21st century business herald reporter bothered to report from Shanghai

Europe's household storage market was once a honeypot. domestic inverter unicorns took the express train to sea through ODM and OEM modes. ZTE's Paneng Technology (688063.SH), inverter company Homai (688032.SH) and Goodway (688390.SH) have all benefited from this.

at a time when the household storage bonus is fading away, after two inquiries about whether "du Jie" will eventually go public and become the first IPO in 2024, will Arrow energy (688717.SH) be the last lucky passenger on this express?

The once lucrative European market

On January 3, Arrow Energy was listed on the Science and Technology Innovation Board. This is the second trading day of the 2024 New Year and the first IPO of the year. It has been one and a half years since Arrow Energy's first delivery on June 30, 2022.

On December 22, 2023, Airo Energy opened the subscription, with an issue price of 55.66 yuan per share and 40 million shares issued, with a price-earnings ratio of 7.95 times, which is lower than the industry's price-earnings ratio of 17.42 times. After the issue, the total share capital of Arrow Energy reached 0.16 billion shares.

it is worth mentioning that aro energy originally planned to raise 0.808 billion yuan for the expansion project of energy storage battery and inverter, the construction project of optical storage intelligent energy research and development center, etc. The final issuance results showed that the funds raised by Arrow Energy rose to 2.226 billion yuan, about 1.75 times higher than the issuance plan.

It is undeniable that, as the first enterprise to ring the bell in the new year, although the energy storage track of Arrow Energy is hot, the price war, production capacity war and patent war have encountered a capital winter in 2023 just past, which has discouraged the social forces that have just assembled.

However, the performance of Arrow Energy on the first day brought some morale encouragement to the enterprises of the energy storage track in the new year-the opening price was 98.00 yuan, up to 100.03 yuan, and finally closed at 87.93 yuan, up 57.98, the turnover was 1.212 billion yuan, the amplitude was 22.71, the turnover rate was 69.05, and the latest market value came to 14 billion yuan.

during the same period, the latest market value of paineng technology was 18.4 billion yuan, and the market value of solid dewei and wo mai shares was 22.2 billion yuan and 22.6 billion yuan respectively.

In fact, Arrow Energy is most praised for its rapid performance growth in the past three years.

according to the prospectus, the operating income of Arrow Energy in 2020, 2021, 2022 and the first half of 2023 (hereinafter referred to as the "reporting period") is 0.389 billion yuan, 0.833 billion yuan, 4.61 billion yuan and 3.399 billion yuan respectively. During the same period, net profits were 0.033 billion yuan, 0.063 billion yuan, 1.13 billion yuan and 0.975 billion yuan respectively.

Not only is the net profit in 2022 increased by 17 times, but the cumulative growth in three years has reached 34 times. From 2020 to 2022, the compound growth rate of revenue is as high as 244.27 percent, and the compound growth rate of net profit is as high as 485.64 percent.

The European market is an important hinterland. During the reporting period, Arrow Energy achieved revenue of $0.268 billion, $0.289 billion, $0.65 billion and $1.308 billion in the European market, accounting for 68.99 per cent, 74.25 per cent, 78.11 per cent and 93.56 per cent, respectively.

"Europe is the largest and fastest growing household storage market in the world," Arrow said in its response to the second round of audit inquiries."

this is not blindly optimistic. according to the soochow securities industry research report, the new installed capacity of European household energy storage is expected to reach 9.7GWh in 2022, accounting for 63% of the global household storage, up 373 percent from the previous year. At this stage, well-known domestic and foreign manufacturers, including Paneng Technology, Sunshine Power, Guriat, Jinlang Technology and Goodway, as well as SMA and SolarEdge, are also actively laying out the European market.

in fact, the performance growth rate of Arrow Energy is also a true portrayal of China's household storage enterprises in the European market in 2021 and the 2022 two years.

The real attraction comes from the impressive gross margins in the European household storage market.

During the reporting period, Arrow Energy's sales in the European market accounted for 68.99 per cent, 74.25 per cent, 78.11 per cent and 93.56 per cent of the company's total sales revenue, with gross margins of 37.97 per cent, 43.53 per cent, 37.85 per cent and 36.79 per cent, respectively.

Arrow Energy pointed out that the gross profit margin of the European market is higher than that of other regions because the European region has a developed economy, strong customer acceptance, and low price sensitivity; European countries attach importance to clean energy and have introduced more subsidy policies., The market demand is strong.

But these are stories just before winter arrives.

Household savings dividend may ebb

On a fast-growing track, changes in the market are often as breathtaking as expected.

On October 20, 2023, Israel-based Nasdaq-listed company SolarEdge(SEDG) announced its third-quarter results forecast. Its third-quarter operating profit may be only US $12 million to US $31 million, a year-on-year decline. Nearly 90%. More importantly, this performance is significantly lower than the previous forecast of $0.115 billion to $0.135 billion.

the opening of the day, the SolarEdge immediately suffered a flash crash, the opening of the plunge of 27.2 percent, by the SolarEdge implicated, the day the U.S. photovoltaic plate plummeted. Energy(ENPH), another minor Enphase, also suffered a fall, with its share price plunging 14.68 per cent.

SolarEdge CEO Zvi Lando (Zvi Lando) said that after entering the second half of the year (2023), due to high inventory in Europe and the continued slowdown in installation speed, the company's European distributors unexpectedly canceled a large number of orders, and began to continue to inventory. The person also predicts that in the fourth quarter (2023), the inverter industry will face a more severe situation.

"This year (2023), the growth rate of the company's household energy storage product sales has slowed down in stages under the combined influence of changes in the macro environment, the decline in subsidies in some countries and regions, the fall in upstream raw material prices, and the destocking of downstream enterprises." On November 28, 2023, Ye Wenju, vice president, chief financial officer, and secretary of the board of directors of Pereng Technology, said at the third quarter of 2023.

the energy storage leaders alliance (EESA) pointed out in its analysis of the supply-demand relationship of energy storage in Europe in 2022 that the shipment of household energy storage batteries to Europe will reach about 9.8GWh in 2022 alone, which is about 2.1 times of the actual installed capacity in Europe. The remaining inventory at the end of 2022 is about 5.2GWh. Among them, Chinese enterprises shipped about 7.3GWh to Europe, accounting for about 75%. The shipping side of the European market is expected to be overly optimistic, disorderly expansion of production capacity, homogenization of products make the industrial chain price fluctuations serious.

Overseas destocking and low capacity utilization hit the household storage track, and Arrow Energy is not immune. In the third quarter of 2023, Arrow Energy achieved operating income of 0.608 billion yuan, down 57.37 percent from the previous quarter, and net profit of 0.043 billion yuan, down 90.91 percent from the previous quarter. According to the prospectus, Arrow Energy expects revenue of 4.5 billion to 4.7 billion yuan and net profit of 1.05 billion to 1.15 billion yuan in 2023.

this profit performance will be basically the same as the profit performance in 2022, which also means that the myth of high growth brought about by household storage opportunities is no longer there.