Goldman Sachs has issued a research report indicating an upgrade to its earnings per share forecast for Weichai Power (02338) for the years 2026 to 2030 by 1% to 4%. This adjustment is primarily driven by a more robust outlook for the company's AI Data Center (AIDC) power generation business than previously anticipated, which is expected to sufficiently offset the impact of declining profit margins in the traditional Heavy-Duty Truck (HDT) engine segment. The firm reaffirmed its "Buy" rating on Weichai Power and raised its target valuation, increasing the target price for the H-shares to HK$41 and for the A-shares (000338.SZ) to 38 Chinese yuan, up from previous targets of HK$37 and 34 yuan, respectively. This new valuation implies a consolidated price-to-earnings ratio of 22 times for the current year, compared to 20 times previously. Goldman Sachs believes the transformation of the company's engine business portfolio will accelerate. It is projected that by 2028, AIDC power generation will contribute one-third of the company's net profit, surpassing the contribution from the HDT engine business. By 2030, this share is expected to reach 40%, amounting to approximately 11 billion Chinese yuan, which is equivalent to the company's current net profit scale.
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