Summary of Weichai Power (000338.SZ) Conference Call Company Overview - **Weichai Power** is the largest manufacturer of internal combustion engines in China, holding approximately **18%** market share in the diesel engine segment. The company operates in several key verticals including commercial vehicles (mainly heavy-duty trucks), construction machinery, agricultural equipment, marine, and power generation [6][7]. Financial Performance - Following the **3Q25 results**, Weichai Power's **2025E-27E EPS estimates** have been raised by **4-5%** due to better-than-expected profitability [1][5]. - The updated **12-month target price** is set at **HK$21.00/Rmb20.3** for Weichai's H/A shares, reflecting a potential upside of **35.7%** for A-shares and **30.8%** for H-shares [11][8]. Revenue and Profit Estimates - The revenue estimates for 2025E, 2026E, and 2027E are **Rmb227,748 million**, **Rmb248,893 million**, and **Rmb266,214 million**, respectively [5]. - Net profit estimates for the same years are **Rmb12,047 million**, **Rmb14,453 million**, and **Rmb16,430 million** [5]. Investment Thesis - The investment thesis is based on a positive cyclical outlook for heavy-duty trucks as supply and demand rebalance, alongside stronger profitability from a more profitable engine portfolio [7]. - Weichai's exposure to European capital expenditure through KION is expected to shift from headwinds to tailwinds, enhancing long-term earnings prospects [7]. - The company is projected to have a robust free cash flow profile, which, combined with a strong net cash position, should improve shareholder returns [7]. Risks - Key risks include: 1. Slower-than-expected macroeconomic activity, particularly in road freight, infrastructure, and property [9]. 2. Weaker-than-expected global economic growth [10]. 3. Shift towards higher electrification in powertrains, impacting internal combustion engine market size [10]. 4. Weaker performance in the heavy-duty truck engine market share [10]. 5. Slower development in the large-bore engine business [10]. Valuation Methodology - Weichai's H-share is valued at **11.5x 2026E EPS**, aligning with its long-term mid-cycle average of **11x**. This reflects improving earnings prospects and a promising outlook for KION, balanced against the long-term impact of truck electrification [8]. Conclusion - Weichai Power is positioned for growth with a strong market presence and diversified business portfolio. The raised earnings estimates and target price indicate a favorable investment opportunity, despite the outlined risks. The company is rated as a **Buy** for both A- and H-shares [1][7].