Weichai Power(02338) 交银国际证券·2024-08-27 11:09Investment 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].