市場資訊

Sinotruk (Hong Kong) preannounced 1H22 results fall 62-68% YoY
The firm estimates its attributable net profit fell 62-68% YoY to Rmb1.16-1.38bn, in line with our expectations.
Trends to watch
Multiple negatives weigh on the commercial vehicle segment; Sinotruk had the largest market share in the Chinese mainland in 1H22. Sales volume of the firm’s heavy-duty trucks (HDTs) fell 75.5% YoY to 50,781 units in 2Q22. Based on the median of the firm’s preannouncement, we estimate that the firm’s attributable net profit declined 65% YoY (+81.9% HoH) to Rmb1.27bn in 1H22. Sales volume of the commercial vehicle industry slumped in 1H22, due to disrupted logistics due to COVID-19, a downturn in the infrastructure construction sector, and a shortfall in demand following the implementation of the China VI emission standards. The firm preannounced its profit declined in 1H22 due to a sector downturn. However, its products have remained competitive, with Sinotruk ranking no. 1 with a 23.3% (+5ppt YoY) share of the domestic commercial vehicle market, according to the China Association of Automobile Manufacturers (CAAM).
End-market demand for commercial vehicles shows signs of recovery; high export growth offsets the impact of declining domestic demand. The total sales volume of commercial vehicles in China grew 9% MoM to 230,000 units in June. Sales volume of HDTs rose 11.7% MoM to 50,781 units in June, showing signs of recovery. The firm posted high export growth thanks to its flexible overseas supply chain system and its well-established brand (it has ranked first in HDT exports for 17 consecutive years). According to cvworld.cn, China’s HDT export volume grew rapidly YoY and reached about 14,000-15,000 units in June. Sinotruk and Shaanxi Automobile ranked in the top 2, with a combined share of 70% in June. Sinotruk held a mobilization meeting on May 24, where it set the HDT export sales target at over 80,000 units for 2022.
Pro-growth policies bolster demand growth; commercial vehicle market to recover in 2H22. Since April, the State Council has introduced a series of pro-growth policies to ensure orderly resumption of work and production and facilitate recovery of the infrastructure construction and logistics sectors. Since the beginning of May, about 30 cities - including Changsha, Dongguan, and Nanjing - have eased real estate policies. We expect favorable policies to boost demand for construction HDTs. The weekly index of China’s truckload traffic volume grew by 6.3% from 97.39 on June 5 to 103.49 on July 3, according to logistics platform, G7. We expect the recovery of the domestic logistics sector to continue in 3Q22. HDT sales volume in 2H21 was relatively low due to the shift towards the China VI emission standards. As a result, we expect the YoY growth in HDT sales volume to turn positive in 3Q22 and accelerate on a monthly basis in 2H22. Amid a sector uptrend, we believe that the firm will leverage its competitive product portfolio to expand its market share, which could support its earnings recovery.
Financials and valuation
The stock is trading at 6.2x 2022e and 4.7x 2023e P/E. Given a sharp decline in sector demand in 1H22, we lower our 2022 and 2023 net profit forecasts 24.2% and 20.2% to Rmb3.65bn and Rmb4.83bn. We maintain OUTPERFORM and cut our TP by 27.8% to HK$13 (8.4x 2022e and 6.4x 2023e P/E), offering 35.4% upside.
Risks
Slowing macroeconomic growth; sluggish logistics and transportation fees; disappointing infrastructure construction; slow inventory digestion.