Weichai pre-announced over the weekend that 1H23 net profit is expected to grow 50-70% YoY to RMB3.59-4.07bn, representing 50-57% of our full year profit forecast. This implies net profit of RMB1.73-2.21bn （up 30-65% YoY） in 2Q23E, with the high-end slightly better than our expectation. We continue to like Weichai’s recovery story as: （1） the significant decline in LNG price will continue to boost the sales of LNG trucks/engines, where Weichai has strong presence on; （2） easing supply chain pressure will help KION achieve margin recovery; （3） the continuous growth of engines for agricultural machinery and HDT through rising penetration in LOVOL and Sinotruk （3808 HK, BUY） is on good track. We maintain our SOTP-based TPs for Weichai A/H of RMB13.8/HK$15.8. Maintain BUY.
　　Weichai’s engine sales continued to outpace industry in 5M23.
　　According to CICEIA, Weichai's multi-cylinder sales （HDT and other engines） grew 26% YoY to 303k units in 5M23 （vs the industry average of 8%）， with a market share of ~16%.
　　HDT Industry: Sales volume +31% YoY in Jun. According to the　preliminary data from Cvworld, China HDT industry sales volume in Jun （including export） grew 31% YoY to 72k units, driven by strong demand for gas-fuelled trucks （helped by the decline in LNG price） and export. In 1H23, China HDT sales volume grew 25% YoY to 474k units, representing 57% of our full year forecast of 829k units （+23% YoY）。
　　Decline in LNG price positive to Weichai. LNG price in late Jun has　declined 40%+ from the peak in Dec 2022. We believe it will continue to boost the sales of LNG trucks given the lower operating cost to truck owners. We expect Weichai to be a key beneficiary as we estimate Weichai has >40% market share in HDT gas engine. Besides, Shaanxi Heavy-duty Motor, subsidiary of Weichai, is a key player in gas-fuelled HDT segment.
　　Risk factors: （1） weakness in engine demand; （2） increase in component cost; and （3） new business growth below expectations.