On Monday, CMB International Securities revised its price target for Weichai Power (2338:HK) (OTC: WEICY), a leading Chinese manufacturer of automotive and equipment engines. The firm reduced its target to HK$19.50 from the previous HK$22.00, while keeping a Buy rating on the stock.
The adjustment in the price target comes after CMB International Securities updated its industry heavy-duty truck (HDT) sales forecast, leading to an 8% reduction in the expected sales volume of Weichai Power's HDT engines for each year from 2024 to 2026. Consequently, the earnings forecast for the same period was decreased by 5-8%.
Despite the lowered expectations, the analyst sees the current stock price as an attractive entry point for investors, especially after the stock's recent decline. The optimism is partly based on anticipated market catalysts, including a rebound in domestic HDT sales spurred by new equipment replacement policies and a potential positive shift in investor sentiment following recent changes in the company's senior management.
The firm's sum-of-the-parts (SOTP) based target price for Weichai Power's A and H shares has been adjusted to reflect the new estimates, now set at RMB18.0 for A shares and HK$19.5 for H shares, down from the previous RMB20.4 and HK$22, respectively. The Buy rating has been reaffirmed, signaling confidence in the company's long-term prospects despite the short-term forecast adjustments.
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