We trim our HDT engine sales volume forecast by 7%/7%2% in 2024E/25E/26E, after incorporating our new industry HDT sales forecast (for details, please refer to our sector report “China Heavy-duty Truck - Headwinds in 4Q24 in both China & export; Eyes on policy-driven recovery in 2025”). In the near term, we believe the narrowed LNG/diesel price spread will be unfavourable to Weichai’s gas engine segment. While our earnings forecast in 2024E-26E is only revised down by 1-3% due to a relatively solid margin outlook, our new forecasts suggest profit growth to decelerate from 51% in 1H24 to 7%/2% in 2H24E/2025E. Our SOTP-based TP for A/H (rolled over to 2025E) is revised down to RMB17.9/HK$17.7 (from RMB18.0/HK$19.5). We still maintain BUY rating as valuation (10.7x 2025E P/E) is not excessive even under our new earnings forecast, but we see a better entry point after the upcoming announcement of 3Q24E results (30 Oct).

Risk factors: 1) weakness in engine exports; 2) lower-than-expected replacement demand in China; (3) further contraction of diesel/gas price ratio.