China National Heavy Duty Truck: August sales are improving

The company's sales in August improved, and it is expected that the growth rate in the fourth quarter will be faster than the third quarter. The company's sales volume in August achieved a growth of 26.53% compared with the previous period, which stopped the sales decline caused by a variety of external factors in the previous period. We expect the heavy truck industry's growth rate to rebound from the third quarter. It is estimated that the annual sales growth of heavy trucks will be around 3%-5%. China National Heavy Duty Truck Co., Ltd. will also increase its market share due to the advantages of EGR and achieve a sales plan of 85,000 vehicles throughout the year.

China National Heavy Duty Cycle has historically been weaker than the cyclical fluctuations in the industry. Thanks to the good brand effect and the benefit from the heavy truck trend, the company has continued to improve its market share, reflecting the good characteristics of the industry cycle fluctuations. Based on the sales of Heavy Duty Truck from January to August, the preemptive advantage of EGR products, and the major downstream customers, we believe that Sinotruk has the ability to meet the established production targets.

Nearly a third of the products in the future will be exported. The potential for growth from China’s heavy-duty trucks’ export market is huge. The Russian and African markets account for 80% of China National Heavy Duty Trucks' exports. The supply of local suppliers in this market is insufficient, and there is a clear gap between supply and demand. In Southeast Asia and Latin America, the market is mainly produced through SKD and CKD assembly. In recent years, the company’s overseas sales have increased significantly. The company expects that the export sales volume in 2010 will account for 30% of the total sales.

Complete industrial chain advantages. At the group level, key components such as engines, partial transmissions, cabs, frames, and axles can be solved, and the industry chain is longer than competitors.

The main risk factors: Heavy-duty card industry experienced a sharp negative growth in the second half of 2008; many manufacturers began to provide EGR products, leading to increased competition, the company's market share can not rise; in the second half of the domestic fixed assets growth rate fell more than expected.

We expect the company's 2008-2010 earnings per share to be 1.86, 1.86 and 2.09, respectively. Based on the relative and absolute valuations, we believe that Sinotruk's reasonable valuation range is 10-11 times, corresponding to a value of 18.6-20.46 yuan per share.
View related topics: China National Heavy Duty Truck Breaks Monthly Sales Record for National Heavy Truck Industry

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