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26 March 2026 | 9:40AM HKT Equity Research Weichai Power (000338.SZ): Read-across from Generac's investor day Generac (GNRC, Not Covered) – a global leader in backup power systems and a key US partner of Weichai Power (via Baudouin‑branded large‑bore diesel engines) hosted its 2026 Investor Day on Mar 25. Compared to the management commentary post its 4Q25 results (see our read-across note), incremental developments in data center business include: 1) backlog further rose to ~US$700mn compared to US$400mn a ...

Group 1: Market Reactions - The FTSE 100 index fell by 150 points to 9,768, marking its lowest level in three months, reflecting investor concerns over geopolitical tensions and economic impacts [4][5][8] - Precious metals miners, including Endeavour and Fresnillo, experienced declines of around 4% due to falling gold and silver prices, while copper miner Antofagasta dropped by 3.3% [5] - Financial stocks such as M&G, Standard Life, St James's Place, and Prudential saw declines of 2.5%-3%, indicating a broader market reaction to the ongoing geopolitical situation [6] Group 2: Geopolitical Developments - The situation in Iran remains tense, with President Trump warning that Iran must fully open the Strait of Hormuz within 48 hours or face severe consequences, including the obliteration of its power plants [2][3] - Iran has threatened to target U.S. and Israeli infrastructure in the region if its energy infrastructure is attacked, suggesting a potential escalation in conflict [3] - U.S. Treasury yields rose by 13 basis points to 4.38%, the highest since July, indicating market sensitivity to geopolitical developments and potential implications for U.S. economic policy [4]

Core Insights - The demand for electricity driven by artificial intelligence (AI) is reshaping the energy landscape, with data centers evolving into significant energy consumers requiring gigawatts of reliable power [2][13] - Engine manufacturers are responding to this demand with rapid deployment of gigawatt-scale projects and advanced technologies that enhance power generation capabilities [3][12] Group 1: AI-Driven Power Consumption - AI workloads create rapid fluctuations in power demand, necessitating fast-response generation solutions that traditional data centers do not require [1] - Major technology companies are increasingly adopting behind-the-meter generation solutions to ensure power quality and reliability for AI operations [1] Group 2: Market Transformation - The reciprocating engine market is experiencing a fundamental shift, with significant orders such as INNIO Group's 2.3 GW project and Caterpillar's multiple gigawatt-scale agreements [3][12] - Engine manufacturers are securing contracts that were previously considered improbable, indicating a structural transformation in the market rather than a cyclical one [13] Group 3: Fast-Start Technology - Fast-start capability is becoming a standard requirement for data center applications, with modern gas engines able to reach full output in seconds or minutes [5][6] - Rolls-Royce and INNIO are introducing engines with enhanced fast-start capabilities, which are critical for meeting the dynamic power needs of data centers [5][6] Group 4: Supporting Grid Stability - Engine power plants are addressing broader grid reliability challenges, particularly as renewable energy sources become more prevalent [7] - The flexibility of reciprocating engines allows them to balance intermittent renewable output, creating substantial market opportunities [7] Group 5: Sustainability and Future Fuels - Environmental performance is increasingly central to engine manufacturers' value propositions, with companies like Rolls-Royce developing environmental product declarations for their systems [10] - Many manufacturers are preparing for future fuel pathways, including hydrogen, to reduce emissions and enhance sustainability [10] Group 6: Strategic Partnerships - Engine manufacturers are forming strategic partnerships to enhance deployment efficiency and optimize energy solutions for data centers [11] - Collaborations, such as that between Vertiv and Caterpillar, aim to simplify deployment and accelerate time-to-power for data center operations [11] Group 7: Manufacturing Capacity Expansion - The surge in demand has led to significant investments in manufacturing capacity, with companies like Wärtsilä expanding production to meet the growing needs of the market [12] - Caterpillar is also enhancing its manufacturing footprint to deliver generation packages more quickly, which is critical for data center developers [12] Group 8: Critical Infrastructure Applications - Engine power plants are securing critical infrastructure worldwide, with applications extending beyond data centers to airports, hospitals, and industrial plants [14] - The versatility of engine technology is demonstrated by contracts for backup power systems in demanding environments, showcasing their reliability and adaptability [14]

Market Overview - The market reaction to the Supreme Court ruling against Liberation Day tariffs was relatively muted, indicating ongoing investor uncertainty [2][4]. - The Dow Jones Industrial Average ended the day up by about 0.5%, while the S&P 500 increased by approximately 0.7% [7]. - The Russell 2000, which includes small-cap stocks, finished unchanged, reflecting a divergence in market performance [8]. Sector Performance - The communications services sector was the biggest gainer, up by about 2.7%, driven by Alphabet [9]. - Energy and healthcare sectors were the only ones to finish in the red, with energy down about 0.7% and healthcare down about 0.3% [10]. - Overall, 334 names in the S&P 500 saw gains, with 169 declining [8]. Individual Stock Highlights - FDX (Comfort Systems) was the top gainer in the S&P 500, hitting an all-time high with a gain of about 6.5% [11]. - General Electric also reached an all-time high, closing up about 2.5% [13]. - Alphabet was the top gainer in the NASDAQ 100, increasing by about 4%, as the company explores new markets for its AI chips [15]. Company-Specific News - Blue Owl shares fell by 4% due to concerns over liquidity in private credit, following the restriction of withdrawals from one of its funds [17]. - Wal-Mart's stock decreased by 1.5% after a recommendation cut from HSBC, despite solid fourth-quarter results [20]. - CoreWeave shares dropped by 8% amid fears regarding financing for a $4 billion data project [22].

Core Viewpoint - The U.S. Food and Drug Administration (FDA) has declined to approve Disc Medicine's experimental drug bitopertin for treating erythropoietic protoporphyria, leading to a significant drop in the company's stock price by 31.6% to $48.90 [1]. Company Summary - Disc Medicine was seeking FDA approval for bitopertin, aimed at treating a rare genetic metabolic disorder caused by a deficiency of the ferrochelatase enzyme [1]. - The primary symptom of erythropoietic protoporphyria is hypersensitivity of the skin to sunlight [1].

Core Viewpoint - United Airlines' A350 order faces new uncertainty due to a dispute with engine supplier Rolls-Royce, raising questions about the delivery timeline and the future of the order [1]. Group 1: Order Background - The A350 order dates back to 2009 and has undergone multiple changes and deferrals over the years [1]. - United Airlines has indicated that the delivery timeline for 45 A350 jets has been dropped, with no expected arrival date provided [1]. Group 2: Engine Contract Dispute - United Airlines claims that Rolls-Royce breached their long-term contract, which includes a $175 million upfront payment made in 2017 [1]. - Rolls-Royce denies any breach of contract and asserts that it has complied with its obligations [1]. - Both companies are currently in a dispute over financial claims, with each party alleging that the other owes them money [1]. Group 3: Implications for Stakeholders - The dispute between United Airlines and Rolls-Royce could have implications for Airbus, as the A350 order involves complex relationships among the airline, the aircraft manufacturer, and the engine supplier [1]. - United Airlines is considering the potential impact of the dispute on its long-term widebody replacement needs, particularly regarding older Boeing 767s and 777s [1]. - Speculation exists that United may cancel the A350 order or convert it to other Airbus aircraft, such as the A321neo family [1].

Core Viewpoint - SpaceX is considering a dual-class share structure for its planned IPO this year, which could value the company at over $1.5 trillion [1]. Group 1: IPO Details - The dual-class share structure would allow for different voting rights, typically granting greater voting power to founders or early investors [1]. - SpaceX is in the process of adding members to its board of directors to oversee the IPO and expand Musk's space ambitions beyond its main rocket and satellite business [1]. - Ongoing deliberations may lead to changes in the details of the IPO [1]. Group 2: Elon Musk's Influence - Elon Musk has indicated that he needs to maintain a significant stake, approximately 25%, to exert sufficient voting influence, although Tesla does not currently have a dual-class voting structure [1].

Core Insights - Ryanair, Europe's largest budget airline, has entered into a multi-year, multi-billion dollar agreement with CFM, a French-U.S. engine manufacturer, for engine material services [1] Company Summary - Ryanair is recognized as the largest budget airline in Europe, indicating its significant market presence and operational scale [1] - CFM is a joint venture between General Electric and Safran, specializing in aircraft engines, which highlights its expertise and technological capabilities in the aviation sector [1] Industry Summary - The deal between Ryanair and CFM reflects ongoing trends in the aviation industry, where airlines are increasingly investing in long-term partnerships for essential services [1] - The multi-billion dollar nature of the agreement underscores the substantial financial commitments involved in the aviation supply chain, particularly in engine services [1]

Economic Data - Non-farm payroll employment in the U.S. increased by 64,000 jobs in November, following a decline of 105,000 jobs in October, surpassing economists' expectations of a 50,000 job increase [2][20] - The unemployment rate rose to 4.6 percent in November from 4.4 percent in September, higher than the anticipated increase to 4.5 percent [2][21] - Retail sales in the U.S. were virtually unchanged in October, after a downwardly revised increase of 0.1 percent in September, while economists had expected a rise of 0.2 percent [3][21][22] - Excluding motor vehicle and parts dealers, retail sales increased by 0.4 percent in October, compared to a 0.1 percent rise in September, with expectations of a 0.3 percent increase for ex-auto sales [3][22] Stock Market Performance - Major U.S. stock indices showed a lack of direction, ending the previous session modestly lower, with the Nasdaq down 0.6 percent, S&P 500 down 0.2 percent, and Dow down 0.1 percent [4][5] - Initial buying interest was observed as traders sought to acquire stocks at reduced levels, but concerns over AI spending impacted stocks like Broadcom and Oracle [5][6] - The NYSE Arca Computer Hardware Index fell by 2.9 percent, reflecting a broader pullback in computer hardware stocks [6][7] International Markets - Asian stocks fell broadly as investors awaited U.S. jobs and inflation data, with the Shanghai Composite Index down 1.1 percent and the Hang Seng Index down 1.5 percent [10][11] - Japanese stocks declined, with the Nikkei 225 Index dropping 1.6 percent, influenced by a stronger yen and expectations of a Bank of Japan rate increase [12][13] - South Korean stocks also fell, with the Kospi down 2.2 percent amid concerns over AI sector profitability [14] European Markets - European stock markets exhibited mixed performance, with the French CAC 40 Index up by 0.1 percent, while the German DAX Index and the U.K.'s FTSE 100 Index were down by 0.3 percent and 0.5 percent, respectively [16] - The U.K. unemployment rate rose slightly to 5.1 percent in the three months to October, with average earnings excluding bonuses growing by 4.6 percent year-over-year [17]