Macquarie's "Outperform" rating on Weichai Power (02338) with a target price lowered to 18.7 Hong Kong dollars.

Macquarie released a research report stating that the management of Weichai Power (02338) has confirmed the establishment of a joint venture company with BYD COMPANY (01211) (holding about 49% stake) to develop new batteries, and it will be put into operation in the first half of this year. As these batteries are mainly used for short-haul transport, the bank estimates that they will not be a significant driver of growth. The bank maintains its profit forecast for Weichai, with a target price lowered by 13% to HK$18.7, and a "outperform" rating. The report stated that the management of Weichai Power expects China's heavy truck sales to increase by about 10% year-on-year to 1 million units this year, mainly due to strong domestic demand and stable export demand. The management also confirmed that sales of large-bore engines last year may only reach 8,000 units, similar to the level in 2023, which is relative to the earlier target of a 50% growth. Furthermore, the bank pointed out that due to intensifying competition, Weichai's market share in the liquefied natural gas (LNG) heavy truck market decreased from 65% in the first half of the year to 63%, the management confirmed that the market share stabilised in the fourth quarter of last year. However, the bank believes that the growth potential of Weichai's LNG heavy trucks is limited. The company expects the domestic penetration rate of LNG heavy trucks to increase from 30% in 2024 to over 30% in 2025.