Goldman Sachs: Weichai Power (02338) AIDC power generation business outperforms expectations, target price raised to HK$41

Goldman Sachs released a research report stating that it has raised Weichai Power's (02338) earnings forecasts by 1% to 4% for the years 2026 to 2030. This is mainly due to the stronger than expected prospects of the AI Data Center (AIDC) power generation business, which is enough to offset the impact of declining profit margins in the traditional Heavy Duty Truck (HDT) engine business. The bank reiterated its "buy" rating on Weichai Power, raised its target valuation, and increased its target price for Weichai Power's H shares and A shares to HK$41 and RMB 38 respectively (previously HK$37 and RMB 34), equivalent to a 22 times price-to-earnings ratio for this year (previously 20 times). The bank believes that the company's engine business portfolio transformation will accelerate. It is expected that by 2028, AIDC power generation will account for one-third of the company's net profit, exceeding the contribution of the HDT engine business. By 2030, this proportion will increase to 40%, reaching around RMB 11 billion, equivalent to the company's current net profit size.