB 27.86 million in 2023, incurred a loss of RMB 65.24 million in 2024 due to overseas expansion investment and exchange rate fluctuations, and quickly turned the loss into profit in 2025, achieving a net profit of RMB 26.32 million. The key driver of this "V-shaped" reversal is the continuing and significant improvement in gross profit margin. During the reporting period, the company's comprehensive gross profit margin increased from 12.3% to 16.5%, a cumulative increase of 4.2 percentage points. The improvement in gross profit margin has a solid structural basis: the proportion of low-margin photovoltaic inverter business has decreased, while the high-margin energy storage system business (with a gross margin as high as 30.3% in 2024) has become the core growth engine. A closer analysis of cost and expense structure reveals Esware's meticulous operations and strategic investments are not contradictory. Against the backdrop of a slight decline in total revenue, sales and distribution expenses have continuously increased from RMB 154 million in 2023 to RMB 189 million in 2025, with their proportion of revenue rising from 5.3% to 7.6%. This reflects the company's firm commitment to market expansion during the transformation period, especially in the upfront investment in global channel construction and self-brand promotion. Of note, research and development expenses, after a brief adjustment in 2024, rebounded to RMB 131 million in 2025, accounting for 5.3% of revenue. However, the impressive transformation in financial data cannot completely conceal the serious challenges Esware faces at the operational level. The most prominent issue is the significant divergence between profit quality and cash flow. In 2025, while the company achieved a net profit of RMB 26.32 million, the net cash flow from operating activities recorded a negative value of RMB 206 million. The inability to effectively convert profit into cash reflects significant pressure on the company's working capital management. This is closely related to the sharp increase in accounts receivable from related parties. This item surged from RMB 472 million in 2023 to RMB 1.104 billion in 2025, exceeding 55% of the total accounts receivable. Furthermore, the company's debt-to-asset ratio increased from 66.3% to 72.5%, indicating increased financial leverage, while the current ratio maintained at around 1.3 times level suggests a need to strengthen its short-term debt repayment ability. This indicates that during rapid expansion and business transformation, the company's financial stability is being tested, and the issue of fund use by related parties and major customers requires close attention. Energy Storage Surge Cannot Conceal Photovoltaic Slowdown The Growth Quality Dilemma in the "New and Old Kinetic Energy Switch" Observing, Esware's core logic is clear and direct - shrinking the photovoltaic inverter business actively at the cost of explosive growth in the energy storage system business. From the perspective of financial data, this transformation has achieved some phase results: energy storage system revenue soared from RMB 1.13 billion in 2023 to RMB 8.61 billion in 2025, showing a growth of over 660% in three years, with its revenue share jumping from 3.9% to 34.6%, while traditional photovoltaic inverter revenue continued to decline from RMB 2.679 billion to RMB 1.583 billion, with its share decreasing from 92.7% to 63.7%. This "switch of new and old kinetic energy" is more prominent at the gross profit margin level - the gross profit margin of photovoltaic inverters dropped to a low of 9.4% in 2024, while the gross profit margin of the energy storage system remained in the high range of 21.9% to 30.3%, driving the company's comprehensive gross profit margin from 12.3% to 16.5%. Looking at the improvement in profitability, Esware seems to have completed its business upgrade. However, when viewed in the context of industry competition, Esware's situation is far from optimistic on the surface. Its business growth logic is essentially a "follower" strategy - in the midst of the global energy storage market's rapid growth at a compound annual rate of 75.9%, any company with accumulated inverter technology has a natural advantage in entering the energy storage PCS field. Photovoltaic inverters and energy storage inverters share the same technology base, which is why Esware was able to quickly expand its product line. However, the problem lies in the fact that this logic is not unique to Esware. Competitors in the same field, such as Sungrow Power Supply and Ningbo Deye Technology Corporation, have already completed the integration of photovoltaics and energy storage, but more alarming is the more aggressive entry into the energy storage field by major photovoltaic chain manufacturers such as LONGi Green Energy Technology, JA Solar Technology, and Trina Solar Co., Ltd. - LONGi acquired Jinko Energy to gain system integration capabilities, JA Solar partnered with Chu Energy, and Tianhe insisted on independent research of cell technology. These companies, with their size and resources, far exceed Esware, and once their energy storage business scales up, Esware's current first-mover advantage is likely to be quickly diluted. Of greater concern is the significant "passive adjustment" in Esware's business transformation. The shipment volume of photovoltaic inverters dropped from 782.7 thousand units in 2023 to 562.9 thousand units in 2025, a cumulative decrease of 28%, which was not solely due to strategic initiatives - the product iteration gap of core customers in 2024 and the impact of the reform of domestic electricity pricing logic on traditional photovoltaic business in 2025 both contributed to this contraction. In other words, the shrinkage of the photovoltaic business is not only due to proactive "subtraction," but also due to external environmental deterioration. The change in shipment volume data further reveals the true depth of Esware's business competitiveness. The shipment volume of energy storage inverters increased from 7.4 thousand units in 2023 to 52.5 thousand units in 2025, while the shipment volume of energy storage batteries surged from 7.2 thousand units to 143.0 thousand units, showing an astonishing increase. However, when compared horizontally, the global energy storage market is experiencing "explosive growth," with top companies experiencing shipment growth rates in the triple digits. In such a "rising tide lifts all boats" market, Esware's growth reflects more industry trends than individual enterprise performance. More importantly, the profit quality of the energy storage business is showing concerns - the gross profit margin of the storage system dropped from 30.3% in 2024 to 25.9% in 2025, a decrease of 4.4 percentage points. This change is consistent with the overall industry trend: with photovoltaic manufacturers collectively entering the energy storage track, price competition for energy storage systems is becoming increasingly fierce, and this "internal competition" has spread from the photovoltaic to the energy storage sector. As more and more competitors enter, the continuous decline in the gross profit margin of energy storage systems is almost an inevitable trend. In terms of expanding into overseas markets, Esware has indeed shown some degree of execution. Overseas revenue accounted for 51.0% in 2025, with Oceanian revenue surging by 4431.5% to RMB 288 million, largely benefiting from the policy dividends of Australia's "Cheap Household Battery Plan." However, policy-driven growth has a high degree of uncertainty and unsustainability - once subsidies are reduced or policies are adjusted, this growth engine will face the risk of abrupt halt. At the same time, the depth of company penetration in core markets such as Europe and North America still appears insufficient, showing a clear gap between the breadth and depth of its global layout. In conclusion, Esware's business growth logic heavily relies on the sustained high prosperity of the energy storage track, but this track is getting crowded at a breathtaking speed. As photovoltaic manufacturers open up a "second growth curve," battery manufacturers extend downstream, and specialized energy storage integrators accelerate technological iteration, these three forces are forming a siege on the energy storage market. Esware lacks the cost advantages brought by in-house cell production capabilities and lacks the brand and channel depth of leading photovoltaic enterprises, and its "inverter technology transfer" moat is not deep enough when industry technology matures. When energy storage system prices continue to decline, and gross profit margin space is gradually compressed, the question of whether Esware has sufficient cost control capabilities and economies of scale to maintain profitability is an unavoidable dilemma.