Weichai Power(02338) 交银国际证券·2024-03-27 16:00Investment 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 26.7% from the current price of HKD 14.68 [1][6]. Core Insights - Weichai Power's net profit for 2023 increased by 84% year-on-year to RMB 9 billion, aligning with the previously announced profit range of RMB 8.58 billion to RMB 9.32 billion [1]. - The company's revenue grew by 22.2% to RMB 213.96 billion, with an improved gross margin of 21.1%, up from 17.8% in 2022 [1][5]. - The fourth quarter of 2023 saw a net profit increase of 58% year-on-year to RMB 2.5 billion, driven by a 20% revenue growth to RMB 53.6 billion and a gross margin increase of 3.3 percentage points to 23.7% [1]. - The dividend payout ratio has risen to 50% for 2023, up from 40% in 2022, with a final dividend of RMB 0.293 per share [1]. Financial Overview - Revenue and Profit Forecasts: - 2022: Revenue of RMB 175.16 billion, Net Profit of RMB 4.91 billion - 2023: Revenue of RMB 213.96 billion, Net Profit of RMB 9.01 billion - 2024E: Revenue of RMB 235.46 billion, Net Profit of RMB 11.84 billion - 2025E: Revenue of RMB 252.95 billion, Net Profit of RMB 13.71 billion - 2026E: Revenue of RMB 269.54 billion, Net Profit of RMB 14.85 billion [4][7]. - Earnings Per Share (EPS) is projected to grow from RMB 1.05 in 2023 to RMB 1.38 in 2024E, reflecting a year-on-year growth of 31.3% [4][7]. - The price-to-earnings (P/E) ratio is expected to decrease from 12.9 in 2023 to 9.8 in 2024E, indicating improved valuation metrics [4][7]. Business Segment Performance - The engine business experienced a robust recovery with a revenue increase of 55% year-on-year to RMB 60.8 billion, and segment profit surged 1.7 times to RMB 7.7 billion [1]. - Forklift production and warehouse technology services saw a tenfold profit increase to RMB 4.9 billion, benefiting from a low base effect [1]. - The demand for natural gas engines is expected to remain strong, with Weichai holding nearly 70% market share in this segment [1]. Market Position and Outlook - The report anticipates continued growth in heavy-duty truck engine sales, supported by a replacement cycle and strong demand for natural gas trucks [1]. - The overseas business, particularly through Kion Group, is expected to recover, contributing positively to revenue and profit growth [1].