20240327-招银国际-潍柴动力-02338.HK-Key_takeaways_from_post-results_call_7页_1mb

Analysis Summary of Weichai Power (2338 HK) Report

Weichai Power's post-results call highlights key expectations for 2024E HDT demand, which is forecasted at ~900k units, down 2% YoY. China demand is expected to decrease 10% YoY to 600k units, while exports are projected to grow 20% YoY to 300k units. In the long term, HDT demand (China + exports) is anticipated to stabilize between 800-900k units annually, with reduced peak levels due to weak construction truck demand linked to low property investment.

Natural gas HDTs are expected to see increased penetration due to low LNG prices from weak gas demand and supply growth. Weichai has a strong market share (65% in 2023) in this segment.

The combined fleet size of medium-to-heavy-duty trucks (HDT + MDT) is ~9.6mn units, with the phase-out of NES III trucks via government subsidies anticipated to drive replacement demand.

Industry consolidation may reduce HDT manufacturers to four major players, each achieving ~150-200k unit sales. High-speed large-bore engines are a key growth driver for Weichai, with global sales increasing to 2MW and beyond, expected to hit a US$20bn market by 2030. Weichai delivered 8k units in 2023, capturing ~10% share of the large-bore engine market (~80k units in 2023).

Weichai is rated "BUY" with a SOTP-based target price of HK$22 (44.5% upside from current HK$15.22). Key financial metrics include revenue growth (from FY23A to FY26E), improving profit margins, and valuation metrics like P/E and P/B ratios showing upside. Risks include potential weakness in engine exports, lower-than-expected replacement demand, and increases in component costs.