AIDC gen-sets growth on track; Attractive valuation after pullback

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE MORE REPORTS FROM BLOOMBERG: RESP CMBR <GO> OR http://www.cmbi.com.hk 1 MN 2 Nov 2026 CMB International Global Markets | Equity Research | Company Update Weichai Power (2338 HK/000338 CH) Weichai Power (2338 HK/000338 CH) - AIDC gen-sets growth on track; Attractive valuation after pullback AIDC gen-sets growth on track; Attractive valuation after pullback China Capital Goods 12-mth Price Performance Source: FactSet Related reports: Weichai Power - Generac & Amazon deal positive to Weichai – 17 Sep 2026 (link) Weichai Power - High visibility of AIDC gensets; SOFC to offer upside potential – 31 Aug 2026 (link) Weichai Power – Net profit in 2Q26 +57% YoY helped by other income and expense control; Rising AIDC power contribution – 28 Aug 2026 (link) Ceres Power – Key takeaways from London visit – 13 Jul 2026 (link) In the post-results call, Weichai revealed that AIDC gen-sets delivery is on a good track and is confident of maintaining a resilient ASP due to the shortage over the coming 2-3 years. Power business (including non-AIDC) accounted for 30% of total profit in 3Q26, up from 25% in 9M26, which has served as a key earnings growth driver. For HDT engines, by leveraging the partnership with Sinotruk (3808 HK, BUY), FAW (000800 CH, NR) and Foton (600166 CH, NR), Weichai is confident of enjoying the growth of HDT export going forward. We continue to like Weichai given the solid outlook of AIDC gen-sets. Besides, trading at only 5x 2026E EV/EBITDA which is below the historical average of 6x, Weichai’s current valuation has yet to reflect AIDC gen-sets growth potential. Maintain BUY with unchanged SOTP-based TP of HK$44.7/RMB38.9 for Weichai H/A. Weichai remains a key pick in the Capital Goods sector.  3Q26 results highlights: Weichai’s revenue grew 1% YoY to RMB58bn in 3Q26. Gross margin expanded 1.5ppts YoY to 22.9%. Affected by FX loss and fair value change, EBIT increased only 2% YoY to RMB5.1bn. Net profit dropped 9% YoY to RMB2.96bn, due to higher effective tax rate.  AIDC gen-sets: Weichai revealed that sales volume of AIDC diesel gen-sets in 3Q26 reached 1.3k units, up from 500/800 units in 1Q/2Q26. For natural gas gen-sets, the delivery is expected to be only 200 units this year as Weichai has allocated the capacity for diesel gen-sets. Looking into 2027E, Weichai expects the ramp-up of gas gen-sets will be similar to that of diesel gen-sets in 2026. We maintain our gas gen-sets sales forecast of 2k units in 2027E, as we see the deal between Generac (GNRC, NR) and Amazon (AMZN US, BUY, covered by our internet team) offers good demand visibility.  SOFC: Weichai maintained the target of 30MW capacity (phase one) to be completed by end-2026. Production is expected to be 15-20MW in 2027E, as time is needed for ramp-up. Weichai expects 200MW capacity (phase two) to be completed by end-2027E. Earnings Summary - 2338 HK (YE 31 Dec) FY24A FY2