BOCOM International has released a research report stating that Weichai Power Co.,Ltd. (02338) achieved revenue of RMB 123.16 billion and net profit attributable to shareholders of RMB 7.70 billion in 1H26, representing year-on-year increases of 8.9% and 36.5%, respectively. The company's non-GAAP net profit attributable to shareholders reached RMB 6.12 billion, up 18.9% year-on-year. The firm has maintained its "Buy" rating and target price of HK$44.5, noting that 1H26 net profit attributable to shareholders has already fulfilled approximately 54% of its 2026 forecast. With continued volume expansion in diesel power generation in 2H26, the initial contribution from gas power generation, and the earnings recovery of KION Group, the achievability of the full-year forecast is relatively high. The company declared an interim dividend of RMB 0.517 per share, raising the payout ratio to approximately 58%, further strengthening shareholder returns.

In 2Q26, the company achieved revenue of RMB 60.60 billion, up 8.8% year-on-year, with net profit attributable to shareholders surging 57.4% to RMB 4.62 billion, primarily driven by one-off investment gains. However, non-GAAP net profit grew 17.6% to RMB 3.13 billion. The gross margin stood at 21.5%, down 0.6 percentage points year-on-year but roughly flat quarter-on-quarter. Investment income in 2Q26 amounted to approximately RMB 1.45 billion, a notable increase from around RMB 180 million in the same period last year, serving as the main driver of the substantial profit growth. Meanwhile, KION's operational recovery contributed positively to the group's profits, reflecting fundamental improvement. Operating cash flow in 1H26 increased 66% year-on-year to RMB 11.35 billion, indicating that the quality of core earnings and cash flow remains robust.

The firm believes that gas power generation orders have begun to lock in 2027 sales volumes, allowing the power and energy segment to transition from a long-term growth story to a phase of order fulfillment and earnings validation. Management guided that diesel power generation sales will exceed 4,000 units in 2026, with North America accounting for over 1,000 units, and further surpass 6,000 units in 2027, remaining the primary driver of power and energy profit growth this year. Gas power generation is expected to commence bulk sales in September and October, with deliveries of 200–300 units in 2026 and a target of over 2,000 units in 2027. These target volumes are already supported by orders, implying significantly improved revenue and earnings visibility for 2027. The company also plans to expand gas power generation capacity to over 9,000 units by 2027, notably exceeding the current order scale. In the first half, the power and energy segment contributed approximately 20% of the group's profits, and the firm expects its share to continue rising, gradually reducing the cyclical impact of the traditional heavy-duty truck business on group earnings. SOFC remains at an early commercialization stage, with small-batch deliveries not expected until 1Q27.

With gas power generation orders progressively securing 2027 sales volumes, the firm believes there is further room to raise 2027 earnings forecasts if delivery progress and new order intake continue to materialize over the next one to two quarters. As the profit contribution from power and energy increases, the company's earnings structure is gradually shifting from a traditional cyclical power system to a "cyclical plus growth" model. Should the new business continue to raise its share of group profits and reduce earnings volatility, the firm sees further upside potential for the valuation center. The company's interim dividend of RMB 0.517 per share corresponds to a payout ratio of approximately 58%.