Morgan Stanley has released a research report maintaining a positive outlook on the demand prospects for the artificial intelligence data center (AIDC) equipment industry. The firm anticipates that Weichai Power's AIDC business will achieve a compound annual growth rate of approximately 130% in both revenue and profit between 2026 and 2028. By 2028, the brokerage expects the AIDC segment to contribute 10% of the company's total revenue and more than 35% of its profits, while continuing to gain market share.

Based on an upward revision of the projected price-to-earnings ratio for the AIDC business from 60 times to 90 times for 2026, and an increase in the P/E ratio for the traditional engine and truck operations from 10 times to 13 times, Morgan Stanley has raised its target price for Weichai Power's H-shares from HK$32 to HK$47, maintaining an "Overweight" rating.

The report notes that Weichai Power is transitioning from a traditional truck engine manufacturer into a broader power and energy equipment platform. It is projected that demand in the heavy-duty truck sector will grow by 5% year-on-year to 1.2 million units in 2026 and remain at that level in 2027. The company's market share in the heavy-duty truck engine segment is expected to remain stable.

Taking into account the first-quarter performance of this year, Morgan Stanley has raised its revenue forecasts for 2026, 2027, and 2028 by 4%, 8%, and 14%, respectively. However, it has lowered its gross margin projections for 2026 and 2027 by 0.7 and 1.3 percentage points, while increasing the 2028 gross margin forecast by 2 percentage points. In terms of profit forecasts, the 2026 estimate has been reduced by 5%, but those for 2027 and 2028 have been raised by 3% and 7%, respectively.