From 2020 to 2023, DeYe Corporation’s overseas sales revenue from inverters was $39.44 million USD, $146.48 million USD, $447.89 million USD, and $464.79 million USD, respectively.
In 2023, the South African market became the company’s largest overseas market, contributing $183.10 million in sales revenue, accounting for 32.8% of the company’s total overseas sales revenue.
However, after in-depth investigation and research, we found that DeYe solar’s sales data in the South African market significantly differed from the concurrent home storage installation data in the South African market, Zhejiang Customs’ concurrent export data, and the sales data of peer companies.
Another anomaly is that DeYe Corporation’s sales revenue in the South African market primarily came from OEM products for overseas companies, yet it achieved a gross profit margin of over 50%, approaching its gross profit margin in the German market.
01 Deye’s Shipments in South Africa Far Exceed Local Residential Storage Installation Capacity
Although the residential storage market in South Africa has grown rapidly in recent years, it still cannot compare with developed countries in terms of market size.
According to BNEF data, the top five countries in terms of new residential storage installations in 2023 were Germany, Italy, USA, Japan, and Australia.
Taking 2023 as an example, how much installation and capacity did Deye inverter’s sales of energy storage inverters in the South African market correspond to?
Source: Deye inverter’s 2023 annual report
In 2023, Deye inverter achieved sales revenue of 3.99 billion RMB from photovoltaic products overseas, with inverters accounting for about 3.3 billion RMB and energy storage batteries for about 690 million RMB. Inverters accounted for 82.7% of Deye inverter’s overseas revenue.
As mentioned, Deye inverter achieved 1.31 billion RMB in sales revenue in the South African market in 2023. If we assume that 82.7% of Deye inverter’s overseas revenue comes from inverters, it means Deye inverter sold approximately 1.08 billion RMB worth of inverters in the South African market in 2023, primarily energy storage inverters.
Source: Deye inverter’s investor research announcement on March 14, 2022 So, how many units does 1.08 billion RMB worth of energy storage inverters represent?
Deye inverter did not disclose the sales amount of its energy storage inverters in 2023, so it is impossible to calculate directly. However, it is still possible to estimate based on the unit price of similar products from industry peers in 2023. We found three reference companies.
In 2021 and 2022, the unit price of Deye inverter’s energy storage inverters was always lower than that of Alro Energy. In 2023, the unit price of Alro Energy’s energy storage inverters was 9448 RMB.
Assuming Deye inverter’s unit price in 2023 caught up with Alro Energy’s, then the number of energy storage inverters Deye sold to South African OEMs and distributors in 2023 would be at least 114,300 units (1.08 billion / 9448 RMB).
Next, let’s estimate the power capacity corresponding to 114,300 energy storage inverters.
Deye inverter has disclosed the corresponding relationship between the number of units and power capacity of its energy storage inverters as follows:
In 2023, Deye inverter’s 0.9 GW of energy storage inverters shipped to South Africa would correspond to at least 0.9 GWh of capacity, if not more. In 2023, South Africa’s new residential storage installations were only 0.73 GWh.
02 Deye’s Export Data to South Africa Conflicts with Zhejiang Peers
According to Deye inverter, the company’s inverter sales revenue in the South African market from 2020 to 2022 was 26.37 million RMB, 160 million RMB, and 680 million RMB, respectively. We estimate it to be 1.08 billion RMB in 2023. Source: Deye inverter’s listing review inquiry response
China Customs data shows that Zhejiang Province’s inverter export value to South Africa in 2020, 2021, 2022, and 2023 was 69.03 million RMB, 194 million RMB, 707 million RMB, and 1.38 billion RMB, respectively.
From 2020 to 2023, Deye inverter’s inverter exports to South Africa accounted for 38.2%, 82.5%, 96.2%, and 78.3% of Zhejiang Province’s total inverter exports to South Africa.
Thus, since 2021, Deye has become the undisputed leader in the South African market among Zhejiang inverter companies, holding an overwhelming advantage.
Zhejiang is home to numerous inverter companies, especially dominating the small power product sector nationwide. Just as Guangdong has companies like Huawei, Growatt, Sungrow, GoodWe, KSTAR, and Hopewind, Zhejiang has many inverter star companies like Ginlong Technologies, Chint Power, Hoymiles, Alro Energy, and Enphase Energy.
How do these Zhejiang inverter companies fare in exporting to South Africa?
Alro Energy disclosed that in 2022, the company’s energy storage inverters and grid-tied inverters revenue in Africa were 9.92 million RMB and 31.51 million RMB, respectively, totaling 41.43 million RMB. Source: Alro Energy’s IPO second-round review inquiry response Alro Energy disclosed in its IPO second-round review inquiry response: “During the reporting period (2020-2022), the company’s main products in the African market achieved revenue of 10.87 million RMB, 17.27 million RMB, and 67.87 million RMB, respectively, with the company’s customers in Africa mainly located in South Africa, Morocco, and Tunisia, accounting for 78.32%, 89.06%, and 93.47% of the company’s revenue in the region. Among them, the South African market is primarily focused on energy storage system products, while Morocco and Tunisia are mainly focused on grid-tied inverters.”
In 2022, the GDP of South Africa, Morocco, and Tunisia were 405.27 billion USD, 130.91 billion USD, and 46.3 billion USD, respectively. South Africa’s GDP accounted for 70% of the combined GDP of the three countries.
Even ignoring the special factor of South Africa’s electricity crisis, simply based on the share of the African market and South Africa’s share of the GDP of the three countries, Alro Energy’s sales revenue in South Africa in 2022 could be estimated at around 44 million RMB.
In 2022, Deye inverter alone accounted for 96.2% of Zhejiang’s inverter exports to South Africa, while Alro Energy, another Zhejiang company, if calculated at 44 million RMB, would also account for 6.22% of the province’s exports to South Africa. The combined exports of these two companies to South Africa would actually exceed the total exports of Zhejiang Province.
Zhejiang has many other inverter companies doing business with South Africa. Although Hoymiles has not disclosed its export data to South Africa, public information reveals that Hoymiles had certified three microinverters in the South African market as early as 2018 and developed South African distributors.
Source: Hoymiles announcement
In addition, based on Deye’s export data and Zhejiang’s customs data on inverter exports to South Africa, other inverter companies in Zhejiang Province exported 33.41 million RMB, 26.98 million RMB, and 296.52 million RMB worth of inverters to South Africa in 2021, 2022, and 2023, respectively. The solar storage market in South Africa did not suddenly boom in 2022. As early as 2019, the South African government launched the “South African Resource Plan,” with wind power installation targets of 11 GW and solar power installation targets of 8 GW. In 2021, the South African government initiated a new round of renewable energy project bidding with a total installation capacity of 2.6 GW, including 1 GW of solar power project bidding.
In 2022, as South Africa’s power system collapsed, Chinese inverter companies saw a significant increase in exports to South Africa. In November 2022, Sungrow signed the largest inverter order in Africa at that time with South Africa’s SOLA Group, totaling 256 MW!
This means that Zhejiang’s inverter exports to South Africa, in addition to energy storage inverters, microinverters, and grid-tied small string inverters, might also include large string and centralized inverters.
In any case, it is hard to imagine that in the great expansion of the South African solar storage market in 2022, Deye alone achieved 680 million RMB in revenue, while in the previous year it was only 160 million RMB. At the same time, other Zhejiang peers with a presence in the South African market saw their export value drop from 33.41 million RMB to 26.98 million RMB. This is illogical.
03 South African Market Gross Profit Margin Rivals Germany
Source: Various company annual reports
In 2023, Deye inverter had the highest gross profit margin among all inverter companies listed on the A-share market, even surpassing several microinverter companies such as Hoymiles, ENPH, and Enphase Energy.
In the eyes of institutional investors, Deye inverter’s gross profit margin has been on an upward curve in the past three years, meeting the characteristics of a “white horse” stock. Because of this, Deye inverter has performed well in the A-share market, outperforming the industry average. However, Deye inverter’s South African story is far from a fairy tale.
Despite the saturation of the South African residential storage market in the second half of 2023 and the large-scale backlog of residential storage products, Deye inverter’s gross profit margin in 2023 was not adversely affected. How did they achieve this?
As mentioned earlier, in 2023, Deye inverter achieved 1.31 billion RMB in sales revenue in the South African market, with a gross profit margin as high as 52.68%. This gross profit margin is second only to its 52.98% in the German market, ranking second among Deye inverter’s overseas markets. Seeing this number, our first impression was that South Africans must be quite wealthy. But the reality is different.
In 2023, South Africa’s per capita GDP was 6253 USD. In the same period, China’s per capita GDP was 12,700 USD, more than double that of South Africa! South Africa’s economic level in 2023 was roughly equivalent to China’s in 2011 when its per capita GDP surpassed 6000 USD.
Although South Africa is still a developing country, it experienced about 200 power outages in a year, making the need for residential storage systems quite apparent. However, what is the purchasing power of its residents?
Companies like Huawei, Penghui Energy, Hive Energy, and Bullbat entered the South African residential storage market later, leading to an imbalance between supply and demand for solar storage products locally. “The already low-profit South African residential storage market quickly saw a price war, turning into a red ocean. Most ordinary families are extremely sensitive to the price of residential storage systems, not pursuing brand and quality, but only low price and usability, even sacrificing warranties. This makes it difficult for mid-to-high-end residential storage manufacturers to scale, while small companies focusing on extreme cost-effectiveness like Sanko and Miesler thrive.”
In such a market where brand pursuit is absent and even warranties can be compromised, Deye inverter managed to achieve a 52.68% gross profit margin in 2023! This profitability effect even rivals Germany (per capita GDP of 52,700 USD in 2023), where the per capita GDP is eight times that of South Africa. It’s remarkable!
Crucially, Deye inverter achieved this miracle through OEM production for other brands.
04 OEM Products Have Double Market Premium
Sunsynk’s actual controller Keith Gough
Deye inverter has a major client in South Africa – Global Tech China Ltd., owned by a British individual. The company owns the Sunsynk series of solar storage products brands. Deye inverter produces various solar storage products, including single-phase and three-phase hybrid inverters, grid-tied inverters, microinverters, batteries, and mobile products, under the Sunsynk brand.
Sunsynk’s website shows that its certified installers are mainly in South Africa and the UK, with a small presence in Europe, indicating that its products are primarily sold to South Africa and the UK.
Around 2010, Keith Gough upgraded the brand, using Sunsynk as a unified brand identifier for external display. Later, the company registered subsidiaries engaged in solar storage business under the name Sunsynk LTD. in various places like Hong Kong, South Africa, and the Netherlands.
Additionally, Keith Gough registered a company named GLOBAL TECH GROUP HK LIMITED in Hong Kong in 2011. This Hong Kong company might be the parent company of Deye inverter’s largest client in South Africa.
Besides producing OEM products for Sunsynk, Deye inverter also produces its own “Deye” branded energy storage inverters, exclusively distributed locally through the South African sales platform of China National Building Material Group Corporation. Source: Deye inverter’s institutional investor research announcement on March 14, 2022
To further understand Deye inverter’s operating model in the South African market, we analyzed the revenue share of its OEM and distribution channels. The table below shows that in 2022, 95.78% of Deye inverter’s revenue in South Africa came from OEM products.
Moreover, buying a residential storage system requires batteries in addition to inverters. Energy storage batteries, with capacities ranging from 5.12-15.97KWh, were priced between 21305-67461 ZAR, approximately 8206-25983 RMB.
Even without considering installation costs, just the energy storage inverters and batteries alone, the cost of purchasing a Sunsynk residential storage system in South Africa ranges from 1.3-5 million RMB, excluding solar panels.
For South Africans, who suffer from frequent power outages, installing a solar storage system is not easy.
We also found that on Amazon South Africa, a 5.2KW hybrid inverter from Miesler sells for only 8140 ZAR, about 3183 RMB, while a 5.2KW single-phase hybrid inverter from Sunsynk is priced at 19205 ZAR, about 7511 RMB.
These two products have a price difference of more than double. What would cash-strapped South African consumers choose?
It is understood that the Sunsynk products OEM produced by Deye inverter have considerable influence locally. However, in such a market, it is questionable how much premium can be achieved. Sunsynk’s prices can also be compared with peers, such as Alro Energy and GoodWe. Deye inverter’s OEM products in South Africa are essentially selling at European market prices.