Generac's Amazon generator deal strengthens Weichai Power's long-term data-center power visibility

Overview

This report assesses the implications for Weichai Power of Generac's new long-term generator supply agreement with Amazon. Goldman Sachs argues that the agreement materially strengthens demand visibility for Weichai's data-center power-generation exposure through its Baudouin engine supply relationship with Generac, and reiterates Buy on both share classes.

Core views

Generac, which Goldman Sachs describes as a global leader in backup power systems and a key US partner of Weichai through Baudouin-branded large diesel engines, announced a transaction agreement with Amazon on September 16. The agreement combines a long-term generator supply commitment with an equity-linked warrant. Generac issued Amazon a warrant for up to 1.69 million shares at $200.93 per share; 307,954 shares vest upfront and the balance vests in tranches tied to as much as $8bn of aggregate payments by Amazon and its affiliates for backup generators used in Amazon data centers. Initial generator deliveries are expected to total $2.4bn in 2027-28, and the warrant remains exercisable through September 16, 2033. Generac's shares rose 33% in after-hours trading following the announcement. Goldman Sachs views the agreement as positive for Weichai because Baudouin is a key supplier of large engines to Generac. The initial $2.4bn delivery commitment is substantial relative to Generac's $1.6bn data-center backlog exiting 2Q and more than five times its FY2026 data-center revenue guidance of $450mn, which had been raised from $300mn during the 2Q26 results. Based on average US manufacturer prices per MW, Goldman Sachs estimates that the deliveries correspond to more than 7GW of generator sets, or more than 2,500 units at 3MW each or more than 3,000 units at 2.5MW each. The potential $8bn aggregate-payment commitment extends visibility beyond 2028 and, in the institution's view, should address investor concerns over the durability of the data-center power business. The report also cites recent Shandong genset supply-chain channel checks as indicating potential upside to Weichai's 2027 power-generation volume target. It further identifies potential ASP upside from a trend toward larger backup-power units in the United States and Southeast Asia. Goldman Sachs therefore reiterates Buy on both Weichai A- and H-shares. For valuation, Goldman Sachs uses a sum-of-the-parts approach anchored to the H-share, arguing that it better captures the different growth stages of Weichai's power-generation products. It values the legacy business at 10x average 2026E-27E EPS, plus Weichai's attributable KION market-cap value. For the AIDC portfolio, it applies 20x 2028E P/E to diesel large engines for backup power and 25x 2030E P/E to both RICE and SOFC prime-power businesses; each AIDC value is discounted to mid-2027E using a 9% cost of equity. This produces a 12-month H-share target of HK$55.00. Applying a 5% A-share discount to H-share equity value based on the prior six months' trading patterns gives an A-share target of Rmb48.00.

Analysis framework

Goldman Sachs first links Generac's Amazon contract to Weichai through Baudouin's role as a large-engine supplier. It then benchmarks the contract's delivery value against Generac's backlog and data-center revenue guidance, translates the value into estimated generator capacity and unit volumes, and combines those implications with supply-chain channel checks. The price targets are derived through a sum-of-the-parts valuation separating legacy operations from AIDC power-generation businesses.

Methodology notes

• Valuation methodsSOTP (Sum-of-the-Parts) Valuation

  Sum-of-the-parts valuation

  Goldman Sachs separately values Weichai's legacy business and distinct AIDC power-generation businesses because they are at different stages of growth, then combines the components into equity value.

• Valuation methodsP/E and PEG Valuation

  Forward P/E valuation with discounting

  The report applies specified forward P/E multiples to legacy and AIDC businesses and discounts longer-dated AIDC values back to mid-2027E using a 9% cost of equity.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Supply-chain demand transmission

  The analysis treats Generac's generator commitments to Amazon data centers as a demand driver for Weichai because Baudouin supplies large engines to Generac.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Weichai Power (A) (000338.SZ)

  Primary covered share class; expected to benefit from higher generator demand transmitted through Baudouin's supply relationship with Generac.

  Strengths

  Exposure to large diesel engines for backup power and potential volume and ASP upside in the power-generation business.

  Comparison

  Goldman Sachs values the A-share at a 5% discount to H-share equity value, based on trading patterns over the prior six months.

  Risks

  Slower macro activity, weaker global growth, electrification and LNG-powertrain shifts, weaker HDT engine share performance, or slower power-generation development.

• Weichai Power (H) (2338.HK)

  Primary covered share class and valuation anchor for Goldman Sachs' sum-of-the-parts analysis.

  Strengths

  Exposure to the same data-center backup-power growth opportunity through Baudouin and Generac.

  Comparison

  The H-share is the primary valuation anchor; the A-share is assigned a 5% discount to its equity value.

  Risks

  Slower macro activity, weaker global growth, electrification and LNG-powertrain shifts, weaker HDT engine share performance, or slower power-generation development.

• Generac

  Customer and key US partner to Weichai through Baudouin large diesel engines.

  Strengths

  Long-term Amazon generator supply agreement and an initial $2.4bn delivery commitment in 2027-28.

  Comparison

  The $2.4bn initial deliveries exceed Generac's $1.6bn data-center backlog exiting 2Q and are more than five times FY2026 data-center revenue guidance.

Key data

• Initial Amazon generator deliveries$2.4bn in 2027-28Generac's expected initial deliveries under the long-term supply agreement.
• Potential aggregate Amazon paymentsUp to $8bnPayments by Amazon and affiliates tied to backup generators and warrant vesting.
• Estimated generator capacity7GW+Goldman Sachs estimate based on average US manufacturer prices per MW.
• Estimated generator units2,500+/3,000+ unitsEstimated at 3MW/2.5MW unit sizes, respectively.
• Generac data-center backlog$1.6bnBacklog exiting 2Q, used as a comparison for the $2.4bn initial delivery commitment.
• Generac FY2026 data-center revenue guidance$450mnRaised from $300mn during the 2Q26 results; the initial deliveries are more than five times this level.
• Weichai A-share target and upsideRmb48.00; 88.1%12-month target versus Rmb25.52 price as of September 16, 2026 close.
• Weichai H-share target and upsideHK$55.00; 86.1%12-month target versus HK$29.56 price as of September 16, 2026 close.

Impact & implications

Goldman Sachs believes the Amazon-Generac agreement provides a clearer multi-year demand backdrop for Weichai's backup-power engine business, with the $8bn potential commitment extending visibility beyond 2028. The institution also sees possible upside to 2027 power-generation volumes and pricing as backup generator unit sizes increase.

Risks

• Slower-than-expected macro activity, particularly in road freight, infrastructure and property.
• Weaker-than-expected global economic growth.
• A powertrain shift toward higher electrification penetration and lower LNG penetration.
• Weaker-than-expected heavy-duty-truck engine market-share performance.
• Slower-than-expected development of the power-generation business.

What to watch

• Execution of Generac's expected $2.4bn of Amazon generator deliveries in 2027-28.
• Progress toward the up-to-$8bn aggregate-payment commitment under the Amazon agreement.
• Weichai's 2027 power-generation volume performance relative to its target.
• Backup-power unit upsizing trends and resulting ASP development in the United States and Southeast Asia.