Q1 '26 Earnings Hit Record High, Core Profit Exceeds Expectations, Maintain Buy

Overview

Goldman Sachs Releases Weichai Power 2026 Q1 Report Commentary, Believing Company Revenue Hits Record High, Core Profit Exceeds Expectations After Excluding FX Impact. Report Maintains Buy Rating, Pointing Out Company Investment Logic Is Transforming From Traditional Heavy Truck Engines To AI Data Center Power Generation Business, Whose High Growth Potential Supports Valuation Premium.

Core views

Regarding Performance, 1Q26 Revenue 625.6 hundred million RMB, YoY +9%, Record High; Net Profit Attributable to Parent 30.9 hundred million RMB, YoY +14%, Basically In Line With Goldman Sachs Expectations. However Noteworthy, If Excluding Approx. 3 hundred million RMB FX Loss Impact, Core Profit Reaches 33.8 hundred million RMB, YoY Significant Increase 31%, Showing Actual Operating Quality Better Than Headline Data. Profitability Significantly Improved, Gross Margin 21.4%, Although Slightly Down YoY But Up 1.2 Percentage Points QoQ, Relieving Market Concerns Over Price Cut Pressure. More Critical Is Expense Control, Operating Expenses Down 15% YoY To 86.1 hundred million RMB, Expense Ratio Drops To 13%, Five-Year Low Level, Driving EBIT Margin Expansion To 7.7%, EBIT Surging 81% YoY. Investment Narrative Undergoes Fundamental Transformation, Report Believes Weichai's Investment Logic Has Shifted From Heavy Trucks To AI Data Center Power. Company Established Comprehensive Technical Portfolio Covering Diesel, Gas And Fuel Cells. Expected AI Data Center Power Generation Business Profit Will Grow 8.6 Times Between 2025 To 2030, Profit Contribution Share Increases From 12% To 40%, Driving Approximately 60% Of Incremental EPS Growth. On Valuation, Giving H-Share 2026 22x PE Target, Compared To Long-Term Midpoint 11x Has Clear Premium, To Reflect Expectation Of Transformation To High Growth Power Generation Business. This Multiple Consistent With Global Generator Peers Average Level. A-share Target Price 38 RMB, H-share Target Price 41 HKD.

Analysis framework

Report Uses Core Profit Adjustment Method, Excluding FX Fluctuations And One-Time Items (Such As KION Efficiency Plan) Interference, To Restore Company True Operating Performance. On Valuation Uses Relative Valuation Method, Referencing Global Generator Peers' Re-rating Mode In Similar Transformation Periods, Combined With Weichai Stronger Growth Profile For Premium. Simultaneously Through Volume-Price Split Analysis On Revenue Growth Drivers, Confirming Traditional Engine Business Still Main Force For Short-Term Revenue Growth.

Methodology notes

• Valuation MethodPE/PEG valuation

  Using 2026E PE Multiple For Valuation, Referencing Peer Re-rating Mode

  Report Gives H-Share 2026 22x PE, Premium Compared To Historical Midpoint, To Reflect New Business High Growth Expectation, This Is Typical Growth Stock Valuation Logic.

• Company Fundamentals And Financial FrameworkProfit Quality Analysis

  Analyze Core Profit Excluding FX And One-Time Impact

  By Adjusting FX Gains/Losses And One-Time Expenses, Restore Company Core Business True Profitability, Avoiding Headline Data Misleading.

• Industry/Industrial Analysis FrameworkVolume-Price Split

  Analyze Revenue Growth Drivers (Traditional Engine Business Volume Increase)

  Deconstruct Revenue Growth Into Sales Volume And Price Factors, Confirm China LNG Heavy Truck Sales Volume Increase And Market Share Gain Are Main Reasons For Revenue Growth.

Asset mapping & comparison

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

• Weichai Power (000338.SZ/2338.HK)

  Core Beneficiary Subject, AI Data Center Power Generation Business Growth Drives Valuation Re-rating

  Strengths

  Comprehensive Technical Product Portfolio (Diesel, Gas, Fuel Cell), Strong Expense Control Ability, Ample Net Cash Position

  Weaknesses

  Traditional Heavy Truck Business Affected By Macro Economy, FX Fluctuations Drag On Headline Profit

  Comparison

  Valuation Multiple Reference Global Generator Peers, Growth Profile Relatively Stronger

  Risks

  Power Business Progress Slows, Macro Economic Activity Slows, Market Share Performance Poor

• Generac (GNRC.US)

  Peer Comparison, Mention Positive Comments On Hyper-Scale Data Centers

  Comparison

  As Global Generator Peer Valuation Reference

• Bloom Energy (BE.US)

  Peer Comparison, Industry Recent Performance Has Positive Transmission

  Comparison

  As Fuel Cell/Power Industry Peers Reference

Key data

• 1Q26 Revenue625.6 hundred million RMBYoY +9%, Record High
• 1Q26 Net Profit Attributable to Parent30.9 hundred million RMBYoY +14%, Basically In Line With Expectations
• 1Q26 Core Profit (ex-FX)33.8 hundred million RMBYoY +31%, Higher Than Expectations
• 1Q26 Operating Expense Ratio13%Five Year Low Level
• 2026E PE (H-Share Valuation)22xPremium Compared To Long Term Midpoint 11x
• Net Cash Position352.9 hundred million RMBIncrease Compared To End of 4Q25

Impact & implications

Report Believes Weichai Power's Valuation Logic Is Undergoing Structural Change, AI Data Center Power Generation Business High Growth Potential Supports Valuation Premium. Strict Expense Control Improves Profit Resilience, Making Company More Defensive Amid Macro Volatility. If Power Business Progress Smoothly, Company Will Receive Similar Re-rating As Global Generator Peers.

Risks

• Macro Economic Activity Slows, Especially Highway Freight, Infrastructure And Real Estate
• Weak Global Economic Growth
• Powertrain Shifts To Higher Electrification Penetration Rate, LNG Penetration Rate Decreases
• Heavy Truck Engine Market Share Performance Poor
• Power Business Progress Slows

What to watch

• Key Operational Trends Across Different Businesses
• AIDC Business Update (Large Bore Diesel Engine, Gas Generator Set, SOFC Progress)
• Latest Order Trends And Production Plans For Core Engine Business