Weichai Power(02338) 招银国际·2024-04-30 02:27Investment 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].