02338 Overview

Daiwa Report on Stock Picks: Daiwa released a report highlighting top picks in the H- and A-share markets, including notable companies like Tencent, Alibaba, and Kweichow Moutai, with varying short selling ratios.

Stock Performance Overview: The report details the performance of several stocks, with Tencent and Alibaba experiencing declines, while Naura and Kweichow Moutai showed gains.

Goldman Sachs Forecast: Goldman Sachs has raised the long-term earnings forecast for WEICHAI POWER, reflecting a positive outlook for its power generation business, which is expanding its product and technology portfolio.

Profit Contribution Growth: The AIDC power generation business is projected to grow significantly, contributing about 10% to WEICHAI POWER's net profit in 2025 and expected to increase to one-third of total profits by 2030, surpassing the domestic heavy-duty truck engine segment.

Investment Rating: Goldman Sachs has reiterated a Buy rating for WEICHAI POWER and raised its target price from HKD21 to HKD37, identifying the company as a key beneficiary in the Asian AIDC power generation sector.

Market Activity: The stock has seen a short selling of $99.74 million with a ratio of 16.038%, indicating significant market activity surrounding WEICHAI POWER.

Citi's Outlook on Chinese Carmakers: Citi has a neutral outlook for Chinese carmakers in 1Q26, predicting that BYD, Geely, and Leapmotor may outperform the market due to model updates and strong export growth, while others like Seres and Li Auto may struggle with profit margins and weak sales.

Industry Challenges and Tailwinds: The Chinese auto industry is expected to face five major tailwinds, including increased EV market share and export growth, but also five challenges such as rising costs and cautious retail growth for EVs, leading to a potential decline in wholesale and retail forecasts for FY26.

Stock Recommendations: Citi has recommended several stocks, including BYD, Pony, WeRide, Hesai, Minth Group, and Weichai Power, amidst a backdrop of short selling activity and varying market performance.

Market Conditions: The report highlights a potential end to the price war in passenger vehicles and a favorable phase for commercial vehicle demand, while also noting high inventory levels of fuel vehicles as a concern for the market.

Stock Performance: TENCENT saw a notable increase of 2.306%, while SHENZHOU INTL and BABA-W also experienced gains of 1.536% and 1.530%, respectively.

Short Selling Data: TENCENT had a short selling amount of $529.35M with a ratio of 8.541%, while SHENZHOU INTL had a significantly higher short selling ratio of 35.574% at $62.89M.

Declines in Other Stocks: WEICHAI POWER, MIDEA GP, and HENGRUI PHARMA experienced slight declines, with MIDEA GP dropping by 0.775%.

Market Overview: The report includes delayed quotes for HK stocks and mentions that the short selling data is as of January 28, 2026, indicating a focus on real-time market analysis.

Daiwa's A+H Share Strategy: Daiwa's research indicates that its A+H share valuation premium strategy has performed exceptionally well, with cumulative relative returns increasing from 90% to 107.5% over two months, driven by rising global metal prices and China's construction machinery renewal cycle.

Impact on Specific Stocks: The strategy has notably benefited materials and industrial stocks, including CMOC, ZIJIN MINING, SANY HEAVY IND, and WEICHAI POWER, despite some experiencing short selling pressures.

Foreign Investment Trends: Many overseas investors are showing interest in Chinese tech companies, favoring H-shares due to geopolitical concerns, which may lead to increased foreign capital inflows and a potential rise in H-share prices.

Potential for A-Share Revaluation: As tech companies complete dual listings, their share prices may increase rapidly, creating opportunities for revaluation of A-shares compared to their H-share counterparts.

China's Heavy-Duty Truck Sector Outlook: HSBC Global Research anticipates the heavy-duty truck sector in China to remain stable in the first half of 2026, with a potential catalyst for growth expected in the second half. The sales forecast for 2026 has been increased to 1.05 million units, despite an anticipated 8% year-over-year decline in sales.

Sales Forecast Adjustments: The report highlights a significant expected decline in domestic sales, projected to drop by 13% year-over-year, influenced by the lower installed base of National IV vehicles.

Stock Recommendations: HSBC has raised its target price for WEICHAI POWER from HKD21.4 to HKD25.8, maintaining a Buy rating, while also expressing optimism for SINOTRUK, increasing its target price from HKD27.2 to HKD34, also with a Buy rating.

Preference for WEICHAI POWER: For the first half of 2026, HSBC favors WEICHAI POWER over SINOTRUK, but holds a positive outlook for both companies in the second half of the year.