Weichai Power: Goldman Sachs expects data-center power generation to contribute about half of net profit in 2027
Goldman Sachs sees data-center power generation as a new profit engine for Weichai: gas-fired generator sets will drive near-term growth, while fuel cells will scale up from 2028. Its target price also incorporates earnings from the primary power-supply business in 2030, making the pace at which growth materializes a direct influence on valuation.
Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
Goldman Sachs’s revaluation of Weichai rests on rapid profit growth in data-center power generation, with gas-fired generator sets supporting near-term growth and the scaling up of fuel cells and 2030 earnings determining longer-term valuation potential.
How will data-center power generation change Weichai’s profit mix?
Goldman Sachs expects the AI data center (AIDC) power-generation business to contribute about 50% of Weichai’s net profit in 2027, becoming a core engine of profit growth. The key to this assessment is the business’s share of company profits, rather than merely the addition of a product line.
In its 2025–2030 model, the AIDC power-generation business has a net profit compound annual growth rate of 69%, versus 24% for the company overall. Power-generation profits growing substantially faster than the overall business is the basis for Goldman Sachs’s view that Weichai’s profit mix will change.
What will drive near-term growth, and when will fuel cells take over?
Goldman Sachs identifies gas-fired generator sets (RICE) as a near-term growth driver and believes a substantial order backlog provides visibility into strong net profit growth through 2028. The near-term case rests mainly on the order-backed generator-set business.
Fuel cells (SOFC), meanwhile, are expected to scale up from 2028. The two businesses have different growth timelines: gas-fired generator sets drive profit growth first, followed by a larger contribution from fuel cells. The pace of the latter’s scale-up directly affects the longer-term profit mix.
Why does the target price look to 2030 earnings?
Goldman Sachs believes the different power-generation products are at different stages of growth and therefore uses a sum-of-the-parts valuation: the traditional business is valued at 10 times 2027 earnings per share, with Weichai’s attributable share of KION’s market value included; large-bore diesel engines serve as backup power supplies and are valued at 20 times 2028 earnings.
Gas-fired generator sets and fuel cells serve as primary power supplies, and both are valued at 25 times 2030 earnings. The valuations of these power-generation businesses are then discounted to the end of 2027 at a cost of equity of 9%, so valuation potential depends on the scale of future earnings, the timing of the scale-up and the multiples applied.
On that basis, Goldman Sachs sets a 12-month target price of HK$55.5 for the H shares; its A-share target price of RMB50 is derived by applying a 2% discount to the H-share equity value. Relative to the share prices on 21 October 2026 used in the report, Goldman Sachs sees upside of more than 100% for both share classes.
What conditions could weaken this revaluation thesis?
The most direct constraint is slower development of the power-generation business than Goldman Sachs expects: this would affect both its profit contribution and the sum-of-the-parts valuation based on 2028 and 2030 earnings.
The traditional business also presents constraints. Risks identified by Goldman Sachs include a slowdown in road freight, infrastructure and real estate activity, weaker global economic growth, and a lower-than-expected share of the heavy-duty truck engine market; higher-than-expected powertrain electrification penetration and lower-than-expected LNG penetration are also risk factors in its model.
