Investment Rating - The report assigns a "Buy" rating to Weichai Power (2338 HK) with a target price of HKD 20.50, indicating a potential upside of 25.8% from the current price of HKD 16.30 [1][7][11]. Core Insights - Weichai Power's 1H25 performance was stable, with revenue of RMB 113.15 billion, a year-on-year increase of 0.6%. The net profit attributable to shareholders was RMB 56.43 billion, a decrease of 4.4% year-on-year. The company expects strong growth from its M series large-bore engines and data center engines, driven by increasing demand in these segments [2][8]. - The company is experiencing significant growth in its large-bore engine sales, with over 5,000 units sold, representing a 41% year-on-year increase. The sales of new energy heavy trucks surged by 255% year-on-year, with over 10,000 units sold [8]. - The report highlights the acceleration of overseas business expansion, with new orders from Kion Group amounting to EUR 6.21 billion in 1H25, setting a new quarterly record in 2Q25 [8]. Financial Overview - Revenue projections for Weichai Power are as follows: RMB 213.96 billion in 2023, RMB 215.69 billion in 2024, and RMB 237.92 billion in 2025, reflecting a compound annual growth rate (CAGR) of approximately 10.3% from 2024 to 2025 [3][13]. - The net profit is expected to grow from RMB 9.01 billion in 2023 to RMB 14.64 billion in 2025, with a significant year-on-year growth rate of 28.4% in 2025 [3][13]. - The report indicates a projected dividend yield of 6.5% in 2025, with a payout ratio expected to increase to 60% in the future, providing a strong safety margin for investors [8]. Market Position and Competitive Advantage - Weichai Power holds an estimated market share of 9-10% in the domestic data center engine market, with significant growth potential due to the increasing demand for AI data centers and the domestic replacement of foreign products [8]. - The company benefits from a short supply cycle, product reliability, and strong product capabilities, which are expected to enhance its market share in the high-margin large-bore engine segment [8].