We’re seeing a steep decline in earnings at Weichai Power: 2.387 billion CNY gain (minus 63.3 percent compared with the previous year) with a 35.9 percent turnover decrease to 86.74 billion CNY. The subsidiary Kion (45% stake) even saw its share price fall on the stock market from over 120 to 20 EUR (recently strongly increased again) due to a profit slump in the course of the year: 210.6 million EUR gain after the 691.1 million EUR in the prior-year period of the first nine months, although turnover in the reported period was able to be upped from 8.24 to 8.4 billion EUR. Supply chain problems as well as cost increases (for raw materials, etc.) were cited as the basis.
Weichai’s valuation – compared to the 30 billion USD of Cummins Engine – is quite low: just 10 billion USD for the market leader in diesel engines in China. In the third quarter, it suffered a slump in diesel engine deliveries to 136,000 units, which corresponds to a 32 percent decline. Shareholders are viewing all this critically, but there are still psychological influences that can’t be accounted for in this type of assessment.
There’s no doubting the fact, however, that China is committing increasingly more to hydrogen and fuel cells, and Weichai will clearly be among the beneficiaries, as they are perfectly – also see Ballard – positioned. For us, a key investment in the hydrogen sector of China. The share has moved noticeably upwards again in recent weeks and should be able to reach quite different, and indeed higher, rates in the coming years, when the fuel cell strategy outlined in the national provisions gains momentum in implementation.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Author: written by Sven Jösting December 12th, 2022
