External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

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Thematic (Sector/Industry)

<ul><li>We are turning more positive on the construction machinery &amp; heavy-duty truck (HDT) sector as we expect meaningful earnings recovery in 2023E (following the down-cycle since early 2021), underpinned by: (1) resilient overseas demand; (2) strong mining activities; (3) gradual reopening in China; (4) decline in freight rate and steel price.</li><li>Meanwhile, the supporting policies on property will serve as risk reduction factor for the sector.</li><li>Aerial work platform (AWP) is our most preferred subsector, followed by HDT, excavator and other machinery.</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 are turning more positive on the construction machinery &amp; heavy-duty truck (HDT) sector as we expect meaningful earnings recovery in 2023E (following the down-cycle since early 2021), underpinned by: (1) resilient overseas demand; (2) strong mining activities; (3) gradual reopening in China; (4) decline in freight rate and steel price.Meanwhile, the supporting policies on property will serve as risk reduction factor for the sector.Aerial work platform (AWP) is our most preferred subsector, followed by HDT, excavator and other machinery.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 Construction Machinery / HDT – 2023 Outlook

China Specialist, Auto and Industrial Specialist

Victoria Li

Equity Bottom-Up

<ul>
<li>Sector outlook is weak with a -20% yoy decline on sales volume expected.</li>
<li>End demand was largely brought forward in 1H2021. Lots of inventory at dealers are waiting to be sold.</li>
<li>Sinotruk’s valuation looks fair now. However we see limited positive momentum to drive its share performance this year.</li>
</ul>


Sector outlook is weak with a -20% yoy decline on sales volume expected.
End demand was largely brought forward in 1H2021. Lots of inventory at dealers are waiting to be sold.
Sinotruk’s valuation looks fair now. However we see limited positive momentum to drive its share performance this year.


Sinotruk: Inventory Overhang at Dealers and Weak End Demand Will Take Time to Clear

China's HDT (heavy duty truck) sales accelerated declining in the past two months. The reasons behind include largely brought forward demand in earlier months of this year, weak demand from commodity transportation, infrastructures and property, etc. We believe HDT demand would remain weak in 2021-2022E until the market fully digest the over-purchased trucks.Although Sinotruk kept gaining market share YTD, its monthly sales growth turned negative in July due to poor market demand. We estimate Sinostruk's market share gain could not offset the decline of sector demand. Its earnings would turn weak in 2H2021. Sinotruk's share performance was nearly halved from this year's peak. Currently it trades at 5.4x P/E 2021E on Bloomberg consensus. However, if Sinotruk's earnings down 50% yoy in 2022E in bear case, current share price might still have some downside potential.

China's HDT (heavy duty truck) sales accelerated declining in the past two months. The reasons behind include largely brought forward demand in earlier months of this year, weak demand from commodity transportation, infrastructures and property, etc. We believe HDT demand would remain weak in 2021-2022E until the market fully digest the over-purchased trucks.Although Sinotruk kept gaining market share YTD, its monthly sales growth turned negative in July due to poor market demand. We estimate Sinostruk's market share gain could not offset the decline of sector demand. Its earnings would turn weak in 2H2021. Sinotruk's share performance was nearly halved from this year's peak. Currently it trades at 5.4x P/E 2021E on Bloomberg consensus. However, if Sinotruk's earnings down 50% yoy in 2022E in bear case, current share price might still have some downside potential.

Sinotruk (3808.HK): Sluggish Sector Demand Ahead

4M2021 sales of China's heavy duty truck (HDT) increased by 57% yoy. However, negative signs indicates the yoy growth rate might turn negative very soon.1) Monthly sales data in May-Dec 2020 were at very high level, since Covid-19 lockdown in 1Q2020 and Covid-related stimulus disrupted normal sales seasonality. 2) Coming National VI emission standard brought forwards the foreseeable demand and then reduce the sales from July onwards. 3)Feedback from truck dealers show their order volume has gone down quickly since 2HApril. We remain our flattish HDT sales for FY2021, which indicates around -23% yoy decline on HDT sales during May-Dec 2021.After recent market correction, we believe valuation of Sinotruk (3808.HK) have priced in a 40% yoy decline on Sinotruk's 2021E earnings, which is too bearish.  Although weakening sector sales trend would keep its share performance under pressure in the rest of this year, valuation re-rating is still possible when Sinotruk's earnings beat expectations.

4M2021 sales of China's heavy duty truck (HDT) increased by 57% yoy. However, negative signs indicates the yoy growth rate might turn negative very soon.1) Monthly sales data in May-Dec 2020 were at very high level, since Covid-19 lockdown in 1Q2020 and Covid-related stimulus disrupted normal sales seasonality. 2) Coming National VI emission standard brought forwards the foreseeable demand and then reduce the sales from July onwards. 3)Feedback from truck dealers show their order volume has gone down quickly since 2HApril. We remain our flattish HDT sales for FY2021, which indicates around -23% yoy decline on HDT sales during May-Dec 2021.After recent market correction, we believe valuation of Sinotruk (3808.HK) have priced in a 40% yoy decline on Sinotruk's 2021E earnings, which is too bearish.  Although weakening sector sales trend would keep its share performance under pressure in the rest of this year, valuation re-rating is still possible when Sinotruk's earnings beat expectations. 

Sinotruk: HDT End Demand Weakness Warning

Heavy-duty truck demand from infrastructure might slow down in 2021E, but demand increase from logistics, which contributed 74% of annual HDT sales, would remain strong in next few years. Also, Sinotruk's new logistic trucks and newly introduced Weichai engines are boosting its market share.We believe Sinotruk's earnings will grow by another 10-15% yoy in 2021E after a 90% yoy increase in 2020E. Current valuation stands below three year historical average of 9x. Valuation re-rating is still possible when Sinotruk's increases on market share and profitability beat market consensus.

Heavy-duty truck demand from infrastructure might slow down in 2021E, but demand increase from logistics, which contributed 74% of annual HDT sales, would remain strong in next few years. Also, Sinotruk's new logistic trucks and newly introduced Weichai engines are boosting its market share.We believe Sinotruk's earnings will grow by another 10-15% yoy in 2021E after a 90% yoy increase in 2020E. Current valuation stands below three year historical average of 9x. Valuation re-rating is still possible when Sinotruk's increases on market share and profitability beat market consensus.

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)

China Construction Machinery / HDT – 2023 Outlook

We are turning more positive on the construction machinery & heavy-duty truck (HDT) sector as we expect meaningful earnings recovery in 2023E...

CMB International

Sinotruk: Inventory Overhang at Dealers and Weak End Demand Will Take Time to Clear

Sector outlook is weak with a -20% yoy decline on sales volume expected. End demand was largely brought forward in 1H2021. Lots of inventory at...

Victoria Li

Sinotruk (3808.HK): Sluggish Sector Demand Ahead

China's HDT (heavy duty truck) sales accelerated declining in the past two months. The reasons behind include largely brought forward demand in...

Victoria Li

Sinotruk: HDT End Demand Weakness Warning

4M2021 sales of China's heavy duty truck (HDT) increased by 57% yoy. However, negative signs indicates the yoy growth rate might turn negative very...

Victoria Li

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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China Construction Machinery / HDT – 2023 Outlook

We are turning more positive on the construction machinery & heavy-duty truck (HDT) sector as we expect meaningful earnings recovery in 2023E...

CMB International

Sinotruk: Inventory Overhang at Dealers and Weak End Demand Will Take Time to Clear

Sector outlook is weak with a -20% yoy decline on sales volume expected. End demand was largely brought forward in 1H2021. Lots of inventory at...

Victoria Li

Sinotruk (3808.HK): Sluggish Sector Demand Ahead

China's HDT (heavy duty truck) sales accelerated declining in the past two months. The reasons behind include largely brought forward demand in...

Victoria Li

Sinotruk: HDT End Demand Weakness Warning

4M2021 sales of China's heavy duty truck (HDT) increased by 57% yoy. However, negative signs indicates the yoy growth rate might turn negative very...

Victoria Li

Sinotruk(3808.HK): Market Share Gainer

Heavy-duty truck demand from infrastructure might slow down in 2021E, but demand increase from logistics, which contributed 74% of annual HDT...

Victoria Li