Bank of America Securities: Maintains "buy" rating on Weichai Power (02338) and raises target price to HK$17.7

Bank of America Securities released a research report stating that it maintains a "buy" rating on Weichai Power (02338) and has raised the target price from 16.4 Hong Kong dollars to 17.7 Hong Kong dollars. With mainland cloud service providers and internet giants increasing their investment in artificial intelligence infrastructure in 2025 and 2026, the demand for backup diesel generators in data centers will significantly increase, providing better growth prospects for Weichai's large engine business. The bank predicts that demand for diesel engines in Chinese data centers will increase by 45% in 2025, leading to potential price increases and extended delivery times due to limited production capacity. As one of the major suppliers of diesel engines for Chinese data centers, Weichai will benefit from the strong industry demand growth. The bank forecasts that Weichai's sales of large engines will reach 4.3 billion yuan in 2025, a year-on-year increase of 44%, and will reach 5.2 billion yuan in 2026, a year-on-year increase of 21%, accounting for 2% of total sales. Due to the gross profit margin of diesel engines in data centers being more than 10 percentage points higher than that of traditional diesel engines, the strong sales growth will slightly increase Weichai's overall gross profit margin.