Goldman Sachs reiterates Buy on Weichai Power: AIDC power generation business is accelerating into a core growth engine

Overview

This report is Goldman Sachs' company research update on Weichai Power. Based on 4Q25 results, the analyst meeting, Generac's investor day, and the latest management guidance, the report raises Weichai Power's earnings forecasts and target price, with the key change being an outlook for the AIDC power generation business that is stronger than expected. Goldman Sachs believes the company's investment narrative is shifting from the traditional heavy-duty truck engine cycle to a high-growth business driven by AI data-center backup and on-site power demand.

Core views

Goldman Sachs' core view is that the AIDC power generation business will become Weichai's most important incremental earnings source over the next five years, sufficient to offset pressure on margins in the traditional HDT engine business. The report expects the AIDC power generation business to grow 8.6x by 2030E, implying a 2025E-30E CAGR of about 55%, driving Weichai's total net profit to approximately 20% compound growth by 2030E. As the AIDC profit contribution rises rapidly, the company's valuation should be re-rated, so Goldman Sachs reiterates Buy on both the H-share and A-share.

Analysis framework

The report combines a top-down view of AI data-center power demand with a bottom-up segment profit model: it adjusts large diesel engine shipments, ASPs, unit profitability, the contribution from gas generator sets starting from 2H26, and the SOFC business ramp-up pace, and then offsets these against lower HDT engine margins. On the valuation side, it uses a 2026E P/E target multiple and cross-checks it with a sum-of-the-parts valuation, while also referencing global peers in generators and the AIDC power-equipment supply chain.

Methodology notes

• Valuation methodsP/E multiple valuation

  22x 2026E P/E

  Goldman Sachs raises its target 2026E P/E multiple from 20x to 22x to reflect the earnings upgrade in the AIDC power generation business, and says the multiple is in line with the global generator peer average.

• Valuation methodsSoTP valuation

  sum-of-the-parts valuation cross-check

  The report uses SoTP as a cross-check and arrives at a valuation of about HK$41.2/share for the H-share and about Rmb37.8/share for the A-share, with the AIDC business accounting for 56% of SoTP value.

• Research frameworkGS Factor Profile

  growth, financial return, valuation multiple, and composite percentile

  Goldman Sachs Factor Profile compares individual stocks with the market and industry peers across growth, financial return, valuation multiples, and composite measures.

• M&A frameworkM&A Rank

  M&A Rank 3

  Goldman Sachs discloses that M&A Rank 3 indicates a low probability of being acquired and is usually not included in the target price.

Asset mapping & comparison

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

• Weichai Power A-share 000338.SZ

  core coverage name

  Strengths

  The AIDC power generation business is growing faster than expected, EPS forecasts and target price are both raised, and the Buy rating is maintained.

  Weaknesses

  The traditional HDT engine business faces margin pressure and remains exposed to the macro cycle, road freight, infrastructure, and real estate.

  Comparison

  Goldman Sachs believes its target 22x 2026E P/E is in line with the global generator peer average, and the company's current valuation is below some peers in the AIDC power-equipment supply chain.

  Risks

  Slower-than-expected development of the power generation business, weaker-than-expected market share in heavy-duty truck engines, and weaker macro and global growth.

• Weichai Power H-share 02338.HK

  core coverage name

  Strengths

  Also benefits from the AIDC power generation re-rating, with the target price raised to HK$41.0.

  Weaknesses

  H-share valuation and share price may be affected by Hong Kong market liquidity, risk appetite, and the discount applied to China industrial stocks.

  Comparison

  The report assumes no discount or premium to A-share equity value, based on trading patterns over the past 2-3 quarters.

  Risks

  Same as the A-share, plus Hong Kong market valuation volatility.

• GENERAC HOLDINGS INC

  industry reference and event source

  Strengths

  Generac's investor day is used to validate the outlook for the AIDC power generation business and the strength of the global generator industry.

  Weaknesses

  Not a core coverage name in this report, and no investment conclusion is provided.

  Comparison

  Used as part of the peer comparison across the global generator and AIDC power-equipment supply chain.

  Risks

  If peer valuations and business trends reverse, Weichai's re-rating logic could weaken.

Key data

• 2026E-30E EPS revisionRaised by 1%-4%Reflects 4Q25 results, management guidance, and higher AIDC power-generation assumptions.
• 2026E-28E EPS vs consensus7%-11% aboveGoldman Sachs believes its estimates reflect an earlier capture of the faster-than-expected AIDC power generation ramp.
• AIDC power generation business growth8.6x growth by 2030E; about 55% CAGR over five yearsThe report says this business will be the main driver of future incremental earnings.
• AIDC contribution to incremental earningsabout 60%Expected to drive roughly 60% of incremental earnings growth during 2025E-30E.
• AIDC share of net profit12% in 2025E; about one-third in 2028E; 40% in 2030EExpected to exceed the contribution from the HDT engine business in 2028E.
• 2030E AIDC net profit scaleabout Rmb11bnThe report says this scale is comparable to Weichai's current net profit base.
• Target P/E multiple22x 2026E P/EPreviously 20x.
• 12-month target priceH-share HK$41.0; A-share Rmb38.0Previously HK$37.0 and Rmb34.0, respectively.
• Market capitalizationRmb219.0bn / US$31.8bnDisclosed in the report's Key Data section.
• Enterprise valueRmb229.6bn / US$33.3bnDisclosed in the report's Key Data section.

Impact & implications

If the report's view proves correct, Weichai Power's earnings structure and valuation anchor will shift from the traditional commercial-vehicle engine cycle to a growth asset linked to AI data-center power infrastructure. As the AIDC business's weight in profit and valuation increases, it could support a higher target multiple and a share-price re-rating; however, the realization path depends on data-center power demand, U.S. market contribution, the rollout of gas generator sets, and the ramp-up pace of SOFC.

Risks

• Macro activity weaker than expected, especially demand related to road freight, infrastructure, and real estate.
• Global economic growth weaker than expected.
• The powertrain mix shifts toward higher electrification penetration and lower LNG penetration.
• HDT engine market share performs worse than expected.
• The power generation business develops more slowly than expected, including a ramp-up that falls short in large diesel engines, gas generator sets, and SOFC.

What to watch

• Orders, shipments, ASPs, and unit profitability changes in the AIDC power generation business.
• U.S. market contribution and the execution of the large diesel engine expansion plan.
• Revenue and profit contribution from gas generator sets starting from 2H26.
• Commercialization and ramp-up pace of the SOFC business.
• Changes in HDT engine margins and market share.
• Whether 2026E-28E EPS continues to exceed Visible Alpha consensus.
• Valuations of global generator peers and the trend in AI data-center power demand.