Deye Share has already found its next "South Africa"!

China Energy Storage Network News:

Recently, the announcement from Deye Share shows that in the first three quarters of 2024, the company achieved operating revenue of 8.016 billion yuan, a year-on-year increase of 26.72%; net profit was 2.24 billion yuan, up 42.81% year-on-year; non-recurring net profit was 2.083 billion yuan, up 22.04% year-on-year.

Deye Share Price

Notably, Deye Share's performance in the first three quarters of 2024 set a historical record, surpassing the company's annual performance scale of any previous year.

Quarterly breakdown shows that in the first, second, and third quarters of 2024, Deye Share achieved operating revenues of 1.884 billion yuan, 2.864 billion yuan, and 3.268 billion yuan, respectively, with year-on-year changes of -9.64%, 1.98%, and 128.16%; corresponding net profits were 433 million yuan, 803 million yuan, and 1.004 billion yuan, with year-on-year changes of -26.48%, 18.97%, and 229.52%.

Uniz team in Deye

It can be seen that Deye Share's performance saw significant year-on-year and quarter-on-quarter increases in the second and third quarters. Among them, the net profit achieved in the third quarter set a new record for single-quarter net profit in the company's history, marking the first time that single-quarter net profit exceeded 1 billion yuan.

Uniz Solar Team in Deye

Regarding the outstanding performance, Deye Share stated that it mainly benefited from its early layout in emerging markets such as Asia, Africa, and Latin America over the years, along with continuous investment in the European market, expanding market coverage. At the same time, the sales of energy storage battery packs driven by inverters have grown rapidly, thus significantly boosting the company's revenue, net profit, and earnings per share in this reporting period.

Product Training in Deye

Industry analysts believe that despite a significant year-on-year decline in performance in the South African market, Deye Share was able to achieve such impressive results due to capturing demand in multiple countries including Pakistan, Ukraine, Germany, India, the Philippines, and Myanmar, providing more support for the company's performance growth.

Similar to South Africa, places like Pakistan have experienced a surge in household energy storage installation demand this year due to lagging power grid construction, extreme weather causing power shortages, rising electricity prices, and policy promotion. The shipment volume in the first three quarters of Deye Share was mainly contributed by these regions.

High Margins Are the Foundation of Success

According to available information, Deye Share was established in 2000 and has been deeply involved in the electrical industry for over two decades. In 2015, the company determined three major development directions: heat exchangers, circuit control series, and environmental appliances series. It entered the photovoltaic (PV) inverter sector in 2016 and launched its first-generation energy storage inverter in 2017. Benefiting from the high prosperity of the PV and energy storage industries, the rapid development of the inverter business has driven the company's performance growth. During the period from 2022 to 2023, Deye Share witnessed rapid growth in its performance, mainly due to the expansion of the inverter business and the energy storage battery pack business. Annual report data shows that Deye Share's total revenue in 2023 was 7.48 billion yuan, representing a year-on-year increase of 25.59%; net profit was 1.791 billion yuan, up 18.03% year-on-year.

An industry insider has summarized the "three magic weapons for companies to win in overseas markets": channel supremacy, product superiority, and technology foundation. DeYe's success in the African, Asian, and Latin American markets clearly demonstrates its distinctive strengths in channels, products, and technology. Specifically, in terms of sales, DeYe mainly focuses on OEM, ODM, and proprietary brand sales, adopting a production model that combines "production based on sales" with "stock-based production," along with a sales system that integrates online direct sales and offline distribution. Notably, thanks to the cost-control heritage from small household appliances, DeYe excels in economies of scale, supply chain management, and cost control, making its product prices competitive and continuously expanding market share. Additionally, due to low costs, its inverter products also boast high profitability, with gross margins gradually surpassing those of peers. According to DeYe's 2023 annual report, the company saw a 33.84% decrease in inverter sales volume but a 11.95% increase in revenue in 2023, with gross margin rising by 4.14%, reaching as high as 52.68%. In the first three quarters of 2024, DeYe's energy storage inverter gross margin remained around 51%, highlighting that the higher profitability is largely due to the scale effect and continuous optimization of the cost side, which is the key to DeYe's competitive edge in the overseas market.

"Differentiated competition" is the gateway to success

To this day, many attribute DeYe's success to its forward-looking vision. However, from an industry observer’s perspective, DeYe's decision as a late entrant to venture into the African, Asian, and Latin American markets reflects a pragmatic spirit aimed at breaking out and surviving. Reviewing DeYe's development journey, the key to its success in overseas markets lies in being the first to enter and establish a foothold in the previously overlooked South African market. It has been proven that this strategy of "differentiated competition" has achieved tremendous success.

As is well known, the certification cycle for high-end overseas markets is long, and the costs of building and maintaining channels are high. Companies like Sungrow have been operating in Europe for many years, establishing a strong presence. Since DeYe entered the inverter industry somewhat later, it did not have a significant advantage in the European market. Therefore, DeYe chose a "differentiation" strategy, targeting potential markets such as Pakistan, Brazil, and South Africa. By signing exclusive sales agreements and engaging in private labeling, among other methods, DeYe formed strong ties with major local distributors, ultimately achieving a high market share.

In 2022, DeYe's market share in the energy storage sector in South Africa exceeded 30%, with revenue accounting for about 35% of its total. In 2023, DeYe's overseas revenue reached approximately 4.34 billion yuan, marking a year-over-year growth of 25.6%. While other micro-inverter companies were fiercely competing in Europe, DeYe achieved a market share of over 50% in South Africa through low-price promotions and similarly benefited from the Brazilian market using this strategy.

In 2024, DeYe Co., Ltd. pointed out in its semi-annual report that the company has been deeply engaged in the South African market for many years, accumulating a strong foundation in brand, customer base, and sales channels, placing it at the top of market share. This led to a significant increase in the sales of the company's energy storage inverters in the first half of 2023. However, in the first half of 2024, the extent of power shortages in South Africa lessened, combined with intensified competition and a temporary increase in industry inventory, causing a decline in market demand. As a result, the sales of DeYe's energy storage inverters in the South African market decreased year-over-year.

However, emerging markets represented by Pakistan, India, the Philippines, and Myanmar have seen a surge in demand due to the rigid demand formed by severe power shortages, along with rising electricity prices, policy promotion, and the economic benefits brought by the reduction in the cost of components and batteries. Benefiting from its earlier differentiation strategy focused on these emerging markets, DeYe has performed notably well in these regions, partly compensating for the shortfall in the South African market.

In the European market, to achieve differentiated competition, DeYe chose to initially expand into Nordic countries with less intense competition, such as Romania and Austria. In 2024, the company launched a new product specifically designed for balcony scenarios—the SUN-BK80-SG01 micro-inverter with integrated energy storage capabilities. Leveraging this product as a breakthrough, DeYe focused heavily on the German market in the third quarter.

Always searching for the next "South Africa" is the path to success

Entering 2024, storage companies of all sizes have begun to focus their attention on emerging markets, intensifying industry competition. DeYe once achieved significant success in overseas markets by leveraging its technological and cost advantages and forward-looking market strategies.

However, with the shrinking demand in the South African market, pressure from electricity price adjustments in Pakistan, and intensifying industry competition, the market environment facing DeYe is rapidly changing. According to internal sources at DeYe, the demand for inverters in Pakistan began to surge from December 2023, with the company's shipments increasing from 3,000-4,000 units per month to a peak of 15,000 units per month, sustaining steady growth. Currently, the electricity price in Pakistan is 0.3 euros per KWh, roughly aligning with European prices. However, due to minimal markups by distributors, the return on investment for household storage systems is better than in Europe. In the first half of 2024, revenue from the Pakistani market accounted for about 14% of DeYe's total revenue, with an estimated full-year contribution of 11-12% and a profit share of about 10%.Recently, the Pakistani Minister of Electricity hinted at a possible reduction in electricity prices, though the extent of the reduction remains uncertain. As one of DeYe's most important overseas markets, any adjustment in Pakistan's electricity prices could impact DeYe's performance. However, it is unlikely that the prices will revert to pre-increase levels. Additionally, DeYe has secured a significant order for 20,000 balcony micro-storage units from a government project in Pakistan, further solidifying its position in the market.

In the North American market, DeYe primarily sells through Solar arc. With the completion of inventory clearance in North America, orders began to show an increase starting from October, with approximately 3,000 units sold each month at a price of about 2000 per unit,this price is equivalent to selling 10,000 units of energy storage inverters in Pakistan, where the price is less than $600 per unit. Additionally, DeYe's inverters have also achieved significant success in Southeast Asian markets, including the Philippines, Thailand, and Myanmar.

Currently, DeYe's market share in Myanmar has reached 80%. In terms of residential storage batteries, the third quarter of this year was a peak period for DeYe's shipments. Although the European market has entered the Christmas off-season in the fourth quarter, the installation season for Africa and Southeast Asia is just beginning, which can offset the slight decline in Europe, keeping the company's shipment volumes and order backlog roughly on par with the third quarter.Given that the Brazilian energy storage market is still in its initial stages, the shipment volume of lithium batteries in South America will be a gradual increase. There won't be a significant increase in the fourth quarter of this year, but it is expected to see a noticeable rise in 2025.

In the current competitive landscape marked by industry-wide "capacity saturation," DeYe needs to continuously introduce new products to address the overseas inventory reduction cycle. On the other hand, with new production capacity set to come online, DeYe must continue to seek out the next "South Africa" to further its growth.

Notably, in late August of this year, DeYe halted an investment in a micro-inverter manufacturing project in Hai Ning, Zhejiang. However, its newly added energy storage battery business achieved a revenue of 884 million yuan in 2023, representing a significant year-over-year growth of 965.43%.

The development of new products for emerging application scenarios, such as the balcony mini-energy storage inverter and the commercial and industrial storage PCS-100KW series, has enabled DeYe to comprehensively cover the product matrix of energy storage, string inverters, and micro-inverters. This positions DeYe as one of the few inverter companies capable of achieving coordinated growth across these three product lines.

From the perspective of industry insiders, the subtle changes in DeYe's business strategy already foreshadow the direction of its future development. These changes suggest that DeYe is focusing on diversifying its product portfolio and exploring new markets to maintain its competitive edge and sustain long-term growth.