J.P. Morgan: Weichai Power’s data-center power-supply transition: Diesel engines scale up as gas engines and fuel cells take the baton

What has the data-center business changed?

Management said data-center power and energy operations accounted for about 25% of group revenue and profit in the first three quarters of 2026, up from about 20% in the first half of 2026 and in 2025, and about 10% in 2024.
Sales of large-bore engines exceeded 11 thousand units in the first three quarters, up more than 40% year on year and exceeding the full-year total for 2025; third-quarter growth exceeded 60%. Diesel engines for data-center backup power were the main driver, with quarterly sales rising from 500 units in the first quarter to 900 in the second and 1300 in the third.
Year-to-date sales of both construction machinery and bus engines rose more than 30% year on year. Together with the agricultural machinery engine business, they offset the impact of weak demand for heavy-duty truck engines.

Management expects shipments of gas engines for data-center primary power to begin in the fourth quarter of 2026 and to replicate diesel engines’ volume ramp this year in 2027, with the increase more pronounced in the second half of 2027, particularly in the third and fourth quarters.
The company believes gas engines are suitable for data centers of 100 to 500 megawatts and plans to increase its share through capacity expansion and its service and partner networks. Management reiterated its target of a market share above 20% in 2027.
In response to concerns about increased supply, management said the current power shortage is structural, capacity for gas turbines and engines is constrained, and delivery lead times are long. It expects no oversupply or price competition over the next two to three years.

The company sees solid oxide fuel cells (SOFCs) and gas engines as complementary solutions: gas engines can be deployed more quickly where fuel and infrastructure permit, while SOFCs may serve sites with fewer alternative power-supply options.
The first 30-megawatt production line is targeted for completion by the end of 2026. Management expects deliveries of 15 to 20 megawatts while prioritizing the production ramp-up, product quality and consistency. A 200-megawatt production line is being designed, with completion targeted by the end of 2027.
Management stressed that commercial progress ultimately depends on whether reliable products can be delivered at scale. JPMorgan also sees execution and delivery capabilities as near-term constraints.

2026 is the final year of the company’s three-year equity incentive plan. Vesting requires full-year profit of 23.3 billion yuan and a profit margin of 9%. Management believes orders on hand for data centers, heavy-duty trucks and KION could support the target, but achieving it requires a record quarterly profit in the fourth quarter.
JPMorgan said current market consensus implies the company will miss the target. The bank’s earnings forecast is above consensus, and it expects the market to raise earnings forecasts over the coming weeks.
The bank maintained its Overweight ratings on Weichai Power’s A-shares and H-shares, with price targets of 54 yuan and 57 Hong Kong dollars, respectively, both for the end of 2027. Risks to its view include a weaker-than-expected heavy-duty truck recovery, market share gains, sales of data-center products and KION performance.