Why does Cao Renxian, chairman of Sungrow, frequently visit energy central enterprises?

Spring Breeze Interview

2024-04-09 00:04Published in Beijing Finance and Economics Creators

Why does Cao Renxian, chairman of Sungrow, frequently visit energy central enterprises?

After the national "two sessions" in 2024, Cao Renxian, chairman of Sungrow, began to enter central enterprises one after another to seek cooperation.

On March 13, at the end of the "Two Sessions", Cao Renxian, as a deputy to the National People's Congress, met with Liu Mingsheng, Chairman of, in Beijing, and the two sides expressed that they would strengthen mutually beneficial cooperation in new energy development, large base project construction, international business development, procurement and supply chain, energy technology innovation and other aspects. On April 7, Cao Renxian led a team to meet with Ma Yongsheng, chairman of Sinopec, and the two sides said that they would further increase cooperation in equipment engineering, technological innovation, and achievement transformation in the field of new energy.

Industry insiders expect that the photovoltaic industry will usher in a "big reshuffle" in 2024. The profitability of the entire industrial chain is declining to a historical low. Only those with cost, technology and market structure advantages can expect to remain profitable.

For Sungrow, how to continue to stand firm in the top position through technological advantages, scale effects, brand premiums, etc., and simultaneously deepen the ecological cooperation with central enterprises, seems to have become the two key channels for its survival and development in 2024.

The latest data shows that in 2023, Sinopec's photovoltaic power generation will be about 132 trillion megawatt hours, an increase of 200% year-on-year. Obviously, for large energy-based central enterprises such as and Sinopec, it seems that it has become a top priority to join forces with industry leaders to ride the momentum and ride the wind.

Net profit in 2023 may exceed 10 billion

2023 will be a disaster for new energy companies in the capital market. Almost all companies have seen a huge decline in their stock prices, and Sungrow has not been spared, falling about 41% in its share price. However, as of the close of trading on March 22, Sungrow closed at 102.97 yuan per share, with a total market value of about 152.926 billion yuan, surpassing LONGi Green Energy and becoming the first photovoltaic stock.

Sungrow was established in 1997 and listed in 2011, and has occupied the first position among Chinese companies in global energy storage system shipments for eight consecutive years. According to the "Energy Storage Industry Research White Paper 2023" released by Zhongguancun Energy Storage Industry Technology Alliance, in 2022, Sungrow's energy storage system shipments ranked first among Chinese enterprises for seven consecutive years, and won the global energy storage system shipment crown for the first time.

A little dissecting the business structure of Sungrow Power Supply is not difficult to see that photovoltaic inverters and other power conversion equipment account for 39%, new energy investment and development accounts for 29%, energy storage systems account for 25%, wind power converters account for 3.6%, photovoltaic power station power generation accounts for 1.6%, and others account for 1.8%.

In the past two years, although the overcapacity of upstream polysilicon has exacerbated the changes in the photovoltaic industry. However, Sungrow still relies on its advanced technology and high-quality brand effect to ensure that its performance has not been greatly impacted, and even handed over a very good answer sheet - the relevant research report of Guosen Securities predicts that Sungrow will ship 120-140GW of photovoltaic inverters in 2023, a year-on-year increase of 56%-82%, of which 35.5-55.5GW will be shipped in Q4. In terms of energy storage systems, it is estimated that 12-15GWh will be shipped in 2023, a year-on-year increase of 56%-95%.

The rapid growth of shipments has also brought good results to Sungrow. In 2023, the company's operating income is expected to be 71 billion yuan to 76 billion yuan, a year-on-year increase of 76%-89%, and its net profit is expected to be 9.3 billion yuan to 10.3 billion yuan, a year-on-year increase of 159%-187%, according to the announcement issued by it.

For the reasons behind the performance growth, Sungrow said that thanks to the rapid development of new energy, the core business of photovoltaic inverters, energy storage systems, new energy investment and development has achieved rapid growth, and the company's net profit has recorded a high growth rate due to the appreciation of foreign currency exchange rates and the decline in sea freight in the first half of the year.

According to the monitoring data of Beijing Bilv New Energy Technology Institute, the new installed capacity of photovoltaic in mainland China will reach 216.88GW in 2023, setting the highest annual installed capacity in history, close to the total new installed capacity of global photovoltaic in 2022, and correspondingly, the total output value of China's photovoltaic manufacturing industry will exceed 1.7 trillion yuan in 2023, a year-on-year increase of 17.1%.

According to the latest data, Sungrow's PV inverter shipments in the first three quarters of 2023 reached 83GW, which has exceeded the 77GW of last year, energy storage revenue was 13.7 billion yuan, a year-on-year increase of 177%, and new energy power station investment revenue was 12.7 billion, a year-on-year increase of 148%.

Leading the development of new quality productivity in the industry

Since its establishment, Sungrow has been leading the technical level of the industry.

In July 2023, Huaneng Shaanxi and Sungrow built the world's first 2,000-volt high-voltage system, which was successfully connected to the grid for power generation in Yulin, Shaanxi Province, and has been running stably for 9 months.

Li Han, vice president of Sungrow Solar Storage Group, said that the investment in the whole life cycle of the 2000V photovoltaic system saved 16.5 billion yuan/100GW. The investment in the whole life cycle of energy storage system CAPEX saves 12 billion yuan/100GWh. Not only that, but the 2000-volt high-voltage system saves 3.6% of the ground area.

"The promotion of 2000-volt high-voltage technology is not achieved overnight, but also needs to be promoted by market mechanisms and national policies. After applying various complex scenarios, it will take two to three years to achieve large-scale development. Song Ge, assistant general manager of Huaneng Shaanxi Power Generation Co., Ltd., said.

Li Han also emphasized that although the 2000V system can significantly improve the efficiency, the large-scale application still faces three major challenges: standards, technology, and supply chain. However, in the past few years, Sungrow has carried out research and development from the three levels of hardware, software and system, has overcome the key technologies of 2000V high-voltage system, and is actively promoting the formulation of standards in conjunction with the industry, and at the same time working together with upstream and downstream to jointly define and design product components and system components, and improve the 2000V industry chain.

Western Securities expects Sungrow's R&D expenses in the first three quarters of 2023 to reach 1.742 billion yuan, a year-on-year increase of +50.17%, and Sungrow will focus on increasing the research and development of new products in power electronics, power grid support, charging pile hydrogen energy business, etc.

As of June 2023, the company has obtained a total of 3,592 patents, including 1,279 inventions, 2,034 utility models, and 279 designs. Sungrow R&D personnel account for nearly 40%, and the company has undertaken more than 20 major national science and technology projects, and is one of the few enterprises in the industry that has mastered a number of independent core technologies.

On March 21, Sungrow officially launched the high-voltage 2000V system technology for optical energy storage. It is understood that after the use of this technology, the initial investment cost of 100GWh energy storage power station can save 12 billion yuan. There is no doubt that the in-depth empowerment of leading technologies has injected new momentum into the high-quality development of Sungrow and its ecological partners.

It is certain that the demand for inverters will continue to grow

It is worth mentioning that, in addition to the technical advantages, the gross profit level of Sungrow continues to rise.

Since 2023, due to the rapid decline in the price of photovoltaic modules and lithium carbonate, the cost of photovoltaic and energy storage has declined, the return on photovoltaic investment has increased, and the gross profit level of Sungrow has also increased. It is understood that in the first three quarters of 2023, Sungrow's gross profit margin has risen quarter by quarter, and it has risen to 34.37% in the third quarter, an increase of 9.23 percentage points year-on-year and 3.84 percentage points quarter-on-quarter.

However, according to ENF statistics, the number of inverter sellers of Sungrow is 232, which is lower than that of competitors Huawei, GoodWe and Jinlang Technology, in addition, Sungrow's sellers involve 47 countries, installers involve 78 countries, and the number of installers is about 1493. In other words, in terms of sales channel data, Sungrow does not have an advantage over other competitors.

At present, inverters are still Sungrow's largest business, accounting for about 40.6% of the business structure. In a conference call looking ahead to the company's market expectations in 2024, Sungrow strongly believes that inverter demand will continue to grow, and the growth rate may slow down slightly given the growing base, but it can roughly maintain the average growth rate for many years.

As far as the new energy investment and development business is concerned, in 2024, the scale of Sungrow's development and grid connection may continue to increase compared with 2023, and the company's key focus is not only to maintain the home photovoltaic business, continue to develop industrial and commercial business, but also continue to seek the expansion of overseas projects.

"From the perspective of global development trends, the photovoltaic industry will continue to maintain rapid development. For the future development trend of the industry, Wang Bohua, honorary chairman of the China Photovoltaic Industry Association, is very optimistic. He predicts that by 2030, the global installed capacity of renewable energy will triple to more than 11,000GW in 2022, and the cumulative installed capacity of PV will increase from 1,055GW in 2022 to 5,457GW in 2030. The photovoltaic trend is soup, and the sunshine on the avenue is just right. In 2024, the sunshine energy is worth looking forward to.

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