Bank of America Securities: Reiterates Weichai Power's (02338) “Buy” Rating Target Price Reduction to HK$16

The Zhitong Finance App learned that Bank of America Securities released a research report stating that it lowered the target price of Weichai Power (02338) from HK$16.7 to HK$16, reaffirming the “buy” rating. In September of this year, the mainland's wholesale volume of heavy trucks fell 33% year on year to 58,000 units. As for the first nine months of this year, mainland China's heavy truck sales volume was 623,000 units, down 3.4% from the previous year. The trend is lower than the bank's forecast of 1 million units for the whole year.

Bank of America Securities lowered the company's earnings per share forecast for the 2024-2026 fiscal year by 4%, 6%, and 7%, respectively, to reflect the reduction in heavy truck sales forecasts and lower profit margins due to an unfavorable product portfolio. The bank believes that Weichai's 6% yield for fiscal year 2024 is very attractive, and is optimistic about its potential to transition from internal combustion engine to electric heavy truck parts supplier.

According to the Bank of America Securities Pipeline Survey, replacement sales of the old “Gu3” heavy trucks are weaker than market expectations. As a result, the bank lowered its forecast for heavy truck sales in the Mainland in 2024 by 9% to 919,000 units. In September of this year, retail sales of liquefied natural gas (LNG) heavy trucks fell by about 60% year on year. In view of the narrowing of the price gap between LNG and diesel, the bank expects LNG heavy truck sales to continue to be weak for the rest of the year.

The bank expects China's heavy truck sales to grow 14% to 1.05 million units in 2025, driven by potential replacement and exports of “National 4” heavy trucks, and the penetration rate of electric heavy trucks will continue to rise in 2025 and 2026.