Citi: Weichai Power’s power generation business accounts for around thirty percent of profit, with data center orders and capacity expansion emerging as key growth themes

How much has the power generation business’s contribution to profit increased?

Management said the power generation business’s share of profit rose from about 20% in the first half of 2026 to about 25% in the first nine months, implying that it was close to one-third in the third quarter.
The company maintains its 2027 AI data center engine shipment targets: 6000 diesel engines, including 2000 for North America, and 2000 gas engines. Data center diesel engine shipments were approximately 500, 900 and 1300 units in the first three quarters of 2026, respectively. Management expects gas engines to follow a similar quarter-by-quarter ramp-up next year.
Capacity allocation has already involved trade-offs: demand for data center diesel engines is stronger than expected, and the company is allocating more capacity to them. The 2026 gas engine sales target remains 200 units, but shipments may lag.

Management said the company and its partners sell gas generator sets to end users and data center developers. Some orders have been signed, while others are at the signing stage; the company is tracking approximately 3 gigawatts of US projects. The increase in contract liabilities came from advance payments by both KION and data center customers.
Management believes current US policy restricts power supply from the main grid, not off-grid generation, and expects implementation details in the middle to latter part of December 2026. It considers the risk to diesel generator sets relatively low and the impact on engines smaller than on complete generator sets.
The response is to increase capacity at France’s Baudouin to supply engines and generator sets originating in France, as well as generator sets compliant with US Section 301. Engine compliance remains subject to supply chain confirmation.

The company plans to complete its first 30-megawatt solid oxide fuel cell (SOFC) production line by the end of 2026, with ramp-up and shipments in the first quarter of 2027. The next-stage 200-megawatt line is being designed, with completion targeted for the end of 2027.
The conventional business is also expanding into more applications: in the first nine months of 2026, sales of construction machinery and bus engines each rose by more than 30% year on year, while agricultural machinery engine sales grew by more than 20%. Engine exports exceeded domestic sales volume and grew by more than 20% year on year.

Management said achieving the 2026 full-year targets associated with the equity incentive plan—revenue of 258.9 billion yuan and an EBIT margin of 9%—requires another quarterly record in the fourth quarter. The company believes its data center order book and the peak season for heavy trucks and KION can provide support.
Citi believes demand for data center energy supply could prompt Weichai to gradually shift more resources from machinery to energy supply, supporting long-term growth. The bank rates the H shares Buy with a target price of 50 Hong Kong dollars, using 2026 expected earnings at a price-to-earnings multiple of 23 to reflect the earnings potential of data center engines.