Acceleration in Tianrun's large-bore engine crankshaft orders strengthens the logic for Weichai to benefit from AIDC capex

Overview

This report summarizes the key points from Jefferies' research on Shandong Tianrun Industry. The core conclusion is that, driven by an upcycle in large-bore engines fueled by AI data centers, Tianrun's large-bore crankshaft orders, delivery cadence and medium-term revenue targets have all improved, while gas injection systems are expected to become a new growth driver. The report further maps Tianrun's positive operating signals to Weichai Power, arguing that as a global leader in large-bore engines, Weichai will directly benefit from accelerating global AI capex.

Core views

First, large-bore engine order momentum is strengthening. Although OEMs have not formally raised shipment targets, they have requested that Tianrun deliver 2026 orders early, pulling forward July-August orders, with production lines operating at full capacity. Second, Tianrun's 2027 revenue target was raised to RMB1.5-1.6bn, while 2028 revenue could reach approximately RMB2.5-2.6bn, indicating stronger medium-term growth. Third, crankshaft capacity expansion is constrained by imported grinding machines and customer validation cycles; industry barriers to entry are high, benefiting existing core suppliers. Fourth, Tianrun has a high share of Weichai's large-bore crankshaft supply, and Weichai Power is expected to be a direct beneficiary of expanding AI data center power demand. Fifth, gas injection systems gained highway heavy-duty truck opportunities following Woodward's withdrawal from China and are expected to ramp up from 2027.

Analysis framework

The report primarily uses company research and management feedback, organizing findings around order cadence, revenue guidance, capacity bottlenecks, customer share, ASP, competitive landscape and new business expansion, and uses supply-chain research results to map implications for related assets including Weichai Power, Caterpillar and Cummins. For valuation, the report uses SOTP for Weichai and multiples including EV/Sales and EV/EBITDA for Caterpillar and Cummins.

Methodology notes

• company_visitManagement research and order validation

  Extracting order, capacity, ASP and customer-share information through company visits

  Based on feedback from Tianrun's management, Jefferies assessed growth in the large-bore crankshaft business, the timing of capacity release and the read-through to downstream engine manufacturers.

• Valuation methodsSOTP

  Sum-of-the-parts valuation

  The report uses SOTP for Weichai Power's target price, valuing the power-generation business separately from traditional engines and other businesses.

• Valuation methodsEV/Sales and EV/EBITDA

  Enterprise-value multiple valuation

  For certain related companies, the report uses a combination of EV/Sales and EV/EBITDA, referencing historical cycle ranges and peer groups.

Asset mapping & comparison

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

• Weichai Power Co Ltd (000338 CH; 2338 HK)

  The increase in Tianrun's large-bore crankshaft orders and share provides a direct positive read-through to Weichai, which is viewed as a global leader in large-bore engines and a beneficiary of AI capex.

  Strengths

  Buy rating; target price of RMB44.2/HKD50.8; Tianrun has high shares in certain Weichai models, with its overall share expected to rise; the power-generation business is assigned a relatively high standalone SOTP value.

  Weaknesses

  Still exposed to the ramp-up of AIDC projects, the pace of data center power demand and heavy-duty truck sales performance.

  Comparison

  Compared with the traditional engine business, the power-generation business is the more prominent valuation driver in the report; compared with other OEMs, supply-share information for Weichai and Tianrun is more comprehensive.

  Risks

  AIDC project ramp-up slower than expected, delays in data center power demand, intensifying competition in power-generation equipment, and HDT sales below market expectations.

• Tianrun Industry

  The company researched and a key supply-chain link, directly benefiting from demand for large-bore engine crankshafts and opportunities in gas injection systems.

  Strengths

  Orders pulled forward, production lines at full capacity, higher 2027 revenue target, high barriers to entry in the crankshaft industry, and high share in certain Weichai models.

  Weaknesses

  Capacity expansion takes more than one year and is constrained by imported German Junker grinding machines; customer validation cycles are lengthy.

  Comparison

  Management stated that the only global large-scale suppliers of large-bore engine crankshafts are Tianrun, Dandong 518 and ALFING Kessler, while Indian suppliers have quality issues.

  Risks

  Delays in equipment delivery and commissioning, capacity ramp-up below expectations, changes in customer validation or demand, and gas injection systems ramping up more slowly than expected.

• Caterpillar (CAT)

  A new large-bore crankshaft customer for Tianrun in 2026 and a related company listed with a BUY rating in the report.

  Strengths

  Planned supply is expected to rise from approximately 600 units in 2026 to approximately 10,000 units in 2028, indicating potential procurement growth.

  Weaknesses

  The report provides limited company-specific details on CAT, which mainly appears as a customer and related security.

  Comparison

  Compared with Weichai, CAT's investment read-through is more indirect in this report.

  Risks

  Recovery in developed markets slower than expected and a slowdown in emerging markets, particularly China.

• Cummins Inc. (CMI)

  A related company listed with a BUY rating in the report, operating in the engine and power-equipment chain.

  Strengths

  Listed as BUY by Jefferies.

  Weaknesses

  The report provides no direct share or procurement data linking CMI to Tianrun's orders.

  Comparison

  Compared with Weichai, the report provides no direct AIDC supply-chain read-through for CMI.

  Risks

  Weakness in the truck, power-generation or industrial markets, as well as production or execution issues.

Key data

• Tianrun 2026 large-bore engine business revenue guidanceRMB700-800mnManagement maintained its 2026 revenue guidance.
• Tianrun 2027 large-bore engine business revenue targetRMB1.5-1.6bnManagement raised its 2027 target.
• Tianrun 2028 large-bore engine business revenue potentialc.RMB2.5-2.6bnManagement believes 2028 revenue could reach this range.
• New crankshaft production line start-up time3Q27Expected to support total annual capacity of approximately 30,000 units.
• Average ASP for large-bore crankshaftsc.RMB45-50kA higher proportion of larger models could provide upside.
• Caterpillar product ASPc.RMB50-60k/unitCustomer model pricing disclosed by Tianrun management.
• Weichai 4MW/3.5MW/other engine crankshaft ASPc.RMB85k/RMB60-65k/RMB40-45kDifferentiated by engine model.
• Tianrun share in Baudouin M3375-80%The report states that Tianrun has a high share in relevant Weichai models.
• Tianrun share in Weichai Heavy Machinery>85%Supply share disclosed in the report.
• Expected overall Tianrun share at Weichai Powerc.1/3 in 2026; c.40% in 2027; 50%+ in 2028Share is expected to increase annually.
• Caterpillar planned procurement volumec.600/5,000/10,000 units in 2026/27/28Caterpillar is a new large-bore crankshaft customer in 2026.
• Weichai target priceRMB44.2/HKD50.8Based on SOTP valuation.

Impact & implications

From an investment perspective, Tianrun's order and capacity information strengthens the industry-chain evidence for an upcycle in large-bore engine demand driven by AIDC. Given its global leadership in large-bore engines and supply relationship with Tianrun, Weichai Power is viewed by Jefferies as a direct beneficiary of expanding AI capex. Bottlenecks and high barriers to entry in the upstream crankshaft segment also suggest that supply-chain tightness could support core suppliers' pricing power and revenue visibility.

Risks

• AIDC project ramp-up slower than expected or delays in data center power demand.
• Intensifying competition in power-generation equipment.
• HDT sales below market expectations.
• Crankshaft capacity expansion constrained by imported grinding machines, production cadence and customer validation cycles.
• Recovery in developed markets slower than expected and a slowdown in emerging markets, particularly China.
• Weakness in the truck, power-generation or industrial markets, or production execution issues.
• Gas injection system mass production and entry into the off-road applications market progressing more slowly than expected.

What to watch

• Whether Tianrun continues to bring forward 2026 deliveries, and whether the pull-forward of July-August orders leads to further sustained upward revisions.
• Progress toward Tianrun's 2027 revenue target of RMB1.5-1.6bn and 2028 target of c.RMB2.5-2.6bn.
• Start-up of the new crankshaft production line in 3Q27, arrival of German Junker grinding machines and optimization of production-line cadence.
• Whether Tianrun's overall share at Weichai Power rises to approximately 40% in 2027 and above 50% in 2028.
• Whether Caterpillar supply progresses according to the plan of approximately 600/5,000/10,000 units in 2026/27/28.
• The 2027 ramp-up of gas injection systems following small-batch supply to Weichai, and progress on M&A in off-road applications.