Kingwus Finance | Bocom Intl's research reports points out that Weichai Power (02338) 3Q24 net income attributable to equity shareholders decreased by -4%/-24.4% to 2.5 billion yuan (RMB, the same below), with a non-GAAP net income of 2.23 billion yuan, +10.0%/-28.8% year-on-year/quarterly. 3Q24 revenue was 49.46 billion yuan, -8.8%/-11.8% year-on-year/quarterly. Although both revenue and net income declined quarter-on-quarter, the performance still outperformed wholesale sales of heavy trucks during the same period. 3Q24 gross margin was 22.1%, exceeding the bank's and market expectations, with a 0.7 percentage point increase quarter-on-quarter, mainly due to the decrease in raw material prices during the period.

Currently, the market sentiment is cautious mainly due to end users waiting for detailed operation rules and local implementation policies of the old-for-new policy. Shanghai and Peking have already announced the old-for-new policy for trucks. The bank believes that more regions will introduce detailed operation rules and policies for scrapping and renewing, which will help improve the quarter-on-quarter sales volume of heavy trucks.

The bank believes that the current valuation already reflects the sluggish heavy truck sales. The current price corresponds to forecast PEs of 7.8 times and 6.8 times for 2024 and 2025, with corresponding dividend yields of 7.2% and 7.9%. The valuation and dividend yields are still attractive. Maintain a buy rating with a target price of HK$18.6.