Founder: Infrastructure construction drives the expansion of the diesel market, and the process of localization ushering in a leap opportunity.

Founder released a research report stating that the relevant infrastructure industry chain is expected to benefit significantly from the intensive construction cycle of Artificial Intelligence Data Centers (AIDC). With the continuous growth in AIDC investment, it is expected that the market size of AIDC diesel engines will increase from 86 billion yuan in 2024 to over 400 billion yuan in 2027, with an average annual growth rate exceeding 68%. There is a significant domestic supply gap for 2MW high-power diesel engines that meet the requirements, and domestic manufacturers are expected to rapidly increase their market share by leveraging comprehensive advantages. In addition, core components will become key for capacity assurance and cost reduction, and it is recommended to focus on key component companies with tight supply and accelerating entry into the supply chain of top customers. Founder's main viewpoints are as follows: Continuous investment in AIDC empowers the infrastructure industry chain and enters a fast growth lane. Since the launch of ChatGPT at the end of 2022, there has been a trend of large-scale model training in the country. Internet companies represented by ByteDance, Alibaba, Tencent, Baidu, and Huawei quickly followed suit, driving the demand for AI data centers, with the focus of investment shifting from traditional computing to AI computing. By 2024, the investment scale of AI data centers in China has exceeded 187.5 billion yuan, and from 2025, leading companies continue to increase their investment. It is expected that by 2027, the overall scale will reach 482.6 billion yuan, and the relevant infrastructure industry chain is expected to benefit significantly from the intensive construction cycle of AIDC. Inflexible configuration of AI data centers, diesel engine units enter a golden expansion period. Data centers generally use a "grid power + UPS + diesel generator set" power supply architecture. UPS provides millisecond-level switching to cope with short interruptions, while diesel engine units provide long-term continuous power supply, complementing each other to constitute the core backup guarantee for stable operation of data centers. China's current design specifications mainly follow the "Data Center Design Code GB50174-2017", in which diesel engine units are a mandatory configuration of redundant backup power supply. High-end data center diesel engine units have high value, accounting for approximately 7%-10% of the total CAPEX. With the continuous growth in AIDC investment, it is expected that the market size of AIDC diesel engines will increase from 86 billion yuan in 2024 to over 400 billion yuan in 2027, with an average annual growth rate exceeding 68%. Supply and demand resonate, domestic substitution accelerates, providing local manufacturers with an opportunity to increase market share. The high-end data center diesel engine market is still dominated by foreign brands, with Cummins, MTU, and Caterpillar accounting for about 65% of the market share, while domestic OEM manufacturers generally have a market share of less than 10%. The market barriers are high, but domestic brands have significant price advantages and perform well in terms of delivery flexibility and production capacity response. In addition, there is a significant domestic supply gap for 2MW high-power diesel engines that meet the requirements. The global development of AI intensifies the bottleneck in imported unit supply, lengthening overseas delivery cycles, while domestic manufacturers can meet delivery periods of less than one year. Domestic manufacturers are expected to rapidly increase their market share by leveraging comprehensive advantages. Closely grasping the heart of diesel engines, accelerating the independence and control of high-power engines and core components. High-power engines are the core cost item of diesel engine units, accounting for over 60% of the BOM. Currently, this field is dominated by the three major foreign players Cummins, MTU, and Caterpillar, with a combined market share of over 75%. In a downstream high prosperity cycle, OEM manufacturers have an urgent need to control costs, and domestic engine prices are 15%-30% lower than foreign ones. The substitution process is expected to accelerate, with leading domestic companies such as Weichai and Yuchai likely to rapidly increase their market share. At the same time, diesel engines are complex in structure, and as demand continues to increase, core components will become key for capacity assurance and cost reduction. It is recommended to focus on key component companies with tight supply and accelerating entry into the supply chain of top customers. Related targets: 1) Diesel engine units: Weichai Heavy Machinery, Shanghai Cooltech Power, Tellhow Sci-Tech, Sumec Corporation; 2) Complete engine: Weichai Power, Yuchai International, CHONGQING M&E, Anhui Quanchai Engine, Shanghai New Power Automotive Technology; 3) Core components: Xiangyang Changyuandonggu Industry, Power HF Co., Ltd., Allied Machinery, Tianrun Industry Technology, Guilin Fuda Co., Ltd., Weifu High-Technology Group, Hunan Meihu Intelligent Manufacturing, Feilong Auto Components, Bohai Automotive Systems, etc. Risk warning: AIDC capital expenditures are lower than expected; domestic substitution progress is slower than expected; intensified industry competition; trade tariff frictions, etc.