External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Equity Bottom-Up

<ul><li>We revise down our 2024E/25E earnings forecast by 5/2%, after incorporating our new industry HDT sales forecast (for details, please refer to our sector report “China Heavy-duty Truck – Headwinds in 4Q24 in both China &amp; export; Eyes on policy-driven recovery in 2025”).</li><li>We forecast ~20% YoY earnings decline in 2H24E, before recovering in 2025E. We rolled over our target valuation to 2025E, with a new TP of HK$21.4 (previously HK$19.5) which is based on 4.5x EV/EBITDA (equivalent to the historical average).</li><li>We believe the earnings downside risk has yet to be reflected in the current share price, in particular after recent rally. Maintain HOLD.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We revise down our 2024E/25E earnings forecast by 5/2%, after incorporating our new industry HDT sales forecast (for details, please refer to our sector report “China Heavy-duty Truck – Headwinds in 4Q24 in both China &amp; export; Eyes on policy-driven recovery in 2025”).We forecast ~20% YoY earnings decline in 2H24E, before recovering in 2025E. We rolled over our target valuation to 2025E, with a new TP of HK$21.4 (previously HK$19.5) which is based on 4.5x EV/EBITDA (equivalent to the historical average).We believe the earnings downside risk has yet to be reflected in the current share price, in particular after recent rally. Maintain HOLD.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Sinotruk (Hong Kong) (3808 HK) - Earnings risk not yet priced in

Thematic (Sector/Industry)

<ul><li>The HK market had a strong run over the past two weeks following the dramatic policy changes announced by the Chinese government.</li><li>In order to have a closer look at the sources of buying forces, we analysed ~13,000 data points of shareholdings over the past nine settlement days (23 Sep - 4 Oct on T+2 basis) for four HK-listed names under our coverage, namely Weichai PowerH (2338 HK, BUY), Zoomlion-H (1157 HK, BUY), SANYI (631 HK, BUY) and Sinotruk (3808 HK, HOLD). Our analysis is based on CCASS data, which represented brokers’ holdings on behalf of clients.</li><li>We divided ~380 brokers into six categories: (1) Hong Kong, (2) the Chinese mainland, (3) Stock connect, (4) the US, (5) Europe and (6) other foreign brokers (excluding the US and Europe). </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

The HK market had a strong run over the past two weeks following the dramatic policy changes announced by the Chinese government.In order to have a closer look at the sources of buying forces, we analysed ~13,000 data points of shareholdings over the past nine settlement days (23 Sep - 4 Oct on T+2 basis) for four HK-listed names under our coverage, namely Weichai PowerH (2338 HK, BUY), Zoomlion-H (1157 HK, BUY), SANYI (631 HK, BUY) and Sinotruk (3808 HK, HOLD). Our analysis is based on CCASS data, which represented brokers’ holdings on behalf of clients.We divided ~380 brokers into six categories: (1) Hong Kong, (2) the Chinese mainland, (3) Stock connect, (4) the US, (5) Europe and (6) other foreign brokers (excluding the US and Europe). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Capital Goods - Who Are Buying/Selling the Sector?

<ul><li>We revise down our 2024E/25E heavy-duty truck (HDT) industry sales forecast by 11%/9% to 0.96mn / 1mn units, representing 4%/5% YoY growth.</li><li>For exports, the growth outlook is less certain given the weakness of truck sales in Russia, a major market for Chinese trucks.</li><li>We are concerned that the growth in other countries will not be able to offset the decline in Russia. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We revise down our 2024E/25E heavy-duty truck (HDT) industry sales forecast by 11%/9% to 0.96mn / 1mn units, representing 4%/5% YoY growth.For exports, the growth outlook is less certain given the weakness of truck sales in Russia, a major market for Chinese trucks.We are concerned that the growth in other countries will not be able to offset the decline in Russia. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Capital Goods - Turning Cautious on Export Market; D/G Sinotruk to HOLD; Maintain BUY on Weichai

<ul><li>The 35% decline in China’s LNG price (due to abundant supply) along with the 4% increase in diesel price (due to strong crude price) YTD have reduced the gas/diesel price ratio to only 0.56x (0.9x in late Dec 2023).</li><li>The expanding price spread boosted the sales of natural gas HDTs substantially by 2x YoY in Mar, taking the gas HDT ratio to 25% (vs 7% in Jan).</li><li>We expect the current gas/diesel price spread could last longer than that in 2023, given the elevated crude price arising from the geopolitical tension in the Middle East. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

The 35% decline in China’s LNG price (due to abundant supply) along with the 4% increase in diesel price (due to strong crude price) YTD have reduced the gas/diesel price ratio to only 0.56x (0.9x in late Dec 2023).The expanding price spread boosted the sales of natural gas HDTs substantially by 2x YoY in Mar, taking the gas HDT ratio to 25% (vs 7% in Jan).We expect the current gas/diesel price spread could last longer than that in 2023, given the elevated crude price arising from the geopolitical tension in the Middle East. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Heavy Duty Truck - Expanding Gas/Diesel Price Spread to Further Boost Sales of Gas HDTs

<ul><li>In the Central Commission for Financial and Economic Affairs (CCFEA) meeting held on 23 Feb, President Xi proposed an acceleration of a large-scale replacement of production equipment to support economic growth.</li><li>This is the first time that equipment replacement is mentioned as a tool to support the economy.</li><li>We believe this message is a positive signal to the heavy-duty truck (HDT) sector. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

In the Central Commission for Financial and Economic Affairs (CCFEA) meeting held on 23 Feb, President Xi proposed an acceleration of a large-scale replacement of production equipment to support economic growth.This is the first time that equipment replacement is mentioned as a tool to support the economy.We believe this message is a positive signal to the heavy-duty truck (HDT) sector. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Capital Goods – Equipment Replacement Proposed in Central Government Meeting

China

Sinotruk Hong Kong Ltd is a heavy truck manufacturer in China.  The company specializes in the research, development and manufacturing of heavy trucks and related key parts and components, including cabins, engines and axles.

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Sinotruk Hong Kong (3808 HK)