CMB International: Raises Weichai Power (02338) H-share target price by 39%, maintaining "buy" rating.

CICC International released a research report stating that the target price for Weichai Power (02338) H shares has been raised by 39.3%, from 21.9 Hong Kong dollars to 30.5 Hong Kong dollars, while also raising the target price for A shares (000338.SZ), both maintaining a "buy" rating. The bank believes that the recent price pullback is a good buying opportunity. Weichai's net profit for 2025 unexpectedly declined by 4% to 10.9 billion yuan, which is 12% lower than the consensus expectations of the bank and institutions. This implies a 32% year-on-year decrease in net profit for the fourth quarter of 2025 to 2 billion yuan. The decline in fourth-quarter profits is mainly attributed to a 3.9 percentage point year-on-year decrease in gross profit margin, which the bank believes is mainly related to the decline in engine profit margin. Despite the weak performance, the bank remains optimistic about Weichai's direction towards transforming into the electric power business (with electric power-related engine sales accounting for 14% in 2025, higher than 12% in 2024). The bank has raised its 2027 profit forecast by 3.5%, mainly due to the bank's upward adjustment of engine sales volume and profit margin forecast for heavy trucks. The increase in the target price is mainly due to the bank's upward adjustment of the core business EV/EBITDA target multiple to 11 times, from the previous 7 times, reflecting strong growth including the planned entry into the US market for AIDC backup power engines.