[Overseas Stocks Spotlight] "SolarEdge Expected to Benefit from Expansion of US Solar Power Market"

[Asia Economy Reporter Eunmo Koo] SolarEdge (SolarEdge·SEDG US), which has risen to the global No.1 optimized inverter solution provider based on strengths such as maximizing power output at the module level and design freedom of system configuration, is expected to benefit from the expansion of the U.S. solar power market.

Founded in 2006, SolarEdge is a solar energy-related company specializing in the development and sales of optimized inverter solutions. Thanks to product differentiation, it became the world's top solar inverter supplier as of last year. In addition to selling optimized inverter solution systems, SolarEdge is expanding its business in smart energy technologies through corporate acquisitions. Supported by increasing residential demand for solar power generation, the company has shown an average annual sales growth of 35% over the past five years.

SolarEdge’s products are evaluated to have strengths such as maximizing power output at the module level, economies of scale, and design freedom of system configuration. Eunhye Lim, a researcher at Samsung Securities, explained in a report on the 20th, “Traditional inverter structures had significant inefficiencies in power loss due to the inability to control at the module level, and while microinverters were introduced to compensate for this, they also had some drawbacks. SolarEdge’s power optimizer inverter structure has emerged as an alternative to these issues.”

From an industrial perspective, it is also expected to benefit from the expansion of the U.S. solar power market. Researcher Lim stated, “Opportunities arising from government or state-level subsidies and mandatory policies, such as the mandatory solar power installation for new homes in California, remain valid.” She also pointed out that, besides residential demand, the expansion of sales in large-scale commercial facilities and utilities is another positive factor. Currently, solar farm construction projects on the scale of several hundred megawatts are scheduled to continue through 2024.

Although the valuation is somewhat burdensome as it is at a historical high level, it is diagnosed that a mid- to long-term approach is necessary. Researcher Lim said, “SolarEdge’s stock price is currently trading at a 12-month forward EV/EBITDA multiple of 25x, a historical high level, due to increased investor interest in renewable energy and strong performance this year, which raises concerns about valuation and short-term stock price volatility. However, interest in the mid- to long-term story of sales expansion into commercial utility facilities and growth in the U.S. residential market based on SolarEdge’s No.1 positioning remains valid.”

Meanwhile, intensified competition, uncertainties in solar energy-related policies, and reduced equipment demand due to COVID-19 were pointed out as risk factors.