How Did Hecon New Energy Under Midea Group's Control Exploit Performance Assessment Loopholes?

Chasing Carbon: Rebuilding the Value of the New Electric Industry

Recently, the publicly listed company engaged in high-voltage variable frequency drives—He Kang New Energy—has seen a significant rise in its stock price. However, this company is not a typical North American power shortage stock; its business is actually minimally related to the main benefits of North American power shortages. Currently, the company primarily focuses on domestic photovoltaic EPC, with over 90% of revenue from the first half of last year, and less than 10% from overseas, with no substantial presence or orders in the North American market.

Public information shows that on April 29, 2020, He Kang New Energy completed share transfer registration, and Midea Group officially acquired controlling interest. At that time, He Kang New Energy held a top-two market share in the high-voltage variable frequency drive sector. Now, how should we evaluate the past five years under Midea Group’s control?

The company’s advantageous position in high-voltage variable frequency drives was a key reason Midea Group targeted He Kang New Energy for acquisition. In the acquisition announcement, Midea stated: “He Kang New Energy was then among the top-tier domestic high-voltage inverter companies, with 20 years of technical accumulation, a mature R&D team, and a full product lineup across all power segments. Post-acquisition, it can directly fill Midea’s gaps in industrial automation control, improve the entire industry chain from low-voltage inverters, servos to high-voltage inverters, quickly enter the industrial automation track, and seize industry dividends from new infrastructure, industrial energy-saving upgrades, and domestic substitution.”

However, Midea Group has not prioritized He Kang New Energy’s high-voltage inverter business as promised. Instead, after controlling the company, Midea shifted its strategic focus toward new energy businesses, continuously shrinking resources allocated to high-voltage inverter operations. Over the past five years, expanding He Kang New Energy’s revenue seems to have been the main focus—an appearance project—while building core competitiveness and generating profits for shareholders were less important.

In 2023, He Kang New Energy’s strategic focus was: developing self-produced high and low voltage inverters, residential energy storage and photovoltaic inverters, and photovoltaic EPC as its three main businesses.

By 2025, the company’s statement shifted to: “Focusing on green energy solutions, residential energy storage, photovoltaic grid-connected inverters, and high-voltage inverters as three core businesses.”

Currently, photovoltaic EPC accounts for up to 90% of revenue, and the company’s senior management and core team’s equity incentives have become completely superficial.

Regardless of internal opinions, He Kang New Energy has shown absolute alignment with Midea Group’s culture and values—the homepage of the company’s official website features Midea’s somewhat quirky headquarters building.

He Kang New Energy’s official website emphasizes: “In 2020, Midea Group became the controlling shareholder of He Kang New Energy, further enhancing internal management and assisting in deep industry resource synergy and empowerment.”

01

Diving into photovoltaic EPC—whose need is it?

Diving into photovoltaic EPC—whether it’s driven by the company’s performance growth needs or by senior management fulfilling KPIs and responsibility commitments—deserves reconsideration.

Before Midea’s control, He Kang New Energy’s main business was high-voltage inverters. Now, with about 90% of revenue from photovoltaic EPC, this has become the dominant business.

He Kang New Energy’s photovoltaic EPC includes residential distributed PV EPC, commercial and industrial distributed PV EPC, and gradually expanding into centralized PV EPC.

Chasing Carbon believes this business itself has no significant technological barriers; it’s a typical red ocean market. If there are barriers, they depend on the company’s project acquisition ability (channel capability) and its capacity to finance upfront costs for clients (financial strength).

But after Midea took control, this business was treated as a treasure.

In 2023, He Kang New Energy’s new energy business (mainly photovoltaic EPC) generated 640 million yuan in revenue with an 8.62% gross profit margin; high-end manufacturing (mainly high-voltage inverters) earned 648 million yuan.

In the first half of 2025, photovoltaic EPC revenue reached 4.066 billion yuan, accounting for 90.41% of total revenue, but gross margin dropped to 6.84%. Meanwhile, the high-voltage inverter products, with a gross margin of 30.41%, saw revenue decline to 281 million yuan. This explains why He Kang New Energy’s growth no longer translates into profit.

Why does He Kang New Energy do this?

Shortly after Midea’s control in 2020, He Kang New Energy launched a round of equity incentives. Strangely, this incentive only assessed revenue, not profit. This is extremely rare among equity incentives—unless some startups deliberately sacrifice profit early on to scale up.

Because the 2020 equity incentive only focused on revenue, the photovoltaic EPC business with low gross margins (6-8%) and easier revenue growth naturally became a priority.

In theory, if only revenue is considered, any team can achieve targets by sacrificing profit—simply by losing money to boost business volume.

According to the January 2021 “Beijing He Kang New Energy Technology Co., Ltd. 2020 Restricted Stock Incentive Plan,”

Chasing Carbon studied He Kang New Energy’s annual reports, showing gross margins of 8.62%, 9.17%, and 6.84% for photovoltaic EPC in 2023, 2024, and the first half of 2025.

Meanwhile, competitors like Huagui Technology, Yongfu Co., Ltd., Xineng Technology, and Linyang Energy had gross margins above 10% in 2024.

As long as revenue contributes, senior management’s rewards follow naturally. Since Midea’s control, He Kang New Energy’s per capita salary has increased significantly—by 122% from 2021 to 2024.

Unit: ten thousand yuan

However, over the past five years, He Kang New Energy’s net profit has been a total loss, and shareholders have not earned a penny.

02

How did the once-strong core business fall behind?

Over the past five years, how did Midea cause He Kang New Energy’s high-voltage inverter business to fall behind?

Because if the focus is solely on revenue growth and expanding low-margin photovoltaic EPC, the company’s original core business—high-voltage inverters—will naturally be marginalized.

After acquisition, He Kang New Energy’s high-voltage inverter business began to decline. This was something many investors did not expect.

High-voltage inverters are developed for motors operating at 3kV to 10kV in high-voltage environments. They are core control devices in industrial automation. As the key equipment for motor system energy-saving upgrades, they can precisely control motor speed, achieving over 30% average energy savings in fans, pumps, compressors, and other loads—crucial for energy conservation and carbon reduction in industry.

The industry leader is the “Big White Horse”—Inovance Technology. According to Rui Industry’s 2024 data, Inovance holds about 18.6% of the mid-to-high voltage inverter market in China, ranking first. Following are Schneider at 13.6% and ABB at 10.2%.

He Kang New Energy was once the second-largest player, with a 2022 market share of 18%. By 2023, it declined to 12-15%. In 2024, its high-voltage inverter revenue was only 547 million yuan, falling to the second tier. Still, He Kang New Energy claims to be “firmly in the domestic top-tier in high-voltage inverters.”

Is it because the high-voltage inverter market has become worse or less profitable?

Although Inovance’s gross margin is nearly 30% and net profit margin 13%, He Kang New Energy believes that the decline in revenue and gross profit in this sector is mainly due to external factors.

In fact:

(1) According to Zhiyan Consulting, China’s high-voltage inverter market grew from 10.8 billion yuan in 2017 to 21.6 billion yuan in 2024, with a CAGR of 10.41%.

This data is also cited by He Kang New Energy in its announcements to demonstrate industry prospects. In a highly competitive environment, an industry with over 10% CAGR is quite good.

(2) Meanwhile, Inovance and Zhiguang Electric’s market shares increased. In 2024, Inovance became the domestic leader with 18.4% market share, while He Kang New Energy’s share fell to around 10%, dropping out of the top two domestically.

(3) Currently, the high-end application market for high-voltage inverters is dominated by international giants like ABB and Siemens. Domestic manufacturers face capacity constraints and limited product structures, making them less competitive in high-end segments. In other words, there is significant space and opportunity for domestic substitution.

However, He Kang New Energy has fallen behind, focusing on EPC.

Different profit motives lead to different strategies; different strategies lead to different resource allocations. Over the past five years, except for 2023, He Kang New Energy’s R&D investment as a percentage of revenue has been much lower than Inovance’s, making it unsurprising that it cannot compete effectively.

03

A dilutive private placement driven by lack of confidence

Recently, He Kang New Energy announced a private placement, but the purpose of this offering seems somewhat unclear.

Once, He Kang New Energy invested all resources into photovoltaic EPC, but now this is no longer its main business focus.

Recently, the company issued a new plan: it proposes to issue 288,234,136 A-shares to Midea Group at 5.7 yuan per share, raising 1.652 billion yuan.

From “He Kang New Energy: 2026 Private Placement Plan to Specific Targets”

All proceeds will be used for five major projects: high-voltage inverter R&D and industrialization (438.5067 million yuan), photovoltaic grid-connected inverter R&D and industrialization (436.9632 million yuan), residential energy storage system R&D and industrialization (292.3048 million yuan), distributed PV benchmark station construction (183.8069 million yuan), and supplementary working capital (300 million yuan).

The high-voltage inverter R&D and industrialization project aims to upgrade production lines through automation and intelligentization, eliminate outdated equipment, introduce automated assembly and intelligent testing systems, and build an intelligent manufacturing line for high-voltage inverters to enhance supply capacity.

What about the economic benefits of this project?

He Kang New Energy states: “Based on feasibility studies and project benefit assessments, this project has good economic prospects.”

Does He Kang New Energy truly value the currently highly competitive high-voltage inverter industry?

In fact, the company’s vague statements about the economic benefits of each project do not provide clear forecasts.

What return rate would be considered “good economic benefit”? For example, would a gross margin of 6-8% in photovoltaic EPC be considered good? Or is a gross margin more than ten percentage points lower than Inovance’s still acceptable?

He Kang New Energy’s confidence in refinancing is not as strong as that of photovoltaic companies. PV firms usually provide very clear estimates of project economic benefits when planning refinancing, even if market conditions change—there’s always a solid rationale and boldness in setting targets.

It’s worth noting that this is the second private placement plan since Midea Group’s control. In June 2023, He Kang New Energy disclosed a plan to raise about 1.473 billion yuan from Midea, but this was terminated in February 2025 due to strategic adjustments and market environment changes. Although the planned fundraise was 1.473 billion yuan, the total investment in several projects was 1.611 billion yuan.

Comparing these plans, investors might think: Midea has always intended to strengthen its controlling stake in He Kang New Energy; the funding support has been around 1.6 billion yuan.

For Midea, the attitude toward capital increase is clear—yet, what kind of company Midea envisions He Kang New Energy to become remains uncertain or perhaps unconsidered.

Chasing Carbon found in the private placement plan that projects include inverters and residential energy storage. If these projects are implemented, what kind of company will He Kang New Energy become? What position will it hold within Midea’s entire new energy strategic landscape?

In the new energy sector, Midea controls two companies besides He Kang New Energy: Kelu Electronics. How do these companies differ in positioning? How will their business strategies and synergies be managed? Rumors suggest Kelu Electronics mainly develops large-scale storage, while He Kang New Energy focuses on residential storage. As product boundaries blur, top energy storage companies—whether residential, commercial, or large-scale—are all about profitability. If they truly divide roles this way, what are the underlying considerations? Will there be future industry competition? Which company should Midea direct its energy storage resources to?

04

Midea Group finally awakens

Everyone knows that the high growth phase of photovoltaic EPC has come to an end…

According to Bloomberg New Energy Finance, China’s overall new photovoltaic installations are expected to decline in 2026, with an expected 264 GW on the AC side, as market saturation and policy adjustments impact the distributed PV sector, making it a key area of decline.

Goldman Sachs’s global outlook for 2026 is pessimistic, forecasting China’s new PV installations at 235 GW, down 17% year-over-year, with distributed PV suffering from high non-technical costs, shrinking returns, and weak demand from residential and industrial sectors.

The core official industry association in China predicts that in 2026, total new PV installations will drop from 315.07 GW in 2025 to between 180 and 240 GW, with distributed PV being particularly affected by new regulations, market reforms, and cautious sentiment.

Therefore, He Kang New Energy’s performance assessment has finally begun to change.

Perhaps Midea Group has finally realized that focusing only on revenue without considering profit can distort management. Consequently, in 2023 and 2025, He Kang New Energy conducted two more rounds of equity incentives, both including net profit indicators.

Postscript

Midea Group’s meticulous management in home appliances is well known and admired by Chasing Carbon. However, its acquisitions and management in the new energy sector—such as M&A integration and management evaluations—are surprisingly rough and strategy vague, which is quite shocking.

In fact, in the home appliance field where Midea excels, its M&A track record is impressive: acquiring Little Swan in 2008, doubling profits in three years, and achieving deep synergy with white goods; acquiring Toshiba’s white goods in 2011, quickly turning losses into profits through supply chain synergy, channel reuse, and management output—transforming acquisitions into core competitiveness.

But crossing into unfamiliar sectors reveals Midea’s shortcomings in ToB cross-sector M&A integration: the 2017 acquisition of KUKA took seven years to complete due to compliance constraints; the 2020 controlling stake in He Kang New Energy, which shifted away from its original core to photovoltaics and energy storage, has yet to reach the top tier and lost its main business; the 2022 takeover of Kelu Electronics took two years to clear debts and turn around.

Experiences tell us that difficulties are only understood through experience. Some may still remember Gree’s CEO joking at a SNEC conference about photovoltaic entrepreneurs. How has Gree itself performed? Gree invested nearly 3 billion yuan to control Yilun New Energy, but due to betting on non-mainstream lithium titanate technology and heavy debt burdens, despite high growth in the lithium battery industry in recent years, the company has yet to escape losses.

The reshuffle in photovoltaics is nearing its end, and more industry mergers and acquisitions are on the horizon. Many successful M&A cases exist—most famously, Tongwei’s acquisition of Silead, which made it a global leader in solar cells. But after this wave of rapid growth, high leverage and debt have made M&A more difficult. That’s why today’s focus on He Kang New Energy’s case aims to dissect a “sparrow” in the current photovoltaic M&A landscape.

Editor: Zhen Tan