Tuesday, Weichai Power shares received a positive outlook from UBS analysts, as the firm's rating was upgraded from Neutral to Buy. The upgrade is accompanied by a new price target of HK$15.10, a significant increase from the previous HK$12.30 target. The decision by UBS comes after a period of underperformance in the latter half of 2024, where Weichai Power's shares did not keep pace with the Hang Seng Index (HSI).
The UBS analysts highlighted that electric trucks (e-trucks) have rapidly captured market share, fueled by higher subsidies and reduced operating costs. However, they anticipate a recovery in demand for Liquefied Natural Gas (OTC:LNGLF) (LNG) trucks in the first quarter of 2025, following a decrease in LNG costs starting from the fourth quarter of 2024.
Weichai Power's strategic move into the electric vehicle (EV) sector also played a crucial role in the rating upgrade. The company has formed a joint venture with BYD (SZ:002594) to transition into an EV supplier. The first phase of their battery capacity was completed at the end of 2024, with operational commencement expected in 2025. This development has led UBS to increase its earnings per share (EPS) estimates for Weichai Power for 2025-26 by 12-15%.
The analysts believe that while the market has accounted for the risks associated with the e-truck competition, it may have overlooked the potential rebound in LNG truck demand in the first quarter of 2025 and Weichai Power's expansion into the EV market. This assessment has contributed to the upgraded rating and optimistic price target for Weichai Power shares.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.