Southwest Securities·2024-03-27 16:00Investment Rating - The report maintains a "Buy" rating for Weichai Power (000338) with a target price of 19.95 CNY over the next six months [1][11]. Core Views - Weichai Power's 2023 annual report shows a significant increase in revenue and profit, with total revenue reaching 213.96 billion CNY, up 22.2% year-on-year, and net profit attributable to shareholders at 9.01 billion CNY, up 83.8% year-on-year [2][3]. - The company has benefited from the recovery in the heavy truck industry, with commercial vehicle sales reaching 4.031 million units, a 22.1% increase year-on-year, and heavy truck engine sales up 96.0% year-on-year [2][3]. - The report highlights the strong performance of natural gas heavy trucks, which saw a 307% increase in sales, indicating a sustained demand for this segment [2][3]. Summary by Sections Financial Performance - In Q4 2023, Weichai Power achieved revenue of 53.58 billion CNY, a 20% increase year-on-year, and a net profit of 2.51 billion CNY, a 57.7% increase year-on-year [2]. - The company expects a compound annual growth rate (CAGR) of 20.4% in net profit from 2024 to 2026, with projected net profits of 11.59 billion CNY, 13.70 billion CNY, and 15.73 billion CNY for those years respectively [3][4]. Market Opportunities - The report emphasizes the structural opportunities in the industry, particularly the optimization of product structure, which is expected to support future profit growth [2][3]. - The company is expanding its high-margin products, particularly in the large-bore and high-power segments, which are anticipated to play a crucial role in enhancing profitability [2][3]. Competitive Position - Weichai Power's market share in natural gas heavy truck engines has reached 65%, reflecting its strong competitive position in this segment [2]. - The report compares Weichai Power's valuation with peers, suggesting a target price based on a 15x PE ratio for 2024, indicating confidence in the company's growth trajectory [11].