Weichai is the largest shareholder of Ceres Power (CWR LN, NR) with an equity interest of ~17.8%. Our meeting with Ceres last week enhanced our confidence in the outlook of Solid Oxide Fuel Cell (SOFC) (for details, please refer to our note “Key takeaways from London visit” published today). For Weichai, based on our understanding, the SOFC capacity construction (using Ceres’ technology) is on track. We expect Weichai’s SOFC production capacity to reach 30MW/200MW by end-2026/27. We forecast it will potentially contribute ~RMB600mn/4bn revenue in 2027E/28E. We maintain our positive stance on Weichai’s AIDC backup engine and SOFC. Reiterate BUY with unchanged SOTP-based TP of HK$45.1/RMB40.2 for Weichai H/A. Weichai is a key pick in the Capital Goods sector.

Key risks: 1) lower-than-expected AIDC power demand; 2) unexpected slowdown in HDT engine demand; 3) increase in raw material costs.