20240305-招银国际-China_Heavy-duty_Truck__Expansion_of_gas_diesel_price_spread_likely_to_boost_natural_gas_HDT_sales_in_the_near_term_4页_710kb

Summary of CMB Heavy-Duty Truck Sector Update (March 5, 2024)

Key Market Conditions

• The expansion of the gas/diesel price spread is expected to boost natural gas heavy-duty truck (HDT) sales. The gas/diesel price ratio in China is currently 0.59x, down from 0.9x in late December 2023.
• Year-to-date, LNG prices have declined 35%, while diesel prices have remained largely unchanged, making natural gas more competitive.

Sales Impact and Trends

• Low gas prices relative to diesel are anticipated to drive significant growth in natural gas HDT sales for the coming months. Gas HDTs, which made up 7% of total sales in January 2024, could see an uptick similar to the July-November 2023 period, when they accounted for 17-29%.
• HDT sales volume dropped 25% YoY in February 2024, primarily due to the Lunar New Year, but year-to-date sales grew 23% vs. 155k units. The full-year sales volume forecast remains 17% growth, supported by replacement demand and strong exports.

Drivers of Growth

• The report highlights potential policy support for equipment replacement and resilient export demand as key factors continuing to drive the sector.

Stock Recommendations

• Weichai (2338 HK/000338 CH) is recommended as a "BUY" (sector top pick) with strong market share gains driven by natural gas engines.
• Sinotruk (3808 HK) is a "BUY" based on export-driven growth potential.

Financial Highlights

• Payback period for natural gas HDTs is approximately 2.5 years, shorter than diesel's period, making LNG trucks more profitable. For example, based on current prices, an LNG truck generates an annual net profit of RMB186k, compared to RMB110k for a diesel truck.
• Financial sensitivity analysis shows that changes in diesel or LNG prices significantly impact payback periods, favoring LNG trucks with declining diesel prices.

Figures and Data

• Primary sources: Bloomberg, Wind, Cvworld. Charts include:
  • Gas/diesel price ratio at 0.59x.
  • Decline in HDT sales angle and payback period sensitivity to price changes.

Projections

• The HDT industry sales volume is forecasted to expand, with drivers including replacement demand, policies, and exports continuing the momentum from previous periods.