JPMorgan: Weichai Power H/A - Raising Target on Power Transformation and New AIDC Targets
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Following a Xi'an briefing, JPMorgan reiterated its positive stance on Weichai Power's strategic transformation from a cyclical engine leader into a high-growth, high-margin provider of recurring AI data center power solutions. The power and energy division's profit contribution increased from 9% in fiscal 2024 to 19% in fiscal 2025, with a medium-term target of 30%. Management raised its 2026 AIDC diesel engine sales target to 3,500 to 4,000 units, up from the previous 2,600 to 2,800 units, reflecting robust order momentum across domestic and international data center clients. Additionally, solid oxide fuel cell commercialization is accelerating, targeting production capacity of 30MW in fiscal 2026 and 200MW in fiscal 2027. JPMorgan upgraded its target prices for Weichai's H-shares and A-shares from HK$36 and Rmb36 to HK$40 and Rmb38, respectively, representing approximately 50% to 60% upside potential. The firm maintains an Overweight rating, viewing recent share price volatility as a compelling buying opportunity. Weichai also benefits from its dominant share in the LNG heavy-duty truck engine market, as stable domestic LNG prices compared to international spot rates support the economic case for fuel switching. Core engine resilience remains evident, with fiscal 2025 heavy-truck engine sales volume growing 29% year-over-year to 153,000 units. The valuation adjustment reflects untapped SOFC and AIDC re-rating potential.