Weichai Power(SZ:000338)2025-04-07 12:55Weichai Power (000338.SZ) Conference Call Summary Company Overview - Company: Weichai Power (000338.SZ) - Market Cap: Rmb143.2 billion / $19.7 billion - Enterprise Value: Rmb160.5 billion / $22.1 billion - Current Price: Rmb16.41 - 12-Month Price Target: Rmb24.00 (Upside: 46.3%) [1] Key Industry Insights - Heavy-Duty Truck (HDT) Engine Market: The market is expected to contract due to truck electrification and reduced mid-cycle demand, but Weichai's earnings power is improving cycle-over-cycle, which is underappreciated by the market [35][39]. - LNG HDT Penetration: Expected to reach 36% by 2030, benefiting Weichai due to its dominant position in LNG engines [50]. - European Capex Outlook: KION, Weichai's subsidiary, is expected to benefit from Germany's €400 billion infrastructure investment, improving the medium-term outlook for Weichai [20]. Financial Performance and Projections - Earnings Estimates: EPS estimates for 2025E-2027E raised by 16-21%, now 6-18% ahead of consensus [1]. - Revenue Growth: Projected revenue growth from Rmb215.7 billion in 2024 to Rmb269.9 billion in 2027 [5]. - Net Profit: Expected to nearly double by 2030E compared to 2024, with peak engine earnings projected to be 1.4x higher than the previous cycle peak [19][46]. - Unit Net Profit: Expected to reach Rmb24,000 by 2030E, significantly higher than the long-term average [40][46]. Investment Thesis - Undervalued Core Engine Business: The market has focused on volume outlook rather than profitability, leading to an undervaluation of Weichai's core engine business [35]. - Structural Profitability Improvements: Weichai has managed to double its engine unit net profit during the current cycle, with a more profitable engine portfolio [18][39]. - Strong Free Cash Flow: Projected free cash flow yield of ~10-20% over 2025E-2027E, supported by a strong net cash position [1]. Risks and Considerations - Market Perception: The long-term overhang from truck electrification may continue to affect stock valuation despite improving earnings prospects [1]. - KION's Near-Term Challenges: One-off expenses related to headcount optimization may impact KION's near-term performance, although the consensus earnings downgrade cycle appears to have ended [20][31]. Conclusion - Recommendation: The stock is viewed as deeply undervalued with a reiteration of the Buy rating, supported by strong earnings potential and improving market conditions [1].