UBS released a research report stating that the rating of Weichai Power (02338) was upgraded from “neutral” to “buy”, and the target price for H shares was raised from HK$12.3 to HK$15.1.
According to the report, Weichai Power's stock price performance in the second half of last year fell short of the Hang Seng Index because electric trucks quickly gained market share with higher subsidies and lower operating costs. However, on a quarterly basis, as liquefied natural gas (LNG) costs have declined since the fourth quarter of last year, the bank expects market demand for LNG trucks to rebound in the first quarter of this year.
Furthermore, the bank believes that Weichai Power is transforming into an electric vehicle supplier through a joint venture with BYD Co., Ltd. (01211). The first phase of battery production capacity was completed at the end of last year, and operations are expected to begin this year. As a result, the bank raised Weichai Power's earnings forecast per share by 12% to 15% for this year and next. It is believed that the risk of electric trucks is reflected in the stock price. Investors may ignore the rebound in demand for LNG trucks in the first quarter of this year and the potential for Weichai to expand into electric vehicles.
