The steady growth in production and sales is expected to increase faster than the industry average. This year's slowdown in the heavy-duty truck industry has dragged down the growth rate of the company's automotive engine and transmission segment, benefiting from the sales of heavy trucks of Weichai- based major manufacturers that are better than their average market segments, and the growth in production and sales of their automotive engines and heavy trucks is higher than Heavy truck industry average growth. According to data from the China Association of Automobile Manufacturers, the heavy-duty truck industry grew by 3.3% year-on-year in January-April 2011, but the sales of Beiqi Futian, Jianghuai, and Shaanxi Auto heavy trucks in the Weichai supporting system were much higher than the growth rate of the heavy truck industry, reaching 17.6% respectively. , 108.7%, 17.8%.
We expect 2011 Weifang vehicle engine sales growth will be higher than our estimated about 8.1% growth rate of the heavy truck industry. At the same time, its engine displacement structure will increase, and revenue growth will increase faster than sales volume over the same period. In addition, due to the rapid growth in the sales volume of construction machinery, the growth rate of engine sales for construction machinery has been accelerated. It is expected that the growth of construction machinery engines will be around 25% in 2011, which will help Weifang Diesel's engine business continue to grow.
Non-vehicle engines have a large market space, and profit margins are slightly lower than vehicle engines. In 2010, 141,000 non-vehicle engines were sold, mainly engines for loaders of more than 5 tons, and the market share of the loader reached 84.8%. The WP5/7 series engine for excavators developed by the company has undergone trials for the past three years and will support small batches in 2011. We estimate that the annual sales volume of 140,000 excavator engines will increase in the next 2-3 years. With the growth of industries such as loaders and excavators, and the rapid growth of engines for excavators, non-vehicle engines will become important growth points for the company over the next 2-3 years. Non-vehicle engines have lower emission and fuel economy requirements than vehicle engines. They have lower product costs and lower selling prices. Gross profit margins are also lower than vehicle engines. In the first quarter of 2011, the growth rate of non-vehicle engines was much higher than that of vehicle engines, which lowered the gross profit margin of the company's entire engine business. With the upgrading of non-vehicle engines, and the leading position of Weichai in the engine market for construction machinery, the non-vehicle engine gross margin will gradually increase in the future.
Leading technology and scale advantages help enterprises maintain their core competitiveness. The company has the core technology resources of three heavy trucks: engine, transmission and axles. Through independent research and development and external alliances, the company has gradually accumulated technological leadership. The company's national IV technology is fully prepared, SCR technology is developed and EGR technology is reserved, and the subsidiary company Fast and Caterpillar have joint ventures to develop hydraulic automatic transmissions, which reserves the leading edge for the company's future development. At the same time, the company's larger engine and transmission production scale, formed a certain scale advantages, product amortization costs significantly lower than other products in the market. Technology reserves and scale advantages will help maintain the competitive advantage of the company in the long run.
The heavy truck industry is expected to recover in the second half of the year. Due to the rise in oil prices and tire prices, the cost of transport companies has risen significantly, but the market freight rates have risen slowly, which has inhibited the demand for logistics companies to purchase cars. At the same time, the Ministry of Communications strictly implemented the “Measures for the Inspection and Supervision of Fuel Consumption for Road Transport Vehicles†also led to a decline in short-term demand in the terminal market. The tightening of the state’s macro-control has also formed a certain impact on the purchase of loans. Multiple-effects superposition has led to an unsatisfactory growth in the heavy truck industry in the first half of 2011. With the coordination of various parties and changes at the macro level, the recovery of the heavy truck industry will be driven in the second half of the year, while at the same time promoting the growth of various business segments of the company. As the heavy truck of production materials, the growth of its demand is related to the growth of macroeconomics. Under the condition of no significant slowdown in domestic economic growth, the demand for investment in heavy trucks for logistics is only temporarily suppressed. The possibility of reversing heavy truck sales in the second half of 2011 is likely. Larger.
Earnings forecast and investment rating. We are cautiously optimistic about the heavy truck market in 2011 and we expect it to grow by about 8% for the full year. The company has a solid industry position and stable profitability. It is estimated that EPS for 2011 and 2012 will be 4.91 yuan and 5.77 yuan respectively. According to the 12 times PE valuation level in 2011, the company's reasonable price is around RMB 60, and maintains the “strongly recommended†rating.
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