Weichai (2338.HK) Continued to Benefit from the Increased Market Share June 3, 2019

PSR Recommendation: BUY Status: Upgraded
Target Price: HKDHKD15.20

Hong Kong | Automobile Parts | Update Report 

Net Profit Reached A New High in 2018, Increasing by Nearly Thirty Percent In 2018, Weichai recorded an annual revenue of RMB159.3 billion, increasing by 5% yoy, and a net profit attributable to the parent company of RMB8.66 billion, increasing by 27% yoy. The basic EPS was RMB1.08, the dividend was RMB0.46 totaling the final dividend of RMB0.28 and the medium-term dividend of RMB0.18, and the dividend payout ratio was 42.6%. In addition, the Company spent nearly RMB500 million to re-purchase and cancel over 63 million A-shares, which accounted for 0.8% of the total share capital. In 2018, Weichai sold 363,000 heavy truck engines in total, basically flat with the same yoy, and accounted for 31.6% of the market share, which remained stable (when compared to 27% in 2016 and 33.1% in 2017); its subsidiary, Shaanxi heavy-duty truck, sold 153,000
heavy trucks in total, increasing by 2.7% yoy and accounting for 13.3% of the market share; its another subsidiary, Fast, sold 909,000 transmissions, increasing by 8.9% yoy; and its
overseas subsidiary, Kion, recorded an annual revenue of EUR8 billion, increasing by 5.2% yoy. The Company expects a sales revenue of RMB175 billion approx. in 2019, an increase of 10% approx. over 2018. In the reporting period, three expenses and R&D expenses accounted for 13.36%, decreasing by 0.19 ppts yoy Vs 2017, among which, the sales expenses accounted for 6.67%, decreasing by 0.15 ppts, the administration expenses (including R&D expenses) was controlled at 6.64%, slightly increasing by 0.28 ppts yoy, and the R&D expenses accounted for 2.71%, increasing by 0.25 ppts. The Company continued to build its moat with high R&D investment. The Company repaid part of long-term debts, and the gearing ratio decreased by 2.6 ppts to 32.9%. Meanwhile, the ratio of financial expenses dropped by 0.34 ppts, benefiting from the increase of interest income from bank deposits. In 2018, the Company`s gross sales margin was 22.33%, increasing by 0.50 ppts when compared to that of 2017. The net profit margin increased from 6.1% to 7.3%, with further
improved profitability. The Company`s heavy-duty engine enjoyed a stable dominant position in the heavy truck market, 5-ton loader market and above-11m bus market.

About the author

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Zhang Jing
Phillip Securities (HK)

Bachelor Degree in Tongji University of Engineering; Master Degree in East China Normal University of finance. Currently covering the automobile and air sectors. She has years of experience in investment research and is good at combining analysis for the companies with industry prospects.

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