Sinotruk (3808 HK)

EQUITY RESEARCH
Sinotruk (3808 HK)
Improving sales structure
9 January 2015
Hong Kong | Automobile | Update Report
Sales of heavy trucks achieving yoy growth of 23% in November
Jinan Heavy Truck, an affiliated company of SINOTRUK, recently released the latest sales
data, a total of 8597 heavy trucks have been sold in November, with 23.2% annual growth.
In the first 11 months of the year, 81534 heavy trucks have been sold cumulatively, with
7.1% annual growth.
Accumulate (Upgrade)
Product structure optimization trend is evident
In recent years, the company has committed to improving product technology, and marked
progresses have been made. T7H and T5G heavy trucks launched by the company employ
the key components such as the engine and vehicle axle that are produced after the
localization of German MAN Company. Among them, T5G is applicable to the logistics of
moderate distance, while T7H is applicable to the logistics of long distance. Among the
heavy truck sales in the company, the proportion of the Euro IV types got increased, so the
company's profitability got improved, and the company's growth rate of revenue in 2014H1
significantly outperformed the sales growth rate. In 2015, the Euro IV models that the
company is going to launch into the market will mainly adopt German MAN technology and
intelligent technology, so as to increase the attraction to clients.
MARKET CAP (HKD MN) :
Recently, focus on the implementation strength for eliminating yellow label vehicles, and
in medium term pay attention to the "One Belt and One Road" strategy and the SOE
reform.
First, recently, the Ministry of Environmental Protection has reported the progress of
eliminating yellow label vehicles, and has worked together with other five ministries and
commissions to issue document for the actual implementation plan and goal of eliminating
yellow label vehicles, which reflects the country's strong resolve and strength in eliminating
yellow label vehicles and continuing to advance the upgrading of the national stage IV
emission standard. Second, large numbers of infrastructure projects that the government
approved at the end of the year will be implemented and advanced one by one in 2015, and
this will serve as a strong simulation to the replacement and renewal demand of heavy
trucks, which will thus boost the sales growth of the company.
In the medium term, according to the national "One Belt and One Road" strategy, heavy
trucks will serve as the first capital goods of infrastructure construction, and therefore the
heavy truck industry will be the first to benefit. While in 2014, the company's controlling
shareholder was changed from SASAC of Shandong Province to SASAC of Jinan City, which
meant the company's autonomy in management was further expanded. As a state owned
enterprise, SINOTRUK's subsequent reform topics are expected to become the focus of the
capital market.
CMP
TARGET
4.56 HKD
4.96 HKD
8.8%
COMPANY DATA
O/S SHARES (MN) :
2761
12,590
52 - WK HI/LO (HKD) :
3.75 - 4.8
Raw Beta (Past 2yrs weekly data)
0.67
SHARE HOLDING PATTERN, %
Sinotruk (BVI) Limited
51.00%
MAN Finance and Holding S.A.
25.00%
PRICE PERFORMANCE, %
Sinotruk
1MTH
3MTH
-0.88
2.46
6.54
HSI Index
8.31
3.65
PRICE VS. HSI
10.00
8.00
6.00
4.00
2.00
0.00
Jan/14
Apr/14
Jul/14
3808 hk equity
Oct/14
Jan/15
HSI
Source: Phillip Securities Hong Kong Research
KEY FINANCIALS
FY12
FY13
FY14E
Revenue
27888
30410
33006
36178
Net Profit
123
271
536
714
EPS, (yuan)
0.04
0.10
0.19
CNY mn
P/E (X),
82.5
36.5
18.5
FY15E
0.26
13.9
BVPS (yuan)
6.75
6.83
7.05
P/B (X)
0.5
0.5
0.5
0.5
DPS (yuan)
0.01
0.04
0.06
0.08
0.3%
1.1%
1.7%
2.2%
Div. Yield (%)
Source: Bloomberg, PSR est.
*All multiples & yields based on current market price
Zhang Jing +86 63512937
zhangjing@phillip.com.cn
Page | 1 | PHILLIPCAPITAL HONGKONG RESEARCH
1YR
10.14
7.26
Sinotruk
Investment Thesis
As analyzed above, we revised EPS expectation of the Company to RMB 0.19 and 0.26
of 2014/2015. And we accordingly revised the target price to 4.96, respectively
20.1/15.1x P/E and 0.6/0.5x P/B for 2014/2015. "Accumulate" rating.
Sales of heavy trucks achieving yoy growth of 23% in November
Jinan Heavy Truck, an affiliated company of SINOTRUK, recently released the latest
sales data, a total of 8597 heavy trucks have been sold in November, with 23.2%
annual growth. In the first 11 months of the year, 81534 heavy trucks have been sold
cumulatively, with 7.1% annual growth.
Better than the industry average
This year, the domestic heavy truck market was affected by the macroscopic
downturn of the economy; the cumulative sales of the heavy truck in the first 11
months were 687.6 thousand, with the yoy decline of 1%. The mom growth ratio
shows the trend from high to low. On a closer look, the semi-trailer towing vehicles
benefit from the stable demand for the logistics industry, its performance is better
than that of the whole vehicles and the chassis.
In this background, bucking the trend, sales of heavy trucks of the company as well as
in the parent group achieved good performance, whose domestic market share rising
for 5 consecutive months. The cumulative income of the heavy trucks in the first 11
months of the company as well as the parent group grew 10% yoy, which was up to
60.83 billion. In addition, there were more than 21 thousand units cumulatively in its
export orders; continues to rank the first among domestic heavy truck enterprises.
Product structure optimization trend is evident
In recent years, the company has committed to improving product technology, and
marked progresses have been made. T7H and T5G heavy trucks launched by the
company employ the key components such as the engine and vehicle axle that are
produced after the localization of German MAN Company. Among them, T5G is
applicable to the logistics of moderate distance, while T7H is applicable to the
logistics of long distance. Among the heavy truck sales in the company, the
proportion of the Euro IV types got increased, so the company's profitability got
improved, and the company's growth rate of revenue in 2014H1 significantly
outperformed the sales growth rate. In 2015, the Euro IV models that the company is
going to launch into the market will mainly adopt German MAN technology and
intelligent technology, so as to increase the attraction to clients.
Gross margin trend
19.0%
18.0%
17.0%
16.0%
15.0%
14.0%
13.0%
12.0%
2006A
2007A
2008A
2009A
2010A
Source: Company, Phillip Securities Hong Kong Research
Page | 2 | PHILLIPCAPITAL HONGKONG RESEARCH
2011A
2012A
2013A
2014F
2015F
UPDATE REPORT
Sinotruk
Recently, focus on the implementation strength for eliminating
yellow label vehicles, and in medium term pay attention to the "One
Belt and One Road" strategy and the SOE reform.
First, recently, the Ministry of Environmental Protection has reported the progress of
eliminating yellow label vehicles, and has worked together with other five ministries
and commissions to issue document for the actual implementation plan and goal of
eliminating yellow label vehicles, which reflects the country's strong resolve and
strength in eliminating yellow label vehicles and continuing to advance the upgrading
of the national stage IV emission standard. Second, large numbers of infrastructure
projects that the government approved at the end of the year will be implemented
and advanced one by one in 2015, and this will serve as a strong simulation to the
replacement and renewal demand of heavy trucks, which will thus boost the sales
growth of the company.
In the medium term, according to the national "One Belt and One Road" strategy,
heavy trucks will serve as the first capital goods of infrastructure construction, and
therefore the heavy truck industry will be the first to benefit. While in 2014, the
company's controlling shareholder was changed from SASAC of Shandong Province to
SASAC of Jinan City, which meant the company's autonomy in management was
further expanded. As a state owned enterprise, SINOTRUK's subsequent reform
topics are expected to become the focus of the capital market.
Peer Comparison
BEst Curr
BEst
EV/BEst
P/E:2FY EBITDA P/B
Mkt Cap BEst
(HKD mil) P/B
BEst
BEst
P/B:2FY P/E
20112
72043
10801
6900
7165
3649
1.9
1.8
2.0
N/A
1.8
N/A
1.7
1.6
1.7
N/A
1.7
N/A
21.6
11.3
14.6
26.6
33.7
N/A
17.0
12.5
12.0
20.8
22.6
N/A
14.9
9.1
12.1
N/A
23.5
N/A
2.5
1.9
2.0
2.6
1.8
4.4
2.7
5.1
2.9
5.2
2.5
-2.4
7.2
18.1
11.7
9.0
5.2
-8.3
124305
124305
2.8
2.8
2.9
2.9
112.7
112.7
50.7
50.7
20.1
20.1
2.4
2.4
1.0
1.0
3.6
3.6
Average
KION GROUP AG
28455
28455
1.8
1.8
1.6
1.6
14.2
14.2
12.3
12.3
6.3
6.3
1.9
1.9
2.9
2.9
11.0
11.0
Average
SINOTRUK
ZOOMLION
SANY HEAVY
CHANGCHAI-B
22100
12839
63997
6265
5299
0.8
0.5
0.9
0.8
N/A
0.7
0.5
0.9
0.8
N/A
18.6
19.9
23.7
12.0
N/A
15.1
14.8
18.0
12.5
N/A
11.9
5.1
20.8
9.7
N/A
0.9
0.5
0.9
0.8
1.2
2.0
0.8
2.0
3.0
2.3
3.7
2.1
4.4
4.5
3.8
Average
KUBOTA
HINO
HITACHI CONST
76439
134940
60557
33819
1.8
2.0
2.2
1.3
1.7
1.8
2.1
1.2
14.5
15.2
12.5
15.6
12.5
13.6
10.8
13.3
8.8
10.9
6.9
8.4
2.0
2.1
2.5
1.3
5.8
6.3
8.4
2.7
15.4
13.9
24.6
7.6
Average
DAEWOO
HYUNDAI MIPO
16458
23233
9683
0.6
0.6
0.6
0.6
0.6
0.6
25.2
14.6
35.8
9.9
8.2
11.6
9.9
15.1
4.7
0.7
0.7
0.7
-3.1
1.1
-7.3
-12.1
4.2
-28.3
Average
VOLVO AB-B SHS
176623
176623
2.3
2.3
2.1
2.1
23.8
23.8
14.8
14.8
12.2
12.2
2.2
2.2
1.6
1.6
7.0
7.0
Average
CATERPILLAR INC
CUMMINS INC
140698
405939
201523
3.3
2.8
3.3
3.0
2.7
2.9
13.4
13.3
15.6
12.2
12.5
13.0
8.6
6.7
9.0
3.4
2.8
3.3
10.7
4.6
10.9
28.3
21.3
22.1
45889
44658
5482
5.6
4.3
0.7
5.1
3.8
0.6
18.3
12.8
7.0
15.9
11.8
7.6
12.1
11.3
3.8
5.8
4.3
0.7
29.7
4.6
3.7
70.6
16.2
11.3
Ticker
CNY (5 securities)
Average
000338 CH Equity
000951 CH Equity
002434 CH Equity
000903 CH Equity
000617 CH Equity
EDM (1 security)
Average
MAN GR Equity
EUR (1 security)
Average
KGX GR Equity
HKD (4 securities)
Average
3808 HK Equity
1157 HK Equity
631 HK Equity
200570 CH Equity
JPY (3 securities)
Average
6326 JP Equity
7205 JP Equity
6305 JP Equity
KRW (2 securities)
Average
042660 KS Equity
010620 KS Equity
SEK (1 security)
Average
VOLVB SS Equity
USD (5 securities)
Average
CAT US Equity
CMI US Equity
Name
WBC US Equity
ALSN US Equity
CYD US Equity
WABCO
ALLISON
CHINA YUCHAI
Average
WEICHAI -A
CNHTC JINAN TRUCK-A
WANLIYANG -A
YUNNEI POWER-A
JINAN ENGINE CO-A
Average
MAN SE
Source: Company, Phillip Securities Hong Kong Research
Page | 3 | PHILLIPCAPITAL HONGKONG RESEARCH
ROA
LF
ROE
UPDATE REPORT
Sinotruk
UPDATE REPORT
Financials
FYE DEC
Valuation Ratios
P/E (X), adj.
P/B (X)
Dividend Yield (%)
Per share data (RMB)
EPS, (Basic)
EPS, (Diluted)
DPS
BVPS
Grow th & Margins (%)
Grow th
Revenue
EBIT
Net Income, adj.
Margins
Gross margin
EBIT margin
Net Profit Margin
Key Ratios
ROE
Incom e Statem ent (RMB m n)
Revenue
Gross profit
EBIT
Profit before tax
Tax
Profit for the period
Minority interests
Total capital share
Net profit
Source: PSR
Page | 4 | PHILLIPCAPITAL HONGKONG RESEARCH
FY11
FY12
FY13
FY14F
FY15F
10.4
0.6
2.1%
84.2
0.6
0.3%
37.2
0.5
1.1%
18.9
0.5
1.6%
14.2
0.5
2.2%
0.36
0.36
0.08
6.79
0.04
0.04
0.01
6.75
0.10
0.10
0.04
6.83
0.19
0.19
0.06
7.05
0.26
0.26
0.08
7.26
-7.7%
-10.9%
-22.9%
-23.8%
-59.0%
-87.7%
9.0%
17.9%
120.7%
8.5%
31.8%
97.6%
9.6%
22.2%
33.1%
15.6%
5.6%
2.7%
14.9%
3.0%
0.4%
16.7%
3.2%
0.9%
16.7%
3.9%
1.6%
17.0%
4.4%
2.0%
5.4%
0.7%
1.4%
2.8%
3.6%
36604
5706
2043
1466
-298
1168
-166
2761
1002
27888
4151
838
320
-149
171
-49
2761
123
30410
5091
988
592
-153
440
-168
2761
271
33006
5495
1302
915
-210
705
-168
2761
536
36178
6150
1591
1201
-270
931
-217
2761
714
Sinotruk
Ratings History
Market Price
Target Price
12
Source: Bloomberg, PSR
10
8
6
4
2
Sep-14
Mar-14
Sep-13
Mar-13
Sep-12
Mar-12
Sep-11
Mar-11
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
1
2
3
4
5
PSR Rating System
Total Returns
Recom m endation Rating
> +20%
Buy
1
+5% to +20%
Accumulate
2
-5% to +5%
Neutral
3
-5% to -20%
Reduce
4
<-20%
Sell
5
Rem arks
We do not base our recommendations entirely on the above quantitative return bands.
We consider qualitative factors like (but not limited to) a stock's risk rew ard profile, market
sentiment, recent rate of share price appreciation, presence or absence of stock price
catalysts, and speculative undertones surrounding the stock, before making our final
recommendation
Page | 5 | PHILLIPCAPITAL HONGKONG RESEARCH
UPDATE REPORT
Sinotruk
Total Return
>+20%
+5% to +20%
-5% to +5%
-5% to -20%
<-20%
UPDATE REPORT
PHILLIP RESEARCH STOCK SELECTION SYSTEMS
Recommendation
Buy
Accumulate
Neutral
Reduce
Sell
Rating
1
2
3
4
5
Remarks
>20% upside from the current price
+5% to +20%upside from the current price
Trade within ± 5% from the current price
-5% to -20% downside from the current price
>20%downside from the current price
We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited
to) a stock's risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and
speculative undertones surrounding the stock, before making our final recommendation
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©
2015 Phillip Securities (Hong Kong) Limited
Page | 6 | PHILLIPCAPITAL HONGKONG RESEARCH
Sinotruk
UPDATE REPORT
Contact Information (Regional Member Companies)
SINGAPORE
Phillip Securities Pte Ltd
250 North Bridge Road, #06-00 Raffles City Tower,
Singapore 179101
Tel : (65) 6533 6001 Fax: (65) 6535 3834
www.phillip.com.sg
MALAYSIA
Phillip Capital Management Sdn Bhd
B-3-6 Block B Level 3, Megan Avenue II,
No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur
Tel (60) 3 2162 8841 Fax (60) 3 2166 5099
www.poems.com.my
JAPAN
Phillip Securities Japan, Ltd
4-2 Nihonbashi Kabutocho, Chuo-ku
Tokyo 103-0026
Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141
www.phillip.co.jp
INDONESIA
PT Phillip Securities Indonesia
ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A,
Jakarta 10220, Indonesia
Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809
www.phillip.co.id
CHINA
Phillip Financial Advisory (Shanghai) Co. Ltd.
No 436 Heng Feng Road, Green Tech Tower Unit 604
Shanghai 200 070
Tel (86) 21 5169 9400 Fax: (86) 21 6091 1155
www.phillip.com.cn
INDIA
PhillipCapital (India) Private Limited
No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg,
Lower Parel West, Mumbai 400013
Tel: (9122) 2300 2999 Fax: (9122) 6667 9955
www.phillipcapital.in
THAILAND
Phillip Securities (Thailand) Public Co. Ltd.
15th Floor, Vorawat Building, 849 Silom Road,
Silom, Bangrak, Bangkok 10500 Thailand
Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921
www.phillip.co.th
FRANCE
King & Shaxson Capital Ltd.
3rd Floor, 35 Rue de la Bienfaisance
75008 Paris France
Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017
www.kingandshaxson.com
UNITED KINGDOM
King & Shaxson Ltd.
6th Floor, Candlewick House, 120 Cannon Street
London, EC4N 6AS
Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835
www.kingandshaxson.com
UNITED STATES
Phillip Futures Inc.
141 W Jackson Blvd Ste 3050
The Chicago Board of Trade Building
Chicago, IL 60604 USA
Tel (1) 312 356 9000 Fax: (1) 312 356 9005
AUSTRALIA
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Level 12, 15 William Street,
Melbourne, Victoria 3000, Australia
Tel: (61) 3 9618 8238 Fax: (61) 3 9200 2277
www.phillipcapital.com.au
SRI LANKA
Asha Phillip Securities Limited
Level 4, Millennium House, 46/58 Navam Mawatha,
Colombo 2, Sri Lanka
Tel: (94) 11 2429 100 Fax: (94) 11 2429 199
www.ashaphillip.net/home.htm
HONG KONG
Phillip Securities (HK) Ltd
11/F United Centre 95 Queensway Hong Kong
Tel (852) 2277 6600 Fax: (852) 2868 5307
www.phillip.com.hk
Page | 7 | PHILLIPCAPITAL HONGKONG RESEARCH