China Yuchai International (CYD) has received a new Buy rating, initiated by UBS analyst, .
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UBS has given his Buy rating due to a combination of factors tied to China Yuchai International’s strong position in the fast-growing high horsepower (AIDC) engine market. The firm highlights Yuchai’s role as China’s second-largest diesel engine producer and its dominant share in high horsepower engines, where capacity, cost advantages, and early entry are expected to translate into robust earnings. UBS projects that, even though high horsepower engines will represent a modest portion of total sales in the next few years, this segment should drive nearly all of the company’s net profit as the traditional engine business stagnates. Their earnings estimates for 2025–2027 stand notably above market consensus, reflecting expectations of market share gains and margin enhancement that they believe are underappreciated by other analysts.
UBS’s positive stance is also supported by strong structural demand from AI data centers, where global requirements for reliable backup power are forecast to expand rapidly through 2028, creating a favorable backdrop for Yuchai’s products. Chinese manufacturers, including Yuchai, are positioned to benefit from both domestic expansion and overseas opportunities, helped by shorter delivery times and upgraded offerings relative to global incumbents facing capacity constraints. On valuation, UBS sets a US$60.00 price target based on a 2026 price-to-earnings multiple that is above Yuchai’s historical average but still at a discount to international peers, arguing that faster expected earnings growth and improving returns on equity justify a higher multiple. This combination of strong industry tailwinds, leading market share, earnings growth visibility, and a still-attractive relative valuation underpins UBS’s Buy recommendation on China Yuchai International.