Goldman Sachs: Weichai Power: Data-center power generation’s share of profit rises to thirty percent, while gas-generator sets have yet to ramp up to take over

Why has data-center power generation become the main profit driver?

In the third quarter of 2026, data-center power generation contributed about thirty percent of group net profit, up from about twenty percent in the first half. Growth in the new business offset weakness in traditional businesses and foreign-exchange pressure, driving third-quarter EBIT to a record high.
Shipments of large-bore diesel engines for AI data centers rose from about 500 units in the first quarter and about 800 in the second to about 1300 in the third. Contract liabilities continued to increase quarter on quarter, mainly reflecting advance payments from data-center engine customers.
Goldman Sachs believes global power shortages and cautious capacity expansion by overseas peers support demand. Diesel engines are mainly used for backup power supplies at data centers, while gas-generator sets can provide on-site primary or backup power supplies.

Management reiterated diesel-engine sales guidance of more than 4000 units in 2026 and 6000 units in 2027, and gas-generator guidance of more than 200 and 2000 units, respectively. It believes the targets could be exceeded.
But diesel demand has been stronger than expected, and the company has shifted some capacity to diesel engines. Actual gas-generator shipments in 2026 may fall short of the target, with some sales potentially moving into 2027. Management expects gas-generator volumes to accelerate in the second half of 2027, particularly in the third and fourth quarters.
The company is tracking about 3 gigawatts of gas-generator projects in the US, with some orders close to signing and the rest still under negotiation. For solid oxide fuel cells, the first 30-megawatt production line is scheduled to ship about 15 to 20 megawatts in 2027; a 200-megawatt line has entered the design stage and is targeted for completion and delivery by the end of 2027.

Exports are an important support for the heavy-duty truck business. Management expects Chinese industry sales of about 1.2 million heavy-duty trucks in 2026, including about 420 thousand exports. In the first three quarters, Weichai Power’s sales of heavy-duty truck engines related to exports exceeded those related to domestic sales.
Management expects China’s domestic heavy-duty truck market to improve in 2027, while a recovery in the penetration of liquefied natural gas trucks depends on an improvement in the natural-gas-to-diesel price ratio. Outside heavy-duty trucks, sales of bus and construction-machinery engines rose about 30% year on year in the first three quarters, and new-energy powertrain revenue more than doubled to 4.9 billion yuan.
Near-term profit remains under pressure. Management acknowledged that achieving the full-year targets of the company’s equity incentive plan after the third quarter is challenging. It also expects the fourth quarter to benefit from growth in data-center power generation, an improvement in the heavy-duty truck business driven by recent strong orders, and KION’s seasonal performance.

Goldman Sachs expects net profit from data-center power generation to rise from 3.3 billion yuan in 2026 to 11.3 billion yuan in 2027, with its share of group profit rising from 22% to 50%. Gas-generator sets are expected to contribute 7 billion yuan and be the main source of the increase.
After the third-quarter report, Goldman Sachs lowered its revenue forecasts for 2026–2028, but offset the impact with better-than-previously-expected margins and left its earnings-per-share forecasts broadly unchanged. Its EPS forecasts for 2027 and 2028 are 2.63 yuan and 2.97 yuan, respectively, about 14% and 8% above the Visible Alpha consensus.
Goldman Sachs maintained buy ratings on the A and H shares and slightly lowered its 12-month target prices from 50 yuan and HK$55.5 to 48 yuan and HK$55, respectively. In its sum-of-the-parts valuation, data-center power generation accounts for about 75% of the total, with gas-generator sets accounting for about 40%.