Investment Rating - The report maintains a "Buy" rating for Weichai Power (2338 HK) with a target price raised to HKD 20.50, indicating a potential upside of 31.4% from the current price of HKD 15.60 [1][6][8]. Core Insights - Weichai Power's engine profits have shown strong growth, with a record high dividend payout ratio of 55%. The company is expected to achieve a revenue growth of 0.8% in 2024, reaching RMB 215.7 billion, driven by improved gross margins and a net profit increase of 26.5% to RMB 11.4 billion [2][6]. - The report highlights several catalysts for growth, including new subsidies to boost heavy truck demand, strong growth in data center engines, and robust demand for natural gas heavy trucks [6][10]. Financial Overview - Revenue projections for Weichai Power are as follows: - 2023: RMB 213.96 billion - 2024: RMB 215.69 billion (0.8% YoY growth) - 2025E: RMB 237.92 billion (10.3% YoY growth) - 2026E: RMB 254.83 billion (7.1% YoY growth) - 2027E: RMB 269.35 billion (5.7% YoY growth) [3][10]. - Net profit forecasts are: - 2023: RMB 9.01 billion - 2024: RMB 11.40 billion (26.5% YoY growth) - 2025E: RMB 14.64 billion (28.4% YoY growth) - 2026E: RMB 16.19 billion (10.6% YoY growth) - 2027E: RMB 17.77 billion (9.8% YoY growth) [3][10]. - The report notes a significant improvement in gross margin, which is expected to reach 22.4% in 2024, up from 21.1% in 2023 [11]. Market Position and Performance - Weichai Power's market share in the domestic heavy truck engine market is 38.7%, with a strong performance in high-end markets such as data centers, where sales of M-series engines grew by 148% [6][10]. - The company has maintained a stable market share despite a 5% decline in overall commercial vehicle demand in the domestic market [6][10]. Valuation Metrics - The report provides the following valuation metrics: - Price-to-Earnings (P/E) ratio for 2025E is projected at 11.5x, with a corresponding dividend yield of 6.6% [6][10]. - The book value per share is expected to be RMB 8.73 in 2025E, with a price-to-book (P/B) ratio of 2.4x [3][10].

Investment Rating - The report maintains a "Buy" rating for Weichai Power (2338 HK) with a target price raised to HKD 20.50, indicating a potential upside of 31.4% from the current price of HKD 15.60 [1][6][8]. Core Insights - Weichai Power's engine profits have shown strong growth, with a record high dividend payout ratio of 55%. The company is expected to achieve a revenue growth of 0.8% in 2024, reaching RMB 215.7 billion, driven by improved gross margins and a net profit increase of 26.5% to RMB 11.4 billion [2][6]. - The report highlights several catalysts for growth, including new subsidies to boost heavy truck demand, strong growth in data center engines, and robust demand for natural gas heavy trucks [6][10]. Financial Overview - Revenue projections for Weichai Power are as follows: - 2023: RMB 213.96 billion - 2024: RMB 215.69 billion (0.8% YoY growth) - 2025E: RMB 237.92 billion (10.3% YoY growth) - 2026E: RMB 254.83 billion (7.1% YoY growth) - 2027E: RMB 269.35 billion (5.7% YoY growth) [3][10]. - Net profit forecasts are: - 2023: RMB 9.01 billion - 2024: RMB 11.40 billion (26.5% YoY growth) - 2025E: RMB 14.64 billion (28.4% YoY growth) - 2026E: RMB 16.19 billion (10.6% YoY growth) - 2027E: RMB 17.77 billion (9.8% YoY growth) [3][10]. - The report notes a significant improvement in gross margin, which is expected to reach 22.4% in 2024, up from 21.1% in 2023 [11]. Market Position - Weichai Power's heavy truck engine sales are projected to remain stable, with a market share of 38.7% in the domestic market. The company has also seen a 148% increase in sales of data center products [6][10]. - The company has a market capitalization of approximately HKD 250.4 billion and has shown a year-to-date price change of 31.31% [5][10].

Financial Performance - Revenue for the year ended December 31, 2024, was approximately RMB 215,691 million, an increase of about 0.8% compared to the previous year[3] - Net profit attributable to shareholders of the parent company was approximately RMB 11,403 million, representing an increase of approximately 26.5%[3] - Basic earnings per share were approximately RMB 1.31, up by approximately 25.4%[3] - Operating profit for the year was RMB 17,321 million, compared to RMB 13,151 million in the previous year, reflecting a significant increase[4] - The company achieved a net profit of RMB 14,278 million, compared to RMB 11,212 million in the previous year, indicating strong overall performance[4] - Total revenue for 2024 reached CNY 15,730,343,333.20, an increase of 29.5% compared to CNY 12,173,391,466.12 in 2023[5] - Net profit attributable to shareholders for 2024 was CNY 1,535,060,989.93, up from CNY 375,112,554.70 in 2023, representing a significant growth[5] - Basic and diluted earnings per share for 2024 were both CNY 1.31, compared to CNY 1.04 in 2023, indicating a 26% increase[5] - The company reported a significant increase in other comprehensive income, with a net amount of CNY 1,709,743,990.92 in 2024 compared to CNY 450,995,017.09 in 2023[5] - The company’s net profit margin improved significantly, with profit growth outpacing revenue growth, indicating strong operational efficiency[73] Cost Management - The company reported a decrease in operating costs to RMB 167,305 million from RMB 170,437 million, indicating improved cost management[4] - Financial expenses decreased to RMB 230 million from RMB 560 million, showing improved financial management[4] - The cost of goods sold for the year was RMB 167,304,917,397.32, down from RMB 170,437,251,422.34, indicating a decrease of approximately 1.3%[45] - Selling expenses increased from approximately RMB 11,815 million in 2023 to about RMB 12,485 million in 2024, a rise of approximately 5.7%[100] - Management expenses rose from approximately RMB 9,457 million in 2023 to about RMB 10,259 million in 2024, an increase of about RMB 802 million or 8.5%[101] Asset Management - Total current assets decreased to CNY 184,749,684,708.12 in 2024 from CNY 197,925,301,358.43 in 2023, a decline of approximately 6.3%[6] - Cash and cash equivalents were CNY 72,066,926,728.68 in 2024, down from CNY 92,856,868,996.26 in 2023, reflecting a decrease of about 22.5%[6] - Accounts receivable increased to CNY 30,877,182,388.79 in 2024, up from CNY 23,753,999,010.24 in 2023, showing a growth of 29.5%[6] - Total non-current assets rose to CNY 159,129,727,839.42 in 2024, compared to CNY 136,321,911,666.48 in 2023, marking an increase of 16.7%[6] - The total assets of the company reached CNY 343,879,412,547.54 in 2024, up from CNY 334,247,213,024.91 in 2023, indicating a growth of 2%[6] Liabilities and Equity - Total liabilities increased slightly to approximately 221.92 billion from 221.56 billion year-over-year, reflecting a growth of 0.16%[7] - Current liabilities rose to approximately 154.84 billion, up from 146.05 billion, marking an increase of 6.03%[7] - Non-current liabilities decreased to approximately 67.08 billion from 75.51 billion, a decline of 11.43%[7] - Total equity attributable to shareholders increased to approximately 86.70 billion from 79.34 billion, representing a growth of 9.66%[8] - Retained earnings grew to approximately 59.85 billion from 55.18 billion, an increase of 8.83%[8] Market and Growth Strategy - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[4] - The company aims to enhance its competitive edge by focusing on high-end product development and expanding into overseas markets[82] - The company plans to accelerate the development of new energy business and strengthen integration with existing advantageous resources[82] - The company is committed to improving its governance and risk management systems to ensure operational stability[83] Research and Development - Research and development expenses were RMB 8,299 million, slightly up from RMB 8,045 million, highlighting continued investment in innovation[4] - The company invested over RMB 3.2 billion in R&D for the engine segment, with an R&D intensity of nearly 6%[91] - The company established the largest multi-source power comprehensive testing laboratory globally, enhancing its R&D capabilities[75] Shareholder Information - The company plans to distribute a cash dividend of RMB 3.47 per 10 shares for the 2024 fiscal year, based on a total of 8,715,671,296 shares[80] - The top five customers accounted for less than 30% of the total sales of the group during the year[162] - The top five suppliers accounted for less than 30% of the total purchases of the group during the year[163] Corporate Governance - The audit committee is composed of independent non-executive directors, chaired by Ms. Jiang Yan, who possesses appropriate professional qualifications as required by the Listing Rules[176] - The company has adhered to all provisions of the Corporate Governance Code as outlined in Appendix C1 of the Listing Rules during the year[177] - KPMG was appointed as the auditor on June 28, 2023, replacing Deloitte, and a resolution will be proposed at the upcoming annual general meeting to reappoint KPMG for the fiscal year 2025[180] Future Outlook - The company plans to achieve sales revenue of approximately RMB 226.5 billion to RMB 237.3 billion in 2025, representing a growth of 5% to 10% compared to 2024[97] - For 2025, the revenue target is set at RMB 231.2 billion, with a sales profit margin of at least 9%[167] - By 2026, the company expects to achieve a revenue of no less than RMB 258.9 billion, maintaining a sales profit margin of at least 9%[167]

Investment Rating - The report maintains a "Buy" rating for Weichai Power (2338 HK) with a target price of HKD 18.60, indicating a potential upside of 57.9% from the current price of HKD 11.78 [1][3][8]. Core Insights - Weichai Power's gross margin improved against the trend in Q3 2024, with a gross margin of 22.1%, exceeding expectations due to a decline in raw material prices. Despite a decrease in revenue and net profit, the performance was better than the overall heavy truck wholesale sales decline [1][2]. - The report highlights a recovery in logistics demand for heavy trucks in Q4 2024, driven by new policies supporting the replacement of old vehicles, particularly in major cities like Shanghai and Beijing [2][3]. - The valuation remains attractive, with projected P/E ratios of 7.8x for 2024 and 6.8x for 2025, alongside dividend yields of 7.2% and 7.9% respectively [3][5]. Financial Summary - For the fiscal year ending December 31, 2024, Weichai Power is expected to generate revenue of RMB 235.46 billion, a year-on-year growth of 10.1%. Net profit is projected at RMB 11.84 billion, reflecting a growth of 31.3% [5][9]. - The report outlines a significant increase in net profit from RMB 9.01 billion in 2023 to RMB 11.84 billion in 2024, with earnings per share expected to rise from RMB 1.05 to RMB 1.38 [5][9]. - The company’s gross profit margin is anticipated to improve from 18.7% in 2022 to 21.1% in 2024, indicating enhanced operational efficiency [9].

Financial Performance - Total revenue for Q3 2024 was CNY 49.46 billion, a decrease of 8.82% compared to CNY 54.25 billion in the same period last year[3] - Net profit attributable to shareholders was CNY 2.50 billion, down 4.00% from CNY 2.60 billion year-on-year[3] - Net profit excluding non-recurring items increased by 10.00% to CNY 2.23 billion from CNY 2.03 billion in the previous year[3] - Basic earnings per share for Q3 2024 was CNY 0.29, a decrease of 3.99% from CNY 0.30 in the same quarter last year[3] - The net profit for Q3 2024 reached CNY 10,341,880,125.59, an increase of 29.1% compared to CNY 7,996,994,567.86 in Q3 2023[11] - The total revenue from operating activities was CNY 165,451,846,515.08, up from CNY 154,412,319,124.49 in the previous year, reflecting a growth of 7.1%[13] - The operating profit for Q3 2024 was CNY 12,553,387,150.51, an increase of 33.0% from CNY 9,396,597,108.89 in Q3 2023[11] - The total comprehensive income for the period was CNY 11,368,422,799.80, compared to CNY 9,487,763,277.59, representing a growth of 19.9%[12] Cash Flow and Liquidity - Operating cash flow for the year-to-date period was CNY 13.52 billion, a decline of 32.72% compared to CNY 20.09 billion last year[3] - The cash flow from operating activities showed a net inflow of CNY 13,515,538,061.25, down from CNY 20,088,767,771.42, a decrease of 32.9%[13] - The company's cash and cash equivalents decreased to ¥64.77 billion from ¥92.86 billion at the beginning of the period, representing a decline of approximately 30.3%[8] - The net decrease in cash and cash equivalents was CNY -24,722,462,726.69, compared to an increase of CNY 7,248,800,602.35 in the prior year[14] - The ending balance of cash and cash equivalents was CNY 46,897,849,599.24, down from CNY 70,009,878,376.33 at the end of the previous period[14] Assets and Liabilities - Total assets at the end of the reporting period were CNY 334.25 billion, an increase of 2.86% from the previous year-end[3] - Total assets increased to ¥343.81 billion from ¥334.25 billion, marking a growth of approximately 2.3%[10] - Total liabilities rose to ¥222.56 billion from ¥221.56 billion, indicating a slight increase of about 0.5%[10] - The company's equity attributable to shareholders increased to ¥86.41 billion from ¥79.34 billion, reflecting a growth of approximately 8.5%[10] Shareholder Information - As of September 30, 2024, the total number of ordinary shareholders is 254,416, with the largest shareholder, Hong Kong Central Clearing Agent Co., holding 22.22% of shares[6] - The top ten shareholders collectively hold a significant portion of the company's shares, with the second-largest shareholder, Weichai Holding Group Co., Ltd., owning 16.30%[6] - The total number of shares held by the top ten unrestricted shareholders amounts to 2.66 billion shares, indicating a strong concentration of ownership[6] - The company reported that the number of shares held by shareholders with limited sale conditions includes 1.35 billion shares pledged or frozen[6] Operational Metrics - The company experienced a 33.60% increase in operating profit year-to-date, reaching CNY 1.26 billion compared to CNY 939.66 million last year[5] - Total operating costs decreased to ¥150.30 billion from ¥151.22 billion, reflecting a reduction of about 0.6%[10] - Inventory decreased to ¥34.70 billion from ¥37.93 billion, a decline of about 8.0%[9] - Accounts receivable rose to ¥34.25 billion, compared to ¥23.75 billion at the beginning of the period, reflecting an increase of about 44.4%[8] - Accounts receivable financing increased to ¥8.90 billion from ¥8.14 billion, showing a growth of approximately 9.4%[9] Research and Development - Research and development expenses increased to CNY 6,205,675,437.50, compared to CNY 5,650,409,153.82, marking an increase of 9.8%[11] Financial Expenses - The financial expenses decreased to CNY 387,696,200.04 from CNY 526,422,587.50, a reduction of 26.4%[11] Other Financial Metrics - Non-recurring gains for the quarter totaled CNY 266.39 million, with government subsidies contributing CNY 310.16 million[4] - The total cash outflow from investment activities was CNY 71,572,329,814.62, significantly higher than CNY 32,941,476,054.73 in the prior year[14] - The net cash flow from investment activities was CNY -30,005,948,084.26, worsening from CNY -3,701,715,396.58 year-over-year[14] - The total cash inflow from financing activities was CNY 6,585,541,928.47, down from CNY 7,813,071,684.86 in the previous period[14] - Cash outflow from financing activities totaled CNY 14,760,423,007.36, compared to CNY 16,959,708,766.55 in the prior year[14] - The net cash flow from financing activities was CNY -8,174,881,078.89, an improvement from CNY -9,146,637,081.69 year-over-year[14] Audit Status - The third quarter report was not audited[14]

Share Issuance and Listing - The total number of issued shares as of 30 June 2024 is 8,726,556,821, consisting of 6,783,516,821 A Shares and 1,943,040,000 H Shares[11] - The company's A Shares are listed on the Shenzhen Stock Exchange with the stock code 000338, and H Shares are listed on the Hong Kong Stock Exchange with the stock code 2338[11] - The company's H-Share registrar and transfer office in Hong Kong is Computershare Hong Kong Investor Services Limited[10] Company Address and Banking - The company's registered address and headquarters are located at 197, Section A, Fu Shou East Street, High Technology Industrial Development Zone, Weifang, Shandong Province, China[4] - The company's principal bankers include Industrial and Commercial Bank of China, China Construction Bank Corporation, Bank of China, and HSBC[9] Committees and Governance - The company's audit committee is chaired by Jiang Yan, with members including Chi Deqiang, Zhao Fuquan, Xu Bing, and Tao Huaan (appointed on 10 May 2024)[6] - The company's strategic development and investment committee is chaired by Ma Changhai (appointed on 12 August 2024), with Michael Martin Macht as vice-chairman[6] - The company's remuneration committee is chaired by Jiang Yan, with members including Zhang Liangfu and Zhao Fuquan[6] - The company's nomination committee is chaired by Chi Deqiang, with members including Ma Changhai and Xu Bing[7] Financial Performance - Revenue amounted to approximately RMB112,490 million, an increase of approximately 6.0%[14] - Net profit attributable to the shareholders of the parent amounted to approximately RMB5,903 million, an increase of approximately 51.4%[14] - Basic earnings per share was approximately RMB0.68, an increase of approximately 51.4%[14] - Revenue increased by 6.0% to approximately RMB112,490 million in the first half of the year compared to the same period in 2023[23] - Net profit attributable to shareholders rose by 51.4% to approximately RMB5,903 million, with basic earnings per share also increasing by 51.4% to RMB0.68[23] - Total revenue for the first half of 2024 reached RMB 112.49 billion, a 6% increase compared to RMB 106.14 billion in the same period of 2023[113] - Net profit attributable to shareholders of the parent company was RMB 5.90 billion, up 51.4% from RMB 3.90 billion in the first half of 2023[113] - Operating profit increased by 60.2% to RMB 8.95 billion, compared to RMB 5.59 billion in the same period last year[113] Industry Performance - Heavy-duty truck industry achieved a sales volume of 504,000 units, representing a slight year-on-year increase of 3.3%[21] - Construction machinery industry achieved sales of approximately 377,000 units, representing a year-on-year decrease of approximately 6%[21] - Agricultural equipment industry sales volume amounted to approximately 235,000 units, representing a year-on-year increase of approximately 6%[21] - Global industrial truck market order numbers in the first half of 2024 were comparable with those in the corresponding period last year[21] - Americas market for supply chain solutions recorded a slight growth, driven by rebounded demand in the U.S.[21] - EMEA and APAC regions saw customer investment in warehouse automation slow down due to economic uncertainties[21] Technological Advancements - Breakthroughs in key technologies of CVT hydraulic unit, control system, and integrated design were achieved, forming a significant differentiated advantage in hydraulic powertrains for construction machinery[22] - The company's new energy business developed heavy-duty and light-duty truck power battery products with long driving range and mass application[39] - The 220-platform high-speed flat wire motor was mass-produced for light-duty trucks, mine trucks, and heavy-duty trucks[39] - High-power fuel cells for high-speed trunk logistics scenarios were developed, with system power increased to 300kW[39] - Solid oxide fuel cells achieved a maximum power generation efficiency exceeding 60% and combined heat and power efficiency exceeding 90%[39] Sales and Market Share - Engine sales volume reached 400,000 units, a year-on-year increase of 9.8%, with domestic market share of natural gas heavy-duty engines at 63.1% and 6x4 tractor engines with 500hp or above at 44.6%[24] - Gear box sales volume increased by 12.1% to 477,000 units, and axle sales volume grew by 18.7% to 428,000 units[24] - Domestic revenue of high-end hydraulic products grew by 6.6% to RMB530 million[24] - Engine business contributed sales revenue of approximately RMB24,904 million, a year-on-year increase of 6.6%[25][26] - Commercial vehicle sales volume increased by 3.6% to 63,000 units, with gas vehicle sales surging by 134.3% to over 17,000 units[28] - Export volume reached 30,000 units, capturing a 20% market share, the highest level in the same period of previous years[28] - New energy vehicle sales doubled year-on-year to 2,840 units, with hydrogen-fueled electric heavy-duty trucks leading the industry[28] - Agricultural equipment business contributed sales revenue of approximately RMB10,618 million[32] - Agricultural equipment sales revenue increased by 28% year-on-year, reaching a historical high[34] - Overseas export sales volume of agricultural machinery products grew by 68% year-on-year[34] - Tractors with horsepower above 100 accounted for 42.3% of total agricultural equipment sales, up 8.3 percentage points year-on-year[34] KION Group Performance - KION Group achieved a record-high revenue of EUR5.74 billion, a 2.1% year-on-year increase[36] - Adjusted EBIT for KION Group increased by 28.3% year-on-year to EUR450 million[36] - KION's forklift business generated EUR4.31 billion in revenue, while the supply chain solution business contributed EUR1.45 billion[36] Financial Metrics and Expenses - Revenue for the first half of 2024 was approximately RMB112,490 million, a 6% increase from RMB106,135 million in the same period in 2023[42] - Principal operations revenue increased by 6.9% to approximately RMB111,665 million from RMB104,410 million in the corresponding period last year[42] - Gross operating margin rebounded to 21.7%, an increase of 3.0 percentage points compared to the same period last year[42] - Distribution and selling expenses increased by 10.9% to approximately RMB6,127 million from RMB5,526 million in the corresponding period of 2023[43] - General and administrative expenses increased by 10.2% to approximately RMB5,095 million from RMB4,624 million in the corresponding period of 2023[43] - EBIT increased by 52.5% to approximately RMB10,792 million from RMB7,077 million in the corresponding period last year[43] - EBIT margin improved from 6.7% in the corresponding period of 2023 to 9.6% during the Period[43] - Finance expenses increased by RMB10 million, representing a year-on-year increase of 47.9%, mainly due to foreign exchange losses from Euro fluctuations and higher interest rates on lease payables and operating financing funds[44] - Provision for impairment during the period amounted to approximately RMB747 million, including RMB375 million for credit losses, RMB368 million for inventory decline, and RMB4 million for fixed assets, right-of-use, and contract assets[44] - Income tax expenses increased by 60.4% to approximately RMB1,542 million, driven by a significant rise in total profit, with the average effective tax rate rising from 16.7% to 17.3%[44] - Net profit for the period was approximately RMB7,374 million, a 54.1% increase from the corresponding period last year, with net profit margin rising to 6.6% from 4.5%[47] - Net cash inflows from operating activities amounted to approximately RMB12,802 million, a year-on-year decrease of RMB90 million, partly used for debt repayment and business expansion[47] - As of 30 June 2024, the Group's net cash position was RMB27,104 million, down from RMB36,368 million at the end of 2023[47] - The Group's gearing ratio decreased to 22.4% as of 30 June 2024, compared to 23.8% at the end of 2023[47] - Total assets of the Group as of 30 June 2024 were approximately RMB343,596 million, with current assets accounting for approximately RMB189,319 million[48] - The Group's cash and bank balance as of 30 June 2024 was approximately RMB75,323 million, down from RMB92,857 million as of 31 December 2023[48] - Total liabilities as of 30 June 2024 amounted to approximately RMB225,212 million, with current liabilities at approximately RMB150,915 million[48] - The Group's current ratio was approximately 1.25x as of 30 June 2024, compared to 1.35x as of 31 December 2023[48] - Total equity as of 30 June 2024 was approximately RMB118,385 million, with RMB83,981 million attributable to equity holders of the Company[48] - The Group's borrowings as of 30 June 2024 totaled approximately RMB34,250 million, including bonds of RMB8,624 million and bank borrowings of RMB24,825 million[48] - Bank borrowings repayable within one year or on demand were approximately RMB7,458 million, while those repayable within more than one year but not exceeding two years were approximately RMB8,648 million[51] - Bonds payable within one year were approximately RMB1,361 million, and those payable within more than one year but not exceeding two years were approximately RMB4,187 million[51] - The Group's revenue is primarily in Renminbi and Euro, and the company does not consider its currency risk significant[51] - The Group's capital management objectives focus on maintaining going concern, a sound capital ratio, and maximizing shareholder value, with an unchanged overall strategy from prior years[51] - Bank deposits, notes receivable, and other non-current assets pledged amounted to approximately RMB22,730 million as of 30 June 2024, down from RMB27,635 million as of 31 December 2023[52] - Fixed assets, long-term receivables, and accounts receivable pledged totaled approximately RMB10,337 million as of 30 June 2024, up from RMB9,587 million as of 31 December 2023[52] - Bank guarantees provided to distributors and agents increased to approximately RMB433 million as of 30 June 2024, up from RMB286 million as of 31 December 2023[52] - Buy-back guarantee liability risk exposure rose to approximately RMB3,941 million as of 30 June 2024, up from RMB2,802 million as of 31 December 2023[52] - Capital commitments decreased to approximately RMB6,731 million as of 30 June 2024, down from RMB13,000 million as of 31 December 2023[53] - Total intangible assets amounted to approximately RMB22,424 million as of 30 June 2024, with land use rights at RMB2,880 million and trademark rights at RMB8,036 million[53] - Intangible assets from in-house R&D accounted for 25.47% of the total intangible assets balance as of 30 June 2024[53] Cash Flow and Hedging - The total cash flow of the hedged item amounted to RMB 4,491,525,423.74 (EUR 586,230,917.91), with RMB 3,721,336,386.20 (EUR 485,706,355.80) due within 1 year and the remaining portion due in 2025[54] - The loss on fair value changes of the hedging instrument included in other comprehensive income amounted to RMB 51,545,588.51 (EUR 6,580,000.00), with RMB 814,702.31 (EUR 104,000.00) transferred to profit or loss for the period[54] - Weichai Power (Hong Kong) International Development Co., Limited conducted cash flow hedging on EUR 241 million of floating rate borrowings, with a loss on fair value changes of RMB 33,821,493.75 (EUR 4,370,002.38) included in other comprehensive income[54] - KION entered into interest rate swap contracts for fair value hedging on fixed-rate medium-term notes with a par value of EUR 100,000,000.00, presenting a book value of RMB 595,168,517.70 (EUR 77,681,000.00) as non-current liabilities due within one year[56] - The adjustment of the fair value change of hedged items included in the carrying amount was RMB 3,534,157.00 (EUR 458,000.00)[56] - KION signed an amortised interest rate swap contract to hedge the interest rate risk of lease receivables, with a carrying amount of RMB 19,631,129,531.40 (EUR 2,562,242,000.00) and an accumulative adjustment of RMB 127,574,966.70 (EUR 16,651,000.00)[56] - The change in fair value of the ineffective portion of the hedged item during the period amounted to RMB 37,043,554.56 (EUR 4,861,000.00)[56] Employee and Training - The Group had approximately 95,000 employees as of 30 June 2024, including 42,000 employees from KION, with total remuneration paid during the period amounting to approximately RMB18,389 million[57] - Training expenses incurred during the period totaled approximately RMB14 million[57] - The Company implemented a restricted share incentive scheme for A Shares, targeting directors, senior management, middle management, and core technical staff, with shares granted at a fixed number upon fulfillment of unlocking conditions[57] Dividends and Share Issuance - The Company approved a cash dividend of RMB3.72 (including tax) per 10 shares, based on the total number of shares eligible for profit distribution on the future record date[58] - The non-public issuance of A Shares was completed on 31 May 2021, with 792,682,926 A Shares issued at RMB16.40 per share, raising a total of RMB12,999,999,986.40[60] - The issue price of RMB16.40 per A Share represented a premium of approximately 9.26% over the benchmarked price of HK$18.02 (equivalent to RMB15.01)[60] Investment Projects - Fuel Cell Industry Chain Development Project has a total investment of RMB 2,000 million, with RMB 835.51 million already utilized and RMB 1,164.49 million remaining[69] - H platform engines intelligent manufacturing upgrade project has a total investment of RMB 1,000 million, with RMB 640.21 million already utilized and RMB 359.79 million remaining[70] - New million units digitalised power industry base stage I project has a total investment of RMB 3,000 million, with RMB 1,155.09 million already utilized and RMB 1,844.91 million remaining[71] - Large diameter high-end engine industrialisation project has a total investment of RMB 1,075 million, with RMB 662.07 million already utilized and RMB 412.93 million remaining[80] - High efficiency and high speed self-owned brand engine industrialisation project has a total investment of RMB 685 million, with RMB 554.57 million already utilized and RMB 130.43 million remaining[82] - Large diameter high-end engine development project has a total investment of RMB 1,240 million, with RMB 793.77 million already utilized and RMB 446.23 million remaining[83] - Full Series hydraulic pressure powertrain and large-scale CVT powertrain industrialisation project has a total investment of RMB 3,000 million, with RMB 1,247.78 million already utilized and RMB 1,752.22 million remaining[85] - Replenishment of working capital has a total investment of RMB 1,000 million, with RMB 800.72 million already utilized and RMB 199.28 million remaining, expected to be fully utilized by the end of 2027[86][87] - Total investment across all projects is RMB 13,000 million, with RMB 6,310.28 million already utilized and RMB 6,689.72 million remaining[88] - The total unutilised proceeds net of expenses amounted to RMB 6,298.34 million, with remaining proceeds of approximately RMB 7 billion expected to be used for relevant investment projects[89] - The company expects to fully utilise proceeds for projects (1)(a), (1)(b), (1)(c), (2)(a), (3)(a), and (3)(c) by the end of 2027, and for projects (2)(b) and (4) by the end of 2026[89] Strategic and Operational Plans - The company temporarily terminated the proposed spin-off and separate listing of Weichai Lovol on the ChiNext Board, which is not expected to have a substantial impact on operations or financial positions[90] - The global economy is expected to shift to a new equilibrium state with stronger-than-expected growth in emerging markets, while China's economy is expected to maintain stability with policy support[91] - The commercial vehicle industry is expected to maintain growth in the second half of 2024, with opportunities arising from intelligentisation and electrification for the company's "Three New" businesses[91] - The company plans to consolidate its leading edge in natural gas engines and achieve breakthroughs in strategic businesses such as generator sets for large-scale data centers[94] - The company will increase R&D investment, strengthen technical research on key components, and focus on improving the risk resistance capability of the supply chain[94] - The company aims to improve the performance parameters of "three electric" products and fuel cells to create differentiated advantages in new energy products[94] - The company will accelerate digital transformation, break down barriers in core systems, and achieve full data communication across all business domains[94] - The company will focus on major equipment upgrading, technological transformation, and project construction to accelerate the release of new quality productivity[94] Financial Position and Liabilities - Total current liabilities increased to RMB 150.91 billion

Investment Rating - The report maintains a "Buy" rating for Weichai Power (2338 HK) with a target price of HKD 18.60, indicating a potential upside of 52.2% from the current price of HKD 12.22 [1][2][6]. Core Insights - Weichai Power's performance in the first half of 2024 showed revenue of RMB 112.49 billion, a year-on-year increase of 6.0%, and a net profit attributable to shareholders of RMB 5.903 billion, up 51.4% year-on-year. The growth in net profit outpaced revenue growth due to improved gross margins and effective cost control [1][4]. - The company experienced a significant increase in the sales of natural gas heavy-duty truck engines, with a year-on-year growth of 92.5%, capturing a market share of 63.1% in this segment. This trend is expected to continue due to stricter environmental regulations and increased subsidies for vehicle replacements [1][2]. - The report highlights that Weichai Power's diversified business model and international expansion contribute to a high certainty of continued profitability improvement in the second half of 2024 [2][4]. Financial Overview - For the fiscal year ending December 31, 2024, Weichai Power is projected to achieve revenue of RMB 235.46 billion, representing a year-on-year growth of 10.1%. The net profit is expected to reach RMB 11.84 billion, with a significant increase in earnings per share to RMB 1.38 [4][7]. - The company's gross margin improved to 21.7%, an increase of 3 percentage points year-on-year, while the combined sales, management, and R&D expenses accounted for 13.8% of revenue, remaining stable compared to the previous year [1][4]. - The interim cash dividend payout ratio increased to 55%, up from 50.6% in 2023, reflecting the company's strong cash flow position [1][4]. Market Position - Weichai Power holds a leading position in the heavy-duty truck engine market, with a market share of 40.5%, bolstered by its dominance in the natural gas engine segment [1][2]. - The report notes that the stock price has adjusted following the resignation of the chairman, presenting an attractive valuation opportunity for investors [2][6].

Financial Performance - Revenue for the six months ended June 30, 2024, was approximately RMB 112,490 million, representing a growth of about 6.0% compared to the previous period[3]. - Net profit attributable to shareholders of the parent company was approximately RMB 5,903 million, an increase of approximately 51.4%[3]. - Basic earnings per share were approximately RMB 0.68, reflecting a growth of approximately 51.4%[4]. - Operating profit for the period was RMB 8,954 million, compared to RMB 5,590 million in the previous period[3]. - Total comprehensive income attributable to shareholders of the parent company was RMB 7,102 million, compared to RMB 5,176 million in the previous period[4]. - The total profit before tax was RMB 8,916 million, compared to RMB 5,747 million in the previous period[3]. - The company reported a significant increase in other income, totaling RMB 630 million, compared to RMB 128 million in the previous period[3]. - The company reported a significant increase in revenue, with a year-over-year growth of 15% in the last quarter[11]. - The pre-tax profit for the current period was approximately ¥8.92 billion, reflecting a significant increase compared to the previous period's profit of ¥5.75 billion[17]. - The net profit attributable to ordinary shareholders for the period was approximately 5.90 billion, up from 3.90 billion in the previous year, reflecting an increase of about 51.5%[40]. Assets and Liabilities - As of June 30, 2024, total assets amounted to RMB 343.60 billion, an increase from RMB 334.25 billion as of December 31, 2023, representing a growth of approximately 0.40%[5][6]. - Total liabilities increased to RMB 225.21 billion from RMB 221.56 billion, reflecting a growth of about 1.48%[6]. - Current liabilities totaled RMB 150.91 billion, up from RMB 146.05 billion, indicating an increase of approximately 3.93%[6]. - Shareholders' equity rose to RMB 118.38 billion from RMB 112.69 billion, marking an increase of approximately 5.06%[6]. - The company reported a significant increase in accounts receivable, which rose to RMB 31.25 billion from RMB 23.75 billion, a growth of about 31.00%[5]. - The company’s long-term receivables increased to RMB 14.54 billion from RMB 13.51 billion, reflecting a growth of approximately 7.67%[5]. - The total equity attributable to shareholders increased to RMB 83.98 billion from RMB 79.34 billion, an increase of about 5.00%[6]. Research and Development - Research and development expenses increased to RMB 4,302 million, up from RMB 3,721 million in the previous period[3]. - The company is investing in new technology development, allocating $50 million for R&D in the upcoming year[15]. - The new energy business is focused on developing differentiated competitive advantages in "three new" products, including high-efficiency power batteries[60]. - The company is advancing the commercialization of solid oxide fuel cells, achieving a maximum power generation efficiency exceeding 60%[60]. Market and Sales Performance - User data showed an increase in active users, reaching 50 million, representing a 10% growth compared to the previous quarter[12]. - New product launches are expected to contribute an additional $200 million in revenue over the next fiscal year[14]. - Market expansion plans include entering three new international markets by the end of the fiscal year[11]. - The company completed a strategic acquisition, enhancing its market position and expected to generate $30 million in synergies[12]. - The company sold 400,000 engines, marking a year-on-year increase of 9.8%, with a domestic market share of 63.1% for natural gas heavy-duty engines[55]. - The sales of gearboxes reached 477,000 units, reflecting a year-on-year growth of 12.1%[55]. - The sales of axles amounted to 428,000 units, which is an increase of 18.7% compared to the previous year[55]. - The total sales revenue from the engine business contributed approximately RMB 24,904 million, with a year-on-year growth of about 6.6%[56]. - The agricultural equipment industry saw sales of approximately 235,000 units, reflecting a year-on-year growth of about 6%[52]. - The smart logistics segment generated revenue of EUR 5.74 billion, a year-on-year increase of 2.1%, achieving a historical high for the same period[59]. Financial Management and Expenses - The company’s financial expenses included interest expenses of RMB 1,875 million, up from RMB 1,330 million in the previous period[3]. - Selling expenses rose to approximately RMB 6,127 million, an increase of about RMB 601 million or 10.9% from RMB 5,526 million in the same period last year, primarily due to increased employee costs and market expansion expenses[63]. - The income tax expense for the period was approximately RMB 1,542 million, an increase of about 60.4% from RMB 962 million in the same period last year, reflecting a stable effective tax rate of approximately 17.3%[68]. Shareholder Information - The company declared an interim cash dividend of RMB 3.72 per 10 shares, based on a total of 8,717,561,296 shares eligible for profit distribution[42]. - The company has implemented a restricted stock incentive plan to attract and retain talent, approved on November 13, 2023[81]. - The company reported a total share capital of 8,726,556,821 shares, with a cash dividend of RMB 2.93 per 10 shares for the 2023 fiscal year[109]. - The company plans to distribute a cash dividend of RMB 3.72 per 10 shares for the mid-year 2024 distribution, based on a total of 8,717,561,296 shares eligible for profit distribution[109]. Strategic Outlook - The company provided an optimistic outlook for the next quarter, projecting a revenue increase of 20%[13]. - The global economy is expected to transition to a new equilibrium state balancing inflation and growth in the second half of 2024, with strong growth anticipated in large emerging markets and developing economies[90]. - The company aims to deepen reforms and enhance vitality, focusing on transformation and upgrading to achieve high-quality development while meeting budget targets[91]. - Continued investment in R&D will be prioritized to strengthen key component technologies and improve supply chain risk resistance, aiming for significant enhancements in product quality[91].

Investment Rating - The report maintains a "BUY" rating for Weichai Power with a target price of HK$22.00, indicating a potential upside of 33.3% from the current price of HK$16.50 [4]. Core Insights - Weichai Power's net profit for 1Q24 increased by 40% year-on-year to RMB2.6 billion, driven by margin expansion in both its core business and KION Group [2]. - The revenue growth of 6% year-on-year to RMB56.4 billion in 1Q24 was below expectations, but the earnings growth was in line with forecasts [2]. - The company is positioned as a sector top pick due to its significant market share in natural gas engines and the expected structural growth from high-speed large-bore engines [2]. Financial Performance Summary - 1Q24 revenue was RMB56.4 billion, with a gross margin expansion of 3.4 percentage points year-on-year to 22.1% [2][6]. - Pre-tax profit surged by 58% year-on-year to RMB4.2 billion, with the core business and KION reporting growth rates of 45% and 93% respectively [2]. - Operating cash flow improved significantly to RMB1.6 billion in 1Q24, compared to an outflow of RMB471 million in 1Q23 [2]. KION Group Performance - KION, in which Weichai holds a 46.5% stake, reported an adjusted EBIT of EUR227 million in 1Q24, a 46% increase year-on-year, attributed to easing cost pressures [2][7]. - KION has set a full-year adjusted EBIT target of EUR790-940 million, reflecting a potential growth of 0-19% year-on-year [2][7]. Market Position and Sales - Weichai's multi-cylinder engine sales grew by 13% year-on-year to 206,000 units in 1Q24, outperforming the industry average, which saw a decline of approximately 1% [2][8]. - The company holds a market share of around 18% in the multi-cylinder engine segment, an increase of 2.3 percentage points year-on-year [2][8]. Earnings Forecast - Revenue projections for Weichai Power are as follows: FY24E at RMB236.3 billion, FY25E at RMB250.1 billion, and FY26E at RMB260.0 billion, with respective year-on-year growth rates of 10.4%, 5.8%, and 4.0% [3][13]. - Adjusted net profit estimates are RMB12.1 billion for FY24E, RMB13.1 billion for FY25E, and RMB13.8 billion for FY26E, reflecting growth rates of 34.4%, 7.7%, and 5.5% respectively [3][13].

Investment Rating - The report maintains a "Buy" rating for Weichai Power with a target price of HKD 22.00, indicating a potential upside of 33.3% from the current price of HKD 16.50 [2][3]. Core Insights - Weichai Power's Q1 2024 net profit increased by 40% year-on-year to RMB 2.6 billion, driven by core business growth and margin expansion, despite a 6% revenue growth that was below expectations [2]. - The company is expected to benefit from a significant price gap between natural gas and diesel, which is likely to drive demand for natural gas engines, with market share projected to exceed 60% [2]. - The sales volume of Weichai's engines outperformed the industry average, with a 13% year-on-year increase in multi-cylinder sales, reaching 206,000 units, while the industry average saw a decline of approximately 1% [2]. Financial Summary - Revenue for FY 2023 is projected at RMB 213.96 billion, with a year-on-year growth of 22.2%. For FY 2024, revenue is expected to reach RMB 236.29 billion, reflecting a growth of 10.4% [3][13]. - Adjusted net profit for FY 2024 is estimated at RMB 12.12 billion, with an EPS of RMB 1.39, representing a year-on-year growth of 34.4% [3][13]. - The company’s gross margin improved by 3.4 percentage points to 22.1% in Q1 2024, while the pre-tax profit surged by 58% to RMB 4.2 billion [2][6]. KION Group Performance - KION Group, in which Weichai holds a 46.5% stake, reported a 46% year-on-year increase in adjusted EBIT to EUR 22.7 million for Q1 2024, benefiting from alleviated cost pressures [2][8]. - KION has guided for an adjusted EBIT target for the full year of EUR 790 to 940 million, reflecting a year-on-year growth of 0% to 19% [2][8]. Market Position and Growth Drivers - The demand for Weichai's natural gas engines is expected to remain strong due to the ongoing construction of data centers, which will support the growth of high-speed large-caliber engines [2]. - The company’s market share in the multi-cylinder engine segment has increased by 2.3 percentage points to approximately 18% [2]. Valuation Metrics - The report highlights a price-to-earnings ratio (P/E) of 14.8 for FY 2023, projected to decrease to 11.0 for FY 2024, indicating a favorable valuation trend [3][13]. - The price-to-book ratio (P/B) is expected to decline from 1.7 in FY 2023 to 1.5 in FY 2024, suggesting an attractive investment opportunity [3][13].