06/11/2023

Weichai Power (000338) First Coverage Report: Engine Leader Beyond Heavy Truck Cycle

Weichai Power (000338) First Coverage Report: Engine Leader Beyond Heavy Truck Cycle

This report reads: The increase in the market share of heavy truck engines and the development of non-vehicle engines will drive the company’s attributable net profit to increase by more than 11% in 2019/2020, without fear of the downward cycle of heavy truck industry sales.

Investment Highlights: The first coverage is given an “overweight” rating.

The market underestimates the performance of the engine business beyond the heavy truck cycle. We believe that the increase in the market share of heavy truck engines and the development of non-vehicle engines have driven high profitable (20% revenue and 70% net profit attributable to mother)Business income increased by 8% / 7% in 2019/2020, ensuring that the company’s attributable net profit in 2019/2020 maintained a growth of more than 11%.

The company’s EPS for 2018/19/20 is forecast to be 0.

98/1.

09/1.

21 yuan, combined with the relevant subject, will be given in November 2019.

3 times PE, corresponding to a reasonable expectation of 12.

32 yuan.

Two engines that drive the engine business beyond the heavy truck cycle: the increase in the market share of heavy truck engines and the development of non-vehicle applications.

(1) The market share of the company’s heavy truck 厦门夜网 engine is expected to increase by about 2% each year in 2019/20. This is due to the rebound in the share of Beiqi Foton’s heavy truck market.Expansion of advantages.

(2) It is estimated that the sales amount of non-vehicle engines in 2019/20 will be +35% / + 25% per year, which will result from the recovery of the 5-ton loader industry and the development of agricultural equipment, industrial power and other fields.

The company’s performance beyond the heavy truck cycle is rooted in the three core powers (incentive budget system, forward-looking R & D deployment, and efficient management of executives).

The operating stability of the KION Group is expected to increase, with revenue growth of approximately 3% and net profit growth of more than 8% in 2019/20.

Catalysts: (1) Announcement of Beiqi Foton Heavy Truck sales; (2) Announcement of China National Heavy Duty Truck’s 天津夜网 new product package.

Risk reminders: (1) The sales volume of the heavy truck industry is lower than expected; (2) The impairment of goodwill is higher than expected; (3) The transaction factors lead to changes.