Weichai Power: Construction Machinery Engines Will Drive Performance
The heavy truck industry is about to enter the peak season. Weichai engine sales are expected to exceed expectations. In 2011, with the gradual implementation of investment in infrastructure construction brought about by the construction of affordable housing, water conservancy construction, and regional revitalization plans, the demand for civil engineering heavy trucks will continue to grow steadily; the trend of high-speed heavy-duty trucks and heavy-duty trucks will become more apparent. The demand for renewal is strong, and it is expected that the sales volume of heavy trucks in 2011 will still achieve about 10% growth. The powertrain composed of Weichai's high-powered engine and more gearbox gearboxes cater to the new needs of the road freight industry. With its leading technological advantages and first-mover advantage, it will obviously benefit from the process of upgrading the heavy-duty truck industry. With the further increase in the sales volume of the 12L engine and 12-speed/16-speed transmission, the position and profitability of Weichai Power in the heavy truck industry chain will further increase. The current heavy truck industry is expected to enter the traditional sales season. According to our investigation of the industry and related companies, the current downstream demand remains strong. Weichai’s engine scheduling in January is very optimistic. In the first quarter, sales are expected to exceed market expectations again, and it is expected to reverse. Before the market was overly pessimistic about the heavy truck industry.
The construction machinery engine is expected to become the driving force for Weichai's new performance. The proportion of Weichai construction machinery engines accounted for more than 20% of total sales. In the first half of 2010, due to tight production capacity, the market share of Weichai Construction Machinery engines declined. Weichai has adopted various measures to increase production capacity and is expected to satisfy the future. 1-2 years of production needs. The start-up of 10 million sets of affordable housing in 2011 will largely offset the decline in investment in commercial housing, infrastructure investment in infrastructure investment in water conservancy projects and regional revitalization plans will be gradually implemented, and it is expected that the downstream demand growth of construction machinery will remain above 15%. The settlement of production capacity will help the company to seize the opportunity of the strong downstream, and the proportion of sales of engineering machinery engines will be further enhanced, providing significant support for Weichai's power performance.
The product line will have a huge space for future diversification. In order to meet future product requirements, Weichai Power will extend the product line to the 5 to 7L and 2 to 4L medium and low-power engine markets and acquire the high-end high-power diesel engine business of 16L and above through the acquisition of Bodu, France, for small and medium-power engines. The profitability is relatively low, but it can avoid market risks for Weichai Power, further significantly increase the scale of production and sales, reduce the company's raw material procurement costs, and increase the company's total profit; and the high-power diesel engine technology reserves will enable the company in the future heavy truck products The first to benefit from the technology upgrade. At present, Weichai has formed a 2-33L full-range diesel engine layout, and there is huge room for diversified development in the future.
Investment rating and target price. In 2011, the heavy-duty truck industry is expected to maintain a steady growth of about 10%. Weichai, as the leading company in the industry chain of heavy-duty truck core components, has deep technical accumulation and high market share; driven by the rapid growth of engines for construction machinery, The profit growth rate will be significantly higher than that of the entire vehicle and surpass the industry average. Weichai's current dynamic valuation is only equivalent to 9.2 times PE in 2011. As the heavy truck industry is expected to enter the sales season, the sales of Weichai power engines are expected to exceed expectations again.
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