Profits reach a new high, yet the stock price plunges 10%; in the fourth quarter, financial results hit a Waterloo, dealing a blow to Sungrow Power Supply

How does the decline in gross profit margin of AI energy storage business affect growth?

On the evening of March 31, the leading company in solar and energy storage, Sunshine Power (300274.SZ), released a mixed annual report. Overall, the company achieved operating revenue of 89.18B yuan last year, a year-on-year increase of 14.55%; net profit attributable to shareholders of the listed company was 13.46B yuan, a year-on-year increase of 21.97%, setting its highest annual net profit record in history. However, its stock price plummeted by 10.82% at the market open on April 1.

The issue lies in the fourth quarter of last year, which fell short of market expectations. The Paper reported that after delivering its strongest three-quarter report ever, Sunshine Power’s net profit in the fourth quarter of last year shrank sharply, dropping 54.02% year-on-year and 61.90% quarter-on-quarter. In 2025, the net profits for each quarter were 3.83B yuan, 3.91B yuan, 4.15B yuan, and 1.58 billion yuan. This was its worst single-quarter performance since April 2023.

After reaching a new high of 209.88 yuan in November last year, Sunshine Power, as a dual leader in photovoltaic inverters and energy storage systems, saw its stock price fluctuate downward. In mid-March this year, driven by the green electricity concept, the stock price briefly rebounded, but in the past five trading days, it has fallen consecutively again. Policy uncertainties in overseas markets, domestic market competition, and intensified competition in energy storage system integration have always been lingering concerns. Especially as upstream prices like lithium carbonate continue to rise, market anxiety about the sustainability of its high growth performance has further intensified.

During the investor call on the evening of the 31st, Sunshine Power’s executives explained the significant decline in gross profit margin in the fourth quarter: “The gross profit margin in the fourth quarter dropped from around 36% to about 23%. On one hand, this is due to changes in revenue structure, as the relatively low-margin new energy investment and development business saw increased revenue share—about 10%—due to large project deliveries concentrated in the fourth quarter, which lowered overall gross margin. On the other hand, the gross profit margin of energy storage business in the fourth quarter was about 24%, a decrease of approximately 17% quarter-on-quarter.”

The reasons for the decline in gross profit margin of the energy storage business include: “In the third quarter of last year, some high-margin overseas projects in the UK and other regions were completed, leading to a higher gross margin in Q3. Additionally, lithium carbonate prices increased in the fourth quarter, and some of our existing projects had not yet reflected these price increases. Moreover, the signing prices in Q4 declined compared to Q3, and regional structural changes also played a role, as the proportion of domestic and South American revenues with lower gross margins increased in Q4.”

The annual report shows that in 2025, Sunshine Power’s global shipments of photovoltaic inverters will reach 143 GW, and energy storage systems will total 43 GWh. Revenue shares from photovoltaic and energy storage industries are 49.95% and 41.81%, respectively, showing significant changes from 2024, when these shares were 61.53% and 32.06%.

In terms of gross profit margin, energy storage systems are Sunshine Power’s most profitable business, with a gross margin of 36.49%; power electronic conversion devices like photovoltaic inverters have a gross margin of 34.66%; and new energy investment and development has a gross margin of 14.50%. Regionally, overseas markets have much higher gross margins than mainland China, at 40.36% and 18.75%, respectively.

Sunshine Power disclosed during the call that in Q4 last year, total energy storage shipments were about 14 GWh, with domestic shipments around 2 GWh, and the rest overseas.

In response to investor concerns that low gross margins in the domestic energy storage market might transfer overseas, the company stated that on the supply side, it has signed long-term cooperation agreements with core cell suppliers, leveraging bulk procurement advantages to lock in cell prices for a certain period, making prices more competitive. Technologically, the company continuously reduces costs through innovation and supply chain collaboration. On the client side, negotiations can be tough, but they will strive to pass on costs through pricing.

Regarding the 2026 energy storage shipment target, Sunshine Power expects the global market to grow by 30-50%. Some projects are in a wait-and-see stage due to rising raw material costs, but demand remains, just delayed. The company aims to meet a market size of over 60 GWh based on market growth potential.

AIDC is Sunshine Power’s second growth engine with high expectations. During the call, the company stated that energy storage in AIDC mainly has two application scenarios: power supply + backup power, and load fluctuation smoothing. The former involves traditional solar-storage power supply projects, which have ongoing orders; the latter pertains to power quality management within data centers, requiring millisecond-level response, and is currently under customized R&D with clients, with no orders yet.