Yamato: Reiterate "Buy" rating on Weichai Power (02338) with target price lowered to HKD 16.

Daiwa issued a research report stating that the demand outlook for liquefied natural gas (LNG) heavy trucks in the second half of the year is bleak, putting pressure on the gross profit margin of Weichai Power (02338) engine business in the second half of the year. The target price was lowered from HK$17.9 to HK$16, but the "buy" rating was reiterated due to its undervaluation. The report pointed out that the retail volume of LNG heavy trucks in August was 12,300 vehicles, a year-on-year decrease of 35% and a month-on-month decrease of 31%. The bank expects that the full year retail volume of LNG heavy trucks will reach 205,000 units, accounting for approximately 31% of the domestic heavy truck market. Due to the lower than expected demand outlook for domestic heavy trucks, Daiwa lowered its revenue forecast for Weichai Power for 2024 to 2026 by 0.5% to 0.7%. Due to the possibility of lower profitability in the engine business, the gross profit margin forecast for 2024 to 2026 was lowered by 0.5 to 0.8 percentage points.