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000338Weichai Power(000338)2025-05-29 14:12

Investment Rating - The report maintains an "Overweight" (OW) rating for Weichai Power with a price target of HK22.00fortheHsharesandRmb24.00fortheAshares,bothwithatargetdateofDecember31,2026[4][13].CoreInsights−WeichaiPowerispositionedasagrowthstockwithintheheavy−dutytruck(HDT)andenginemarkets,anticipatingdouble−digityear−on−yearmonthlysalesgrowthduetotheChinaIVHDTtrade−inprogramstartinginJune/July2025[2][3].−Thecompanyismakingsignificantadvancementsinlarge−boreenginesandAIDataCenter(AIDC)engines,targetingsalesof10,000−12,000unitsin2025,withagoalofcapturinga1022.00 for the H shares and Rmb24.00 for the A shares, both with a target date of December 31, 2026 [4][13]. Core Insights - Weichai Power is positioned as a growth stock within the heavy-duty truck (HDT) and engine markets, anticipating double-digit year-on-year monthly sales growth due to the China IV HDT trade-in program starting in June/July 2025 [2][3]. - The company is making significant advancements in large-bore engines and AI Data Center (AIDC) engines, targeting sales of 10,000-12,000 units in 2025, with a goal of capturing a 10% market share in China and 5% globally for AIDC engines [7][8]. - Weichai is enhancing its new energy capabilities through collaboration with BYD, focusing on electric HDT solutions and leveraging technology and customer resources to drive growth [2][7]. Summary by Sections Heavy-Duty Truck Market - China's domestic HDT sales are expected to increase significantly due to the trade-in program, with management projecting full-year sales to reach approximately 1 million units, implying a 15-20% year-on-year growth for the remaining months of 2025 [3][4]. - Weichai holds a dominant market share of around 60% in the domestic LNG HDT engine market, positioning itself to benefit from the increased demand for LNG trucks [3][4]. Engine Development - Weichai aims to sell 1,000-1,200 AIDC units in 2025, significantly increasing from 400 units in 2024, with a production capacity expansion to 4,000 units planned for the long term [7][8]. - The company produced nearly 200 AIDC power engines in Q1 2025, with 55% of these engines destined for overseas markets, indicating strong international demand [7]. New Energy Initiatives - Weichai anticipates that EV penetration in China will reach around 30% in the medium term, up from 20% year-to-date, while addressing challenges related to long-distance EVs [7][8]. - The Yantai New Energy Industrial Park Phase I is set to produce electric solutions for various vehicle types, marking a significant step in Weichai's strategic transition towards new energy [7][8]. Valuation - The price target of HK22.00 for Weichai Power's H shares and Rmb24.00 for A shares is based on a discounted cash flow (DCF) valuation, with a weighted average cost of capital (WACC) of 9.4% [9][14].