China Securities Co., Ltd.: Energy storage on the user side overseas is thriving, the outcome of the competition depends on industrial and commercial energy storage.

China Securities Co., Ltd. released a research report stating that the current market focuses mainly on the number of shipments as the core indicator to track the prosperity of the household storage and commercial storage industries. However, this method easily overlooks the capacity growth beyond expectations due to the increase in duration of use and single unit electricity load when configuring, thus underestimating the actual shipment volume, coupled with the rigidity of channel costs, individual stock performance elasticity is easily underestimated. In the next three years, the demand ceiling and slope of commercial storage will be much higher than household storage, making it the second growth engine and competitive advantage for household storage companies to maintain high performance growth. The main points of China Securities Co., Ltd. are as follows: The increase in single unit capacity for household storage and the increase in configuration duration for commercial storage drive non-linear growth in capacity demand and performance. By 2021, the mainstream module single package capacity will be increased from below 5kWh to 5-12kWh, using a modular, stackable design to provide flexible selection options, expanding system capacity to 40-100kWh+, and multiple units can be combined to enter medium and small commercial projects. Large commercial storage mainly uses a 261kWh integrated cabinet, with energy storage duration increasing to 2-4 hours, featuring a standard 314Ah large cell and actively developing 5 series large cell solutions. Therefore, if only tracking the number of shipments, the actual demand growth is often underestimated. Additionally, due to the one-time investment and long-term reusability of energy storage channel construction, the marginal channel cost of adding new categories is very low, and the performance elasticity from revenue scale increase is often underestimated. Currently, household storage has a larger scale and stable growth rate, while the future space and slope for commercial storage are more favorable. According to our calculations: 1) the cumulative installed capacity of commercial storage in the long term (4592GWh) exceeds household storage (2842GWh), which essentially means that global commercial electricity consumption is far greater than residential consumption; 2) Global penetration rate: household storage (3%) > commercial storage (1%); At the same time, we expect additional demand for overseas household storage and commercial storage to be around 45/58, 16/26GWh in 26/27, with year-on-year growth of 56%/28%, 82%/63%, and from 2029 onwards, the demand for commercial storage in multiple markets will begin to exceed household storage. Recent markets have been concerned about the sustainability of demand due to the drop in oil prices, but we believe that the underlying macro variables driving the overseas small storage market are still on a positive trajectory, and excessive concerns may be refuted by fundamental trends in the next half year: 1) Policy-driven: Many countries create and stimulate demand through mandatory energy storage requirements (Thailand 15%/Philippines 20%), net metering reductions (Netherlands/Italy), subsidies (Australia/UK/Eastern Europe), which do not disappear due to the drop in oil prices; 2) Electricity demand: Weak power infrastructure in Asia, Africa, and Latin America, and frequent power outages are not alleviated by the drop in oil prices. 3) Economics: The drop in oil prices will indeed narrow the gap in returns between solar storage and diesel, but solar storage solutions are still more economical. Commercial storage has a higher moat, and whether it can enter the market in large volumes will be the key to the sustained high growth performance of household storage companies. The demand for commercial storage has a slower outbreak compared to household storage, we believe this is because the transmission speed of commercial electricity prices is slow, decision-making cycles are long, and there are high customization requirements, which depend on a longer market education process and product standardization cycle, leading to higher barriers to entry. Household storage companies can leverage their existing market awareness and brand foundation to establish direct sales teams for self-built projects, first targeting off-grid/micro-grid medium and small commercial businesses, accumulating operation and grid integration certification technology and experience, and gradually entering large-scale grid-side projects. Since the scale of individual commercial storage projects is tens of times larger than household projects, and the trend towards self-matching battery packs and integrated units is clear, once volume production is achieved, the performance elasticity of household storage companies will greatly improve.