Morgan Stanley: Weichai Power (2338.HK) AI Powering a Key Growth Driver
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Following management discussions, Morgan Stanley asserts that AI-driven power solutions remain a pivotal growth engine for Weichai Power. The company's 2026 shipment guidance for large-bore engines slightly exceeds market expectations. Specifically, large-bore engines destined for data centers are projected to double year-over-year to approximately 2,800 units out of a total target of 13,000 units. AI data center generators maintain stable average selling prices above 2 million RMB, with management targeting an increase in global market share from the low teens to 20-30% over the next three to five years.
Beyond traditional engines, Weichai is cultivating new growth pillars. The solid oxide fuel cell (SOFC) business remains small-scale for 2026, but strategic plans target 1 gigawatt of production capacity by 2030. Additionally, 2-3 megawatt natural gas generators aimed at data centers are expected to begin deliveries in the second half of 2026, focusing on lucrative overseas markets with margins exceeding traditional heavy-duty truck engines.
In the core heavy-duty truck market, management anticipates flat to modest volume growth, supported by exports and domestic subsidy extensions. The new energy business revenue reached roughly 3 billion RMB in 2025, doubling year-over-year with sustained momentum expected into 2026. Furthermore, Kion Group's ongoing cost-saving measures are projected to yield 140 to 160 million euros annually.
Morgan Stanley maintains an Equal-weight rating on Weichai Power's H-shares, establishing a target price of 26.20 HKD. This valuation methodology applies 10 times 2026 PE to the traditional business and 60 times 2026 PE to the AI data center operations. The A-share target price is set at 23.9 RMB.