We expect Weichai Power will gain traction in the near term, as the market has been looking for beneficiaries across the AI-related sectors. Based on our estimates, in 2024, Weichai Power delivered 400 units of large-bore high- speed engines specifically for data centres, of which 60% were sold overseas. We forecast sales volume in 2025E to surge 1.5x YoY to 1k units. We expect segment revenue in 2025E to reach RMB2bn, based on ASP of RMB2mn. Assuming a 25% net profit margin, the segment profit will reach RMB500mn, representing ~4% of our total net profit forecast. While the contribution is not high at the moment, we expect this segment to see structural growth over the coming years. Our SOTP-based TP for A/H is unchanged at RMB17.9/HK$17.7. Maintain BUY.

Large-bore high-speed engines for data centres. Data centres require an uninterrupted power supply (UPS) in order to maintain stable function. Power generation set is therefore in need as a backup solution. Weichai Power has leveraged the continuous upgrade of technology from Baudouin (a French company acquired by Weichai Power more than a decade ago) to develop the large-bore high speed engines, which can be applied in various applications including data centres.

Sales arrangement between Weichai Power and Weichai Heavy Machinery (000880 CH, NR). Weichai Power focuses on the production and sales of large-bore high-speed engines in both China and overseas. For the entire gen-set, Weichai Power focuses on the overseas market while Weichai Heavy Machinery focuses on China market.

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