The energy storage sector is experiencing intense competition, with price wars in large-scale and residential storage markets reaching a peak. Homogenization, overcapacity, and continuously declining prices have become the prevailing reality. Whether in large grid storage, commercial & industrial storage, or overseas residential markets, products from major domestic battery manufacturers are highly similar, with the core competition revolving around cost and production capacity. Despite this challenging environment, some companies are still reaching out to capital markets for expansion opportunities. Recently, Daqin Digital Energy Technology Co., Ltd. submitted its listing application to the Hong Kong Stock Exchange.

Daqin Digital Energy Technology Co., Ltd. was established in 2017. This relatively young company is one of the earliest in China's distributed energy storage system (ESS) industry to focus on overseas markets. Its business covers residential ESS and commercial & industrial ESS product lines. By the end of 2025, the company's products had been deployed in over 100 countries and regions, with cumulative ESS battery shipments exceeding 1 million units. According to Frost & Sullivan data, based on 2025 shipment volume, Daqin ranked as the world's fifth-largest residential ESS provider, with shipments of 2.5 GWh and a market share of 6.5%.

Financial Performance and V-Shaped Recovery

The company's financial data reveals a dramatic V-shaped recovery. Revenue grew slightly from RMB 723 million in 2023 to RMB 734 million in 2024, then surged to RMB 2.525 billion in 2025, a year-on-year increase of 244.3%. However, gross profit margins were highly volatile at 2.7%, -19.9%, and 23.2% over the same period. The significant loss in 2024 was primarily due to a one-time clearance of old inventory. To clear stock from 2023 and 2024, the company offered price discounts, leading to reduced revenue of approximately RMB 50.5 million and write-downs on unsold inventory. High-voltage batteries alone incurred a gross loss of RMB 95.56 million, with a gross loss rate as high as 80.6%.

This situation was closely tied to industry volatility. In early 2023, lithium carbonate prices were at historic highs, with battery-grade lithium carbonate above RMB 500,000 per tonne. The company procured battery cells at these price levels for residential ESS battery production, manufacturing about 284,000 units. However, the market changed drastically in 2023, with lithium carbonate prices plummeting from RMB 500,000/tonne to around RMB 100,000/tonne by year-end. LFP cell prices fell by about 40%-50% year-on-year in both 2023 and 2024, forcing the company to sell these high-cost products at a significant loss.

After clearing this inventory burden in 2025, Daqin's profitability quickly recovered. Low-voltage battery gross profit turned from a loss of RMB 62.5 million in 2024 to a profit of RMB 280 million in 2025, with the margin rising from -12.4% to 20.7%. High-voltage battery gross profit turned from a loss of RMB 95.6 million to a profit of RMB 102 million, with the margin rising from -80.6% to 18.9%.

Revenue Mix and Business Expansion

Residential ESS remains the company's core revenue source. From 2023 to 2025, its contribution to total revenue was 99.3%, 85.3%, and 75.7%, respectively. While the percentage is declining, the absolute scale surged from RMB 718 million to RMB 1.911 billion. Within residential ESS, low-voltage battery revenue grew from RMB 586 million to RMB 1.353 billion, and high-voltage battery revenue increased from RMB 132 million to RMB 538 million, indicating an upgrade towards higher-value systems.

More notably, the commercial & industrial ESS business is rapidly emerging. Its revenue was only RMB 1.6 million in 2023, accounting for about 0.2% of total revenue. This grew to RMB 89.4 million (12.2%) in 2024 and further jumped to RMB 603 million (23.9%) in 2025. This business grew from nearly zero to nearly a quarter of total revenue in just two years, demonstrating accelerating market expansion in commercial and industrial scenarios.

Cash flow also improved significantly in 2025. Net cash used in operating activities was RMB 214 million and RMB 377 million in 2023 and 2024, respectively, indicating continuous net outflow. In 2025, this turned into net cash generated from operations of RMB 81.3 million. Cash and cash equivalents increased from RMB 114 million at the end of 2023 to RMB 283 million at the end of 2025.

Overseas Focus and Market Opportunities

Amidst accelerated global energy transition, recovering residential storage demand in Europe, and the AI computing boom, the energy storage industry is entering a new growth cycle. According to Frost & Sullivan, global residential ESS shipments are expected to grow at a compound annual growth rate of 52.3% from 2025 to 2030, suggesting the market could expand several times over the next five years. For Daqin, this structural global growth presents a significant opportunity.

Geographically, the company's revenue is highly concentrated in overseas markets. In 2025, 95.1% of its revenue came from overseas regions. Europe contributed 61.0% of revenue, the Middle East 12.7%, Africa 10.4%, and Asia-Pacific (excluding mainland China) 9.2%. This geographic mix was drastically different in 2023, when mainland China contributed 56.9% of revenue and Europe only 19.9%. This indicates the company completed a strategic transformation over three years, shifting from a domestic sales focus to an export-oriented strategy centered on Europe with a global footprint.

The explosive growth in the European market benefits from favorable energy policies, high electricity price environments, and increasing recognition of the economic benefits of ESS among households. However, high reliance on a single regional market suggests that any shift in European energy policy or slowdown in demand could lead to significant performance volatility.

Competitive Landscape and Key Risks

The global ESS market is fiercely competitive with continuous technological iteration and evolving customer and regulatory requirements. Daqin's main competitors include global giants like Tesla (Powerwall), LG Energy Solution, BYD, and Sungrow Power. While ranked fifth globally in 2025 residential ESS shipments, the top four players hold larger market shares with stronger brand recognition and financial resources. In the residential ESS field, brand trust, channel coverage, and localized service capabilities are crucial. In the commercial & industrial ESS field, project experience, system integration capabilities, and customer relationships are key competitive factors, where Daqin does not hold a clear advantage.

Furthermore, raw material costs represent the company's largest cost item and risk exposure. From 2023 to 2025, raw material costs accounted for 86.0%, 82.4%, and 90.9% of its cost of sales, respectively, with LFP (lithium iron phosphate) battery cells constituting a major portion. LFP cell prices are closely tied to lithium carbonate prices, which have historically experienced significant volatility due to global supply-demand dynamics. This high sensitivity to a single raw material means the company's profitability largely depends on the stability of the upstream battery supply chain.

At this juncture, proceeds from Daqin's potential listing are intended mainly for capacity expansion, R&D enhancement, deepening the global distribution network, and supplementing working capital. If the company can maintain high revenue growth while sustaining and improving gross margins and reducing dependence on a single raw material, its position as the world's fifth-largest player could be further solidified. However, if LFP cell prices experience significant volatility again, European market demand slows, or intensified industry competition triggers price wars, the stability and sustainability of the company's profits could face another test.