J.P. Morgan: Sungrow guides for energy storage shipments to double in 2027, but margin recovery will take time

What underpins the projected doubling of shipments in 2027?

Sungrow management guided for energy storage system shipments to double to about 120GWh in 2027, based on new orders doubling year on year in the first three quarters of 2026 and a substantial pipeline of projects.
Management expects European energy storage installations to grow by more than 50% in 2027, with the company’s shipments potentially growing faster, partly because of the lag between shipment and grid connection. J.P. Morgan is also positive on European demand and notes that peak-to-trough electricity price spreads were widening as the market entered the fourth quarter of 2026.
A large Middle Eastern project secured in May 2026 is expected to contribute 7–8GWh of shipments in 2027; by comparison, the company shipped less than 1GWh in the Middle East in the first three quarters of 2026. However, Middle Eastern projects have relatively lower prices and margins, an effect that economies of scale can partially offset.
The 120GWh target is above J.P. Morgan’s base case and has not yet been incorporated into its forecast. The bank estimates that US shipments account for about 15% of the target and takes geopolitical uncertainty into account.

Third-quarter margins were below J.P. Morgan’s expectations, mainly because the company recognized revenue from energy storage shipments made in the first half of 2026, when lithium prices were higher; lower export tax rebates, unfavorable exchange rates and higher freight costs also added pressure.
Revenue has yet to be recognized for some low-margin second-quarter shipments, which could continue to weigh on earnings in the fourth quarter of 2026 and even the first quarter of 2027. J.P. Morgan therefore believes the key questions are when earnings will recover and by how much.
The company initiated a price increase of about 10% in September 2026, and declines in lithium prices take about a month to feed through to battery procurement costs; both could support energy storage margins in 2027. However, actual price increases depend on customer acceptance and competitors’ pricing, while exchange rates and freight costs also affect the extent of the recovery.

The company is tracking more than 10GWh of AI data center energy storage projects, has 2GWh in orders on hand and has delivered more than 1GWh. J.P. Morgan believes the timing of progress on the remaining projects depends on data center construction schedules and geopolitical factors.
Management believes the evolution of data center power architectures toward 800V DC creates an opportunity for solid-state transformers (SSTs), which could make power management more efficient and flexible. The company’s products have undergone field testing in China and obtained certification in Europe and the US.
Management said the company has become an NVIDIA ecosystem partner and hopes in the long term to provide an integrated 800V solution covering solid-state transformers, energy storage and green power.

J.P. Morgan acknowledges the medium-term growth prospects for energy storage but expects near-term earnings to be weak amid cost pressures. It maintains a neutral rating and a price target of 69 yuan for December 2027.
The price target corresponds to a target price-to-earnings multiple of 10.5 times over the next 12 months and is derived by adding together the valuations of the individual business segments.