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We believe that the company's reasonable stock price should be around 55 yuan. We believe that Sinotruk has a clear leading position in the heavy-duty truck industry and has a relatively complete spare parts supporting system. Under the premise that the overall industry growth trend of heavy trucks remains unchanged, Sinotruk is expected to achieve a growth rate that exceeds the average level of the industry. Therefore, maintain a "recommended" rating on the company.
Han Haohua Industrial Securities
Investment Highlights:
Sales volume of the company doubled In the first half of this year, sales of the heavy truck industry grew at a rapid rate due to stimulation from multiple positive factors. The growth rate of the company's products even exceeded the industry average. In the first half of the year, the sales volume was close to the level of the previous year.
The main factors that stimulate the industry's growth during the booming period are: weighted charges, rapid development of the logistics industry, increasing investment in the country's fixed assets, and the future industry is expected to continue the growth trend.
The company's main competitive advantage lies in its own supporting system. The company's own engine production line is the same as that of Weichai, which is derived from the Steyr technology platform. There is no significant difference in the technical level. After the bridge box company consolidated the list, it directly improved the gross margin of the company's products.. The high-end products became more mature. The HOWO series of high-end heavy truck products independently developed by the company matured. With the gradual increase of the sales ratio, the company's gross margin level of heavy truck products will come in the future. Will be gradually higher trend.
Export will become the future growth point. We expect the company to export about 10,000 heavy trucks this year. According to the company's plan, the number of exports in the late 11th five-year period will reach about one-third of the company's total sales, which is about 30,000 vehicles. At present, there is no difficulty in accomplishing this goal.
The Group's Hong Kong listing to enhance its brand strength The selection of the Hong Kong-listed Hong Kong stocks by the Heavy Truck Group is mainly due to the fact that the international influence of the Hong Kong market has contributed to improving the overall brand strength of the company. Whether the future group is likely to achieve the overall listing of A shares is worth looking forward to.
Maintain "Recommended" rating We expect the company's 2007, 08 and 09 EPS to be 1.63, 1.86, and 2.02 yuan, respectively. Under the premise that the heavy truck growth trend will remain unchanged in the future, the company will have a bright future as the industry leader. Therefore, maintain a "recommended" rating for the company
We conducted a survey of China National Heavy Duty Truck (Sinotruk) on July 19, visited relevant personnel of the company, and made some exchanges with the company regarding the industry outlook and company development.
Group sales in the first half of the year are ideal
In the first half of this year, due to the influence of multiple factors such as the increase in money supply, the development of the logistics industry, and the toll-by-weight policy, the heavy-duty truck industry has achieved a rapid growth trend. In June, sales volume increased by 84.34% year-on-year, and it maintained a high-speed growth trend in the off-season. As the leading company in the heavy truck industry, the company has achieved an average growth rate that exceeds the industry. In the first half of the year, the company sold 52,692 heavy trucks. According to historical proportions, it is estimated that China Heavy Truck will sell about 39,000 heavy trucks in the first half of the year, basically reaching Last year's sales levels.
The heavy truck industry is expected to remain in the boom cycle in the coming years
Since 2006, the heavy-duty truck industry has experienced a magnificent bull market. In particular, in the first half of this year, sales in the heavy truck industry for three consecutive months in March, April and May were stable at more than 50,000 units. In the first half of 2007, the total sales volume of the industry was 255,711 units, which was a year-on-year increase of 67.35%. This growth rate exceeds the expectations of almost all companies. We believe that the increase in heavy truck sales this year is the result of both internal and external incentives. In the next few years, the growth of the heavy truck industry will continue to be sustainable.
We believe that the main factors affecting sales of heavy trucks in 2007 and in the coming years are:
1. The country continues to implement proactive fiscal policies and sound monetary policies
The growth rate of GDP in China in recent years has been maintained at a high level of over 10%, and it is expected that the annual growth rate of GDP in 2007 will be over 11%. According to statistics, for every 1% of GDP growth in China, the demand for heavy trucks will increase by 16%; in the first half of the year, China’s cumulative investment in fixed assets will increase by 1,125.055 billion yuan, and new fixed asset investments will continue to grow at a high rate of 20% or more. With an additional 10 billion investment in fixed assets, the demand for heavy trucks will increase by 15,000 vehicles. It can be seen that under the premise of a country's rapid macroeconomic development and an ever-growing scale of economic construction, there will be no major turning point in the overall development trend of the heavy truck industry.
2. Upgrading of highway transportation system and rising freight rates, etc.
Heavy truck demand Along with the growth of highway mileage in China and the large-scale construction of high-grade highways, long-distance transportation vehicles such as tractors and trucks will increase substantially. Specialized logistics companies and long-distance container companies have emerged, and the logistics industry has Demand for development and freight transportation has expanded rapidly, and freight rates have remained stable. These have directly stimulated the heavy truck market trend.
3. Toll-in-weight and overburden control policies affect the demand structure of trucks in the long term According to statistics, the proportion of areas where weight-based tolls will be imposed in 2007 will increase from 32% in 2006 to 65%, which will accelerate the adjustment of the demand structure of trucks. According to the provisions of GB1589-2004, the maximum gross mass of a freight car traveling on a toll-involved toll road exceeds the following criteria, it is considered to have exceeded the road carrying capacity: 17 tons of two-axle trucks, 27 tons of three-axle trucks, and 37-axle trucks. Tons, 43 tons of five-axle trucks and 49 tons of trucks with six-axes and above. Weight-based charges and clear restrictions on the carrying capacity of trucks have made the economics of heavy trucks more obvious in road transport.
4. The National III standard is a major factor of uncertainty, but it will not change the trend. According to the plan, China will begin implementing State III emission standards for all vehicles in 2008. The implementation of this emission standard will create a higher threshold, which will have multiple effects on the consumption of heavy trucks. First of all, the heavy truck engine to meet the national III standard, the cost increase of about 14,000 yuan, reflecting the heavy truck, the cost will be amplified to 20,000 yuan more than the impact on heavy truck costs around 10%. Secondly, the quality requirements for the oil products of the State III engine are relatively high, and the maintenance and use costs of the State III heavy trucks will also increase. Since the update time of domestic heavy trucks is about 3-5 years, the increase in cost will exert greater pressure on the profitability of heavy truck users. Therefore, if the country enforces the national III standard in 2008, then the sales of heavy trucks in the second half of the year will also be overdrawn. The rapid growth, and growth in 2008 will slow down. We believe that regardless of when the III national emission standards are implemented, the resulting impact will only be a short-term fluctuation. Under the premise that China's rapid economic development will not change, the pace of heavy truck consumption growth will not slow down the company's major competitive advantages. The advantages of tonnage heavy trucks are obviously in accordance with the statistics of the Automobile Industry Association. Heavy truck sales of heavy trucks ranked third after FAW and Dongfeng, but the company has obvious advantages in the heavy tonnage heavy truck market. In heavy truck companies adopting Steyr technology, although the sales growth of the company lags behind that of Shaanxi Zhongqi and Beiqi Foton, it is still higher than the average growth rate of the industry. Moreover, due to the relatively large sales base of the company, market share has a significant lead.
Leading technology development capabilities, high-end products to improve the level of gross margins The company's technology platform for heavy trucks stems from the Steyr platform technology introduced from Austria in the 1980s. After more than 20 years of development, through the study and digestion, the company has developed Steyr King, Yellow River series, HOWO series and other upgraded products on the Steyr platform. At the same time as the development of the vehicle, the company has developed a world-class unipolar drive axle, retarder and heavy duty disk brake and other important assembly, and achieved new breakthroughs in special, special vehicles and passenger car products. The HOWO and other high-end products independently developed by the company are maturing, and in the future, with the increase in the sales ratio, it will make a positive contribution to improving the company's gross profit rate.
With its own engine supporting system, the bridge box company raised the gross profit margin of heavy trucks. After the separation of Sinotruk and Weichai, in order to ensure the supply of engines, the company invested nearly RMB 1 billion to build Jinan Power Co., Ltd., which together with the Hangzhou engine plant became China National Heavy Duty Truck Group Engine supply base. It is expected that the company's engine production capacity is expected to reach around 100,000 units this year, and it is likely to be sold externally in the future. The company, which accounts for 51% of the company's shares, will directly contribute to improving the gross margin of heavy truck products.
Heavy truck product export volume The first domestic company exported more than 4,000 heavy trucks in 2006. In the first half of this year, the export volume has reached 4,000, which is the highest in the country. It is estimated that the annual heavy truck export volume will reach 10,000 vehicles. According to the company's plan, the company's exports in 2010 will account for 1/3 of the company's total sales, if calculated in accordance with the company's sales of 120,000 units in 2010, the export volume will reach around 30,000.
The Hong Kong listing of the group will enhance the overall brand image of the company Sinotruk is currently preparing for listing in Hong Kong. We believe that in the current situation that blue chips have returned to A-shares, the group companies chose to list in Hong Kong. The main reason for this is that Hong Kong, a highly internationalized market, has a beneficial effect on improving the company’s overall brand image.
After the group company achieves Hong Kong listing, whether it will choose to return to A-shares through overall listing, etc. It will be our focus in the future to maintain the “recommended†rating. Earnings Assumptions Basic Assumptions 1. The heavy truck industry will not be turning in the second half of the year. As the trend changes, sales volume in the second half of the year can reach 80% of sales in the first half of the year. 2. Affected by changes in the product structure of the company and the combined effect of the bridge box company. The gross profit rate of heavy truck products in 2007 will increase to approximately 13.2%, and will remain stable in the next few years. 3. The company enjoys 25% income tax in 2008.
We expect the company's EPS in 2007, 08 and 09 to be 1.63 yuan, 1.86 yuan and 2.02 yuan respectively. According to 30 times PE in 2008, we believe that the company's reasonable stock price should be around 55 yuan.
Based on the above valuation results, we believe that the company's reasonable stock price should be around 55 yuan. We believe that Sinotruk has a clear leading position in the heavy-duty truck industry and has a relatively complete spare parts supporting system. Under the premise that the overall industry growth trend of heavy trucks remains unchanged, Sinotruk is expected to achieve a growth rate that exceeds the average level of the industry. Therefore, maintain a "recommended" rating on the company.
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