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Analysis of Weichai Power : Faster-higher-stronger-more efficient

Oct 10, 2023 | Industry Company Dynamics | 0 comments

Faster: The “speed” of rapid repair after the epidemic has been significantly accelerated


The equipment manufacturing industry, which has high technical content, high capital investment and high information intensity, has been affected by the epidemic and geopolitical conflicts in recent years, and is facing the dual challenges brought by the reduction of external market demand and its own transformation and upgrading. With the advent of the post-epidemic era, the equipment manufacturing industry began to continue to rebound, according to the National Bureau of Statistics, in the first half of 2023, the added value of China’s equipment manufacturing industry increased by 6.5% year-on-year.


However, analyzing the performance statements of several leading listed companies, the performance of major companies can be described as several happy and several sad. The net profit of Yunnei Power in the first half of the year was -207 million yuan, the net profit of Jianghuai Automobile in the first half of the year was -243 million yuan, and the net profit of Power Xinke in the first half of the year was -9.74 yuan. In this context, Weichai Power can be described as a remarkable report card, showing full resilience.


According to Weichai Power’s semi-annual report, the operating income in the first half of the year was 106.14 billion yuan, an increase of 22%. Net profit attributable to the parent was 3.90 billion yuan, up 63% year on year; Net profit returned to the mother after deducting non-profits was 3.61 billion yuan, an increase of 124%; The net cash flow generated from operating activities reached 12.89 billion yuan, an increase of 1235% year-on-year. In fact, looking at the market performance in recent years, Weichai Power’s profitability has always been strong. From 2019 to 2021, the company’s net profit to the mother was 9.112 billion yuan, 9.228 billion yuan and 9.493 billion yuan, respectively. In 2022, the industry demand is weak, and the entire industry has encountered a counter-cycle. But Weichai Power’s performance fell the least among the major listed companies.


From the semi-annual report of Weichai Power, its overall performance is significantly better than that of the industry, and it continues to consolidate its leading position in the industry, ensuring that the core market advantage is expanded, and the strategic market continues to increase. Based on good profitability, Weichai Power has been actively returning shareholders, paying cash dividends of 2.26 yuan per 10 shares in the interim, and further increasing the cash dividend ratio to 50%, sharing the development results with investors.


Higher: the market share of each segment is higher


For any business, quality and technology are fundamental to the success of the business. The core of innovation is customer-centric, market ordering, and giving customers what they want.


Caitong Securities research report believes that the economic recovery has driven the prosperity of the heavy truck industry up, and the heavy truck industry will usher in an upward inflection point in 2023 and enter the rising prosperity channel. In June this year, in the field of heavy trucks, Weichai Power’s Shaanxi Heavy Truck issued a heavy news, its natural gas heavy truck orders exceeded 10,000 units, an increase of more than 600%, real sales exceeded 8,000 units, an increase of more than 400%. From January to June, Weichai Power’s Shaanxi Heavy truck heavy truck sales reached 61,000 units, the market share increased by 2.3 percentage points year-on-year.


In 2020 and 2022, Weichai Power has successively released commercial diesel engines with bulk thermal efficiency exceeding 50.23%, 51.09% and 52.28%, repeatedly breaking the global diesel thermal efficiency record. Such technical advantages enable it to continue to maintain a strong market position in the engine field. In the first half of the year, the total sales volume of Weichai Power engines reached 367,000 units, an increase of 29% year-on-year. Among them, in the field of heavy truck engines, sales reached 142,000 units, an increase of 81%, and the market share rose to 38.4%. In addition, in the high-horsepower, natural gas engine and other market segments are also frequent, the market share of more than 500 horsepower engines rose to 31.7%, an increase of 19.7%; In terms of natural gas engines, the market share climbed to 66.9%, providing strong support for the company’s performance acceleration.


Ten years ago, under the impetus of Tan Xuguang, Weichai Power strategically restructured German Kion Group and its Linde Hydraulic company. Linde Hydraulic’s high-end hydraulic technology directly supports Weichai Power to make full use of its advantages in engine, hydraulic, electronic control and other fields to create a golden hydraulic powertrain for construction machinery. Now, from the data point of view, Weichai Power high-end hydraulic products domestic revenue increased by 46% year-on-year, hydraulic powertrain products for the first time supporting 80 tons of excavator products, reliable performance, significant economy.


It can be said that in the first half of this year, Weichai Power adhered to the market orientation, comprehensively improved the market share of various segments, and constantly promoted products to the high-end.


Stronger: overseas exports continue to increase momentum stronger


Since the beginning of this year, more than 30 enterprises and dealers in Japan and Southeast Asia have ushered in the “China Tan”. Tan Xuguang, who has an extremely dense schedule, has taken a lot of time to carry out long-term market research abroad, and the most important purpose is to seize the overseas market window to accelerate the expansion of the market.


Tan Xuguang understands that it is an excellent node to promote China’s equipment manufacturing industry to “go out” and attach great importance to participating in global competition. The infrastructure of many developing countries is facing a large space for improvement, Europe and the United States are facing the problem of backward supply chain repair, and the transfer trend of the machinery industry chain to China is further clear. From the perspective of the past few years, Weichai Power has accounted for more than 50% of its overseas income structure after long-term structural adjustment.


Open source Securities Research report also said that in the first half of 2023, Weichai Power’s net profit increased significantly year-on-year, mainly due to the benefit of the domestic economy and strong demand in the export market. From the first half of the year, Weichai power engine exports 39,000 units, an increase of 52%; Heavy truck exports of 26,000 vehicles, an increase of 97%. At present, the export situation continues to improve, helping to promote the realization of high-speed export growth targets for the whole year.


Large cylinder diameter high-speed engine is a powerful tool to break through the “low-end lock” of the global value chain, and is a key factor to restructure the global industrial value chain. Weichai Power has won the favor of domestic and foreign markets with its sufficient product power and excellent economic performance, and the continuous rise of production capacity has also continuously boosted the market share. In the first half of the year, sales of large cylinder diameter high-speed engine products increased by 48% year-on-year, and revenue increased by about 77% year-on-year to a new high, of which overseas market revenue accounted for 73%, and continued to seize the international high-end market.


More efficient: Collaborative development chain to seize the market more efficient


Weichai Power is the business card of Shandong and the business card of the world, and Tan Xuguang has repeatedly stressed that the internal industrial sectors should develop in synergy, efficient chain integration, and jointly seize the market.


In January 2021, Weichai completed the strategic restructuring of Revo. After the completion of the restructuring, Weichai relied on its own high-end non-road full range of engines, continuously variable transmission (CVT) powertrain and hydraulic powertrain and other core industrial resources to complement Weichai Revoy’s missing powertrain shortboard. Today, Weichai Rewo is gradually building the core competitiveness in the field of smart agriculture, breaking the long-standing foreign monopoly on the core technology of CVT tractors. At present, Weichai Rewo’s many products are in the forefront of the industry.


In the field of intelligent logistics, after Weichai Power entered Kion, Germany, it built the world’s leading intelligent logistics gold industry chain, established a more balanced cross-cycle business structure and dual-cycle business layout, and jointly expanded the global logistics market. In the first half of the year, Kion’s cash flow from operating activities recovered to the level of 380 million euros, an increase of 810 million euros. At the same time, the full-year 2023 revenue forecast was raised from 11.2 billion euros to 11.4 billion euros, and adjusted EBIT was raised from 615 million euros to 680 million euros. Kion said that it will further build a product technology center based on China, providing more flexible product portfolios and material solutions for the Chinese market, and providing a powerful engine for Kion’s sustainable development on a global scale. The integration and development of Weichai Power and Kion Group can be called a successful example of win-win cooperation between Chinese and German enterprises, and both have benefited greatly in the decade of two-way travel.




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