Weichai Power Summary (2338 HK/000338 CH)
Core Content
Weichai Power reported a significant increase in net profit for the first half of 2026, growing by 36% YoY to RMB7.7bn, with a net profit of RMB4.6bn in 2Q26, a 57% increase YoY. The growth in 2Q26 was driven by investment income and improved expense management. Despite a modest 9% YoY revenue growth, the company's power-related engines, particularly AIDC backup power engines, showed strong performance, with sales surging 1.3x YoY.
Main Points
- Net Profit Growth: Weichai's net profit in 1H26 grew 36% YoY to RMB7.7bn, indicating a strong performance driven by investment income and expense control.
- AIDC Contribution: AIDC backup power engine sales rose 1.3x YoY, contributing significantly to the overall profit growth.
- Segment Performance:
- Engine Segment: Total engine sales increased 15% YoY to 415k units, with exports growing 18% YoY to 44k units. However, the segment EBIT dropped 2% YoY to RMB5.4bn, and the segment margin decreased by 2.5ppt YoY to 14.6%.
- HDT Segment: Delivered 76k units in 1H26, up 4% YoY. Despite slow volume growth, the EBIT surged 4.6x YoY to RMB1.4bn, with a segment margin expanding 3.2ppt YoY to 3.9%.
- Forklifts & Supply Chain Solution (KION Group): EBIT recovered, rising 2.1x YoY to RMB3bn, with a segment margin of 6.6% in 1H26.
- Valuation:
- The target price (TP) for Weichai H/A remains unchanged at HK$45.1/RMB40.2.
- The stock is rated as "BUY" with a potential return of over 15% over the next 12 months.
- Financial Performance:
- Revenue is projected to grow steadily from 2023 to 2028, with a 1H26 revenue of RMB215,691mn and a YoY growth of 9%.
- Adjusted net profit is expected to increase from RMB11,403.3mn in FY24A to RMB19,354mn in FY28E.
- Earnings per share (EPS) are projected to rise from RMB1.25 in FY24A to RMB2.22 in FY28E.
- P/E ratio is expected to decrease from 20.7 in FY24A to 12.2 in FY28E.
- P/B ratio is expected to decline from 2.7 in FY24A to 2.0 in FY28E.
- Dividend yield is forecasted to increase from 2.7% in FY24A to 4.5% in FY28E.
- Key Risks:
- Lower-than-expected AIDC power demand.
- Unexpected slowdown in HDT engine demand.
- Increase in raw material costs.
- Investment Highlights:
- Weichai remains a key pick in the Capital Goods sector.
- The company maintains a strong market position with its traditional business and power engines.
- The SOTP-based valuation suggests a target equity value of RMB351,201mn, with a breakdown showing 55.3% from traditional business and 41.2% from power engines.
- Weichai holds significant stakes in KION Group (46.5%), Ballard Power Systems (20%), and Ceres Power (~17.8%).
Key Financial Metrics
| Metric |
FY24A (RMB mn) |
FY25A (RMB mn) |
FY26E (RMB mn) |
FY27E (RMB mn) |
FY28E (RMB mn) |
| Revenue |
215,691 |
231,809 |
251,331 |
267,680 |
283,746 |
| Adjusted Net Profit |
11,403.3 |
10,930.8 |
14,430.3 |
17,072.0 |
19,353.8 |
| EPS (Reported) |
1.31 |
1.25 |
1.66 |
1.96 |
2.22 |
| P/E |
20.7 |
21.6 |
16.4 |
13.8 |
12.2 |
| P/B |
2.7 |
2.5 |
2.3 |
2.1 |
2.0 |
| Dividend Yield (%) |
2.7 |
0.0 |
3.4 |
4.0 |
4.5 |
| Net Gearing (%) |
-38.8 |
-37.1 |
-42.9 |
-58.6 |
-76.0 |
Segment Profit and Margin
| Segment |
FY24A (RMB mn) |
FY25A (RMB mn) |
FY26E (RMB mn) |
FY27E (RMB mn) |
FY28E (RMB mn) |
Segment Margin (ppt) |
| Diesel engines |
10,395 |
10,608 |
13,499 |
16,755 |
19,270 |
17.5% to 19.5% |
| Automobiles and major components |
563 |
1,420 |
1,097 |
1,133 |
1,169 |
0.9% to 1.5% |
| Forklifts & supply chain solution |
5,971 |
3,869 |
5,741 |
5,914 |
6,091 |
6.7% to 6.0% |
| Agricultural machinery |
796 |
801 |
865 |
909 |
954 |
4.3% to 4.3% |
| Total segment profit |
17,115 |
15,396 |
20,495 |
23,955 |
26,682 |
7.9% to 9.4% |
Key Assumptions for 2026E
| Segment |
2026E (RMB mn) |
Growth YoY (%) |
| HDT and machinery engine |
59,917 |
8.4% |
| Power related engine |
17,223 |
8.4% |
| Large bore engine |
9,736 |
8.4% |
| AIDC |
8,008 |
8.4% |
| Non-AIDC |
1,728 |
8.4% |
| Non-large bore power related engines |
7,487 |
8.4% |
| Diesel engines |
77,140 |
8.4% |
| Automobiles and major components |
73,134 |
8.4% |
| Forklifts & supply chain solution |
95,688 |
8.4% |
| Agricultural machinery |
20,127 |
8.4% |
Stock Performance
| Period |
2338 HK (Abs.) |
2338 HK (Rel.) |
000338 CH (Abs.) |
000338 CH (Rel.) |
| 1-mth |
-6.6% |
-7.9% |
-5.1% |
-4.3% |
| 3-mth |
-25.1% |
-25.8% |
-21.8% |
-19.9% |
| 6-mth |
-3.1% |
0.9% |
-3.1% |
-0.6% |
Stock Data
| Metric |
2338 HK (mn) |
000338 CH (mn) |
| Market Cap |
61,114.4 |
182,830.26 |
| Avg 3 mths t/o |
632.17 |
3,117.55 |
| 52w High |
44.66 |
35.34 |
| 52w Low |
13.8 |
13.77 |
| Issued Shares |
1,934 |
6,774 |
Analyst Ratings
- BUY: Stock with potential return of over 15% over the next 12 months.
- HOLD: Stock with potential return of +15% to -10% over the next 12 months.
- SELL: Stock with potential loss of over 10% over the next 12 months.
- OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
- MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
- UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.
Analyst Certification
The research analyst certifies that the views expressed in the report accurately reflect their personal views and that they have no financial interest in the stocks covered. The analyst also confirms that they have not traded in the stocks covered within 30 days prior to the report's issue and will not do so within 3 business days after the issue.
Important Disclosures
- There are risks involved in transacting in any securities.
- The information in this report is not individually tailored and is based on publicly available data.
- Past performance does not guarantee future results.
- The value of investments is uncertain and may fluctuate due to market conditions.
- CMBIGM is not liable for any losses incurred from reliance on the report.
- The information is provided for general informational purposes only.
