2025年收益低于预期，但结构转型故事仍然完好无损

expectations, but structuraltransition story still intact 2025 earnings below expectations,butstructural transition story still intact Weichai’s net profit in2025surprisinglydropped 4%YoY to RMB10.9bn,whichis 12% below our and Bloomberg consensus estimates.The resultsimply32%YoY decline in4Q25 profit (to RMB2bn). The profit decline in4Q25was duetoa 3.9ppt gross margin contraction,which waslargelyrelated totheenginesegment.Despite the weak results, we remain positive on Weichai’s structuraltransition to a power play(14% of enginessoldwererelated to power in 2025,up from 12% in 2024).Werevise upour 2027E earnings forecastby 3.5%,dueto higher assumptions on engines sales volume and HDT margin.We reviseup our SOTP-based TP for Weichai H/A to HK$30.5/RMB28.7, as we now China Capital Goods Totalenginesaleswere largely stablebut large-bore engines werestrongin 2025.Weichai’stotal engine salesslightly increased 1%YoY to743k unitsin2025(+14% YoYin 2H25). Exportsof75k units, which grew9%YoY, accounted for10% of total engines salesin 2025.Large-boreengines grew32% YoY to11k units, of which engines for data centressurged2.6x YoY(to1.4kunitsbased on our estimates).Power related EngineEBITdropped 8% YoYin2H25.The segmentrevenuein 2H25grew 17%YoYatRMB31.6bn.However,the segmentmargin contracted3.7ppt YoYto RMB5bnin 2H25. This is a key reason for the earnings miss, StrongHDTsegment EBIT.Weichai delivered153k units of HDTs in2025, up 30% YoY(+45% YoY in 2H25).Sales in Chinasurged59% YoYto94k units, while exportswere stableYoYat59kunits. The segmentEBITsurged 1.5xYoY toRMB1.4bn,with segment marginsharply expanding Forklifts & supply chain solution (KION Group)EBIT on track torecover.The segment EBIT in 2H25 dropped only 6% YoY, a sharpimprovement from-67%YoYin 1H25, as the high expensesrelatedtoKION’s “efficiency program”were largelyrecognized in 1H25. KION guided Dividend:Weichai proposed a final dividend of RMB0.374/shr. This,together withan interim dividend of RMB0.358/shr, implies a full-year Related reports:Capital Goods-HDT sales +39% YoY in Jan on low base–3 Feb 2026 (link) Weichai-Expect HDT engines growthtoslow in 2026E; Eyes on backup power fordata centres–1 Dec 2025 (link) Capital Goods–Key themes in 2026;Focus on Mining equipment + Power fordata centres + Replacement cycle–1Dec2025 (link) Source:Bloomberg,company data, CMBIGM estimates Source:Bloomberg,company data,CMBIGM estimates Source:Bloomberg,company data, CMBIGM estimates Source:Bloomberg,company data, CMBIGM estimates Source:Bloomberg, company data, CMBIGMestimates Source:Bloomberg,company data, CMBIGM estimates Key risks:1) High base of industry HDT sales in 2025;2) weak diesel and gas enginedemand due to high oil & gas prices; 3)lower-than-expected data centre backup power Disclosures& Disclaimers Analyst Certification The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuerthat the analyst covered in this report: (1) all of the viewsexpressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report. CMBIGM Ratings BUY: Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM Important Disclosures There are risks involved in transacting in any securities. The information contained in this report may not be suitable forthe purposes of all investors.CMBIGMdoes not provide individually tailored investment advice. This report has been prepared without regard to the individual investment objectives, financial positionor special requirements. Past performance has no indication of future performance, and actual events may differ materially from that which is contained in thereport.The value of, and returns from, any investments are uncertain and are not guaranteed and may fluctuate as a result of their dependence on theperformance of underlying assets orother variable market factors.CMBIGMrecommends that investors should independently evaluate particular inves