20130910-美银美林-Aug._HDT_sales_accelerated_to_35__YoY__Weichai_up_44__YoY_34页_810kb

Summary of China Commercial Vehicle Sales and Market Analysis (August 2013)

Core Content

In August 2013, China's heavy duty truck (HDT) sales increased by 35% YoY to 51,551 units, showing an acceleration from 26% YoY in July 2013. This growth was mainly driven by logistic trucks (truck tractors), which saw an 90% YoY increase due to a mildly recovering highway trucking freight price. The YTD2013 HDT sales were up 12% YoY to 503,085 units, and the full-year 2013 forecast remains at 735,000 units (up 16% YoY), suggesting a 25% YoY growth for the remaining four months of the year.

The top five HDT makers in August 2013 were:

• Dongfeng: Up 8.8% YoY to 8,095 units, YTD2013 up 9.1% YoY
• FAW: Up 65% YoY to 10,095 units, YTD2013 up 13% YoY
• Sinotruk: Up 49% YoY to 9,002 units, YTD2013 up 3% YoY
• Foton: Up 39% YoY to 8,479 units, YTD2013 up 28% YoY
• ShaanQi: Up 48% YoY to 6,890 units, YTD2013 up 10.3% YoY

Key Players and Performance

Weichai Power (2338 HK)

• Large diesel engine sales in August 2013 rose 44% YoY to 23,000 units, outperforming the HDT sector's 35% YoY growth.
• Shaan'Xi Heavy Truck sales increased 48% YoY to 6,890 units in August 2013.

Sinotruk (3808 HK)

• Heavy truck sales in August 2013 increased 49% YoY to 9,002 units.
• Medium trucks also showed strong growth at 35% YoY, contributing to an overall commercial vehicle (CV) sales increase of 39% YoY to 11,580 units.
• Engine sales rose 36% YoY to 6,566 units.

Dongfeng Motor (489 HK)

• August CV sales were down 9% YoY to 28,257 units, but YTD2013 sales were up 2% YoY to 310,434 units.

Leading Indicators

• Freight price growth (YoY) was +0.4%, contributing to HDT sales growth.
• Inventory levels are healthy, and seasonal demand is expected to push September HDT sales to 55,000 units (up 28% YoY).

Commercial Vehicle Sales by Segment

Total CV Sales

• August 2013: 404,054 units, down 5.2% YoY
• YTD2013: 3,831,357 units, down 4.3% YoY

Truck Sales

• Heavy trucks: 51,551 units, up 34.7% YoY
• Medium trucks: 17,243 units, down 14.4% YoY
• Light trucks: 142,184 units, up 3.9% YoY
• Mini trucks: 39,573 units, up 10.7% YoY

Bus Sales

• Total buses: 153,503 units, down 21.4% YoY
• Large buses: 6,338 units, down 23.3% YoY
• Medium buses: 7,438 units, down 12.6% YoY
• Light buses: 31,340 units, up 9.8% YoY
• Mini buses: 108,387 units, down 27.7% YoY

Valuation and Price Objectives

Weichai Power (WEICF)

• Price objective: HK$16, based on 7x FY13E P/E
• Valuation basis: Average consensus P/E multiple over the past 12 months
• Upside risks: Recovery in property FAI, new macro stimulus policies
• Downside risks: Entry of new competitors (Yuchai, Wanliyang), vertical integration by truck makers

Sinotruk (SHKLF)

• Price objective: HK$4.5, based on 0.5x P/B
• Valuation basis: Average consensus P/B multiple over the past 12 months
• Upside risks: Recovery in property FAI
• Downside risks: Aggressive competition from OEMs and new entrants

Great Wall Motor (GWLLF)

• Price objective: HK$25.5, based on 7.5x 2013E P/E
• Valuation basis: Historical average P/E
• Upside risks: Better-than-expected exports to Russia
• Downside risks: Severe price drops due to competition

Guangzhou Auto (GNZUF)

• Price objective: HK$10, based on 18.1x 2013E P/E
• Valuation basis: Historical average two-year forward P/E of 10.6x
• Upside risks: Localization of luxury brands (Acura, Lexus)
• Downside risks: Regulatory restrictions on car purchases, Sino-Japan political tensions

Analysts and Contact Information

• Bin Wang: +852 2161 7967, bin.wang@baml.com
• Edmond Huang, CFA: +852 2161 7807, edmond.huang@baml.com
• Mark Mao: +852 2536 3257, qiyu.mao@baml.com

Risk Factors

Upside Risks

• Industry mix improvement due to stock market and property market rebound
• Potential new policies and price recovery in key sectors

Downside Risks

• Prolonged weak sentiment
• Aggressive competition in large sedan segments
• Regulatory restrictions
• Political tensions
• Price wars from new entrants

Definitions and Disclosures

• A link to definitions of commonly used terms is provided for reference.
• The report includes analyst certifications and important disclosures, indicating the validity of the price objectives and ratings.