Weichai Power (000338.SZ/2338.HK): Transitioning to AIDC power generation growth

We see Weichai Power transitioning from a traditional engine maker toward AIDC power generation, which we expect to become the core driver of net profit growth: diesel large-bore engines for backup power ramping first, gas gensets (RICE) driving near-term growth, and SOFC scaling from 2028E. Robust order backlog visibility underpins strong earnings growth through 2028E. Valuation uses a SoTP approach, applying distinct multiples to the legacy business, diesel large engines, RICE and SOFC, anchored on the H-share, and deriving 12-month target prices for both H- and A-shares; we believe both share classes have yet to price in RICE upside and SOFC potential. Key risks: slower-than-expected macro activity, particularly road freight, infrastructure and property; weaker global growth; faster powertrain electrification and LNG penetration; weaker HDT engine market share; and slower development of the power generation business.