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.

Thematic (Sector/Industry)

<ul><li>We revise down our 2024E/25E heavy-duty truck (HDT) sales forecast by 10%/5% to 856k/ 954k units, following our cut in forecast in Aug, due to further deterioration of HDT demand over the last two months.</li><li>We now expect 5% YoY decline in HDT sales (China sales + exports) in 2024E, followed by 10%/9% recovery in 2025E/26E.</li><li>We are cautious on export market as Russia, the major market for Chinese trucks, will likely see further decline due to high base and impact of high tax recycling tax (starting in Oct).</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) sales forecast by 10%/5% to 856k/ 954k units, following our cut in forecast in Aug, due to further deterioration of HDT demand over the last two months.We now expect 5% YoY decline in HDT sales (China sales + exports) in 2024E, followed by 10%/9% recovery in 2025E/26E.We are cautious on export market as Russia, the major market for Chinese trucks, will likely see further decline due to high base and impact of high tax recycling tax (starting in Oct).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 - Headwinds in 4Q24 in Both China & Export; Eyes on Policy-Driven Recovery in 2025

Equity Bottom-Up

<ul><li>We trim our HDT engine sales volume forecast by 7%/7%2% in 2024E/25E/26E, 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”). In the near term, we believe the narrowed LNG/diesel price spread will be unfavourable to Weichai’s gas engine segment.</li><li>While our earnings forecast in 2024E-26E is only revised down by 1-3% due to a relatively solid margin outlook, our new forecasts suggest profit growth to decelerate from 51% in 1H24 to 7%/2% in 2H24E/2025E.</li><li>Our SOTP-based TP for A/H (rolled over to 2025E) is revised down to RMB17.9/HK$17.7 (from RMB18.0/HK$19.5). </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 trim our HDT engine sales volume forecast by 7%/7%2% in 2024E/25E/26E, 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”). In the near term, we believe the narrowed LNG/diesel price spread will be unfavourable to Weichai’s gas engine segment.While our earnings forecast in 2024E-26E is only revised down by 1-3% due to a relatively solid margin outlook, our new forecasts suggest profit growth to decelerate from 51% in 1H24 to 7%/2% in 2H24E/2025E.Our SOTP-based TP for A/H (rolled over to 2025E) is revised down to RMB17.9/HK$17.7 (from RMB18.0/HK$19.5). 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.

Weichai Power (000338 CH) - Still Positive, but Wait for a Better Entry Point After 3Q24E Results

<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>While Weichai Power (Weichai)’s revenue growth of 6% YoY in 1Q24 is below our expectation, net profit of RMB2.6bn (+40% YoY) accounted for 21.4% of our full-year estimates (run rate in 1Q23: 20.5%), which is still in line with our expectation.</li><li>The earnings growth was driven by margin expansion on both core business and KION Group (KGX GR, NR).</li><li>We maintain Weichai as our sector top pick, given (1) the large gas/diesel price gap will continue to drive natural gas engine demand, where Weichai has &gt;60% market share in; (2) high-speed large-bore engines will serve as a structural growth driver on the back of construction of more data centres. </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.

While Weichai Power (Weichai)’s revenue growth of 6% YoY in 1Q24 is below our expectation, net profit of RMB2.6bn (+40% YoY) accounted for 21.4% of our full-year estimates (run rate in 1Q23: 20.5%), which is still in line with our expectation.The earnings growth was driven by margin expansion on both core business and KION Group (KGX GR, NR).We maintain Weichai as our sector top pick, given (1) the large gas/diesel price gap will continue to drive natural gas engine demand, where Weichai has &gt;60% market share in; (2) high-speed large-bore engines will serve as a structural growth driver on the back of construction of more data centres. 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.

Weichai Power (000338 CH) - 1Q24 Net Profit +40% YoY in Line; Solid Growth Outlook

China

Weichai Power Co., Ltd. specializes in the research and development, manufacturing and sales of vehicles and parts. The Company produces engines, heavy vehicles, light vehicles, construction machinery, hydraulic products, automotive electronics, and related parts. Weichai Power markets its products across worldwide.

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Weichai Power (000338 CH)

Capital Goods - Headwinds in 4Q24 in Both China & Export; Eyes on Policy-Driven Recovery in 2025

We revise down our 2024E/25E heavy-duty truck (HDT) sales forecast by 10%/5% to 856k/ 954k units, following our cut in forecast in Aug, due to...

CMB International