“We are helping Weichai to conduct research on high-end heavy truck projects. It should be said that high-end heavy trucks are the last link for Weichai to build the entire industrial chain. At the same time, it is also a product that is currently lacking in the domestic market.†Recently, an executive of a consulting company Revealed to reporters. In fact, before January 2010, Weichai Power disappointed China National Heavy Duty Truck with a price of about 5 million yuan and lost its position in the Shanghai Huizhong heavy truck business. Its ambition for entering the heavy truck business has been clearly demonstrated.
For Weichai Power, currently in the powertrain, commercial vehicle, and auto parts business segments, the heavy truck business accounted for 34% of sales revenue, but its profit contribution was only 14%. The introduction of high-end heavy truck products was The top priority.
Due to Huizhong heavy truck business, the original annual sales volume was only about 500 units, which was in a semi-discontinued state. The main reason for Weichai Power's previous arrival was to obtain its production qualifications. At the same time, in addition to Shaanxi Heavy Gas, it found another heavy truck resource to implant its own high-end heavy truck program. “Weichai plans to develop 400,000 to 600,000 yuan of products in the future and build a new brand for this purpose.â€
In the huge business chain of Weichai, the engine is undoubtedly the most important piece. In the first three quarters of 2010, Weichai Power achieved sales of 46.9 billion yuan, an increase of 84.45% year-on-year. Among them, 36% of sales and 80% of net profit come from the engine.
The outbreak of the engine business enabled Weichai Power to enter into a rocket-like assault since October. It has soared from RMB 76.6 to RMB 118 at the peak, with a monthly increase of more than 54%. “Weichai’s current rally represents a round of market corrections for valuations. It should be said that the uncertainties of the previous issue concerning Weichai had received positive responses in the third quarter.†The newspaper pointed out.
It should be said that since 2009, with the country’s 4 trillion yuan investment, the heavy truck market has gradually recovered, but the valuation of Weichai Power has not received market response, its price-earnings ratio is only maintained at about 10 times, and many agencies are bearish. Weichai Power.
The market is generally worried that if the effect of the 4 trillion yuan is gradually dissipated, if the demand for the heavy truck market is reduced, will there be large-scale fluctuations in the performance of Weichai Power?
In fact, the year-on-year growth rate of heavy-duty trucks in the 3rd quarter of 2010 has seen a significant decline, with the sales growth of only 4.8% year-on-year in September. Sales volume of major customers, Shaanxi Heavy Duty Truck and Foton Automobiles, fell 37.8% and 32.2% respectively. The engine sales revenue of the division decreased by 13% qoq to RMB 6.24 billion. Under such circumstances, the scale effect of Weichai Power apparently resisted the impact of market fluctuations, and it has maintained a net profit margin of around 20%.
In addition to market fluctuation expectations, another concern for Weichai Power's performance lies in its ability to control the downstream industry chain. In the domestic heavy-duty truck industry, FAW, Dongfeng and CNHTC are the first echelons, and Weichai's main suppliers are concentrated in the second-tier customers of Shaanxi Auto, Futian, and Beiben.
However, with the large-scale development of the “second tier†in recent years, the impulse to self-built engine matching systems has become increasingly strong. Since 2009, Beiqi Foton signed an agreement with Daimler, a joint venture between Jianghuai and NC2, a joint venture between Duff and Hengtian, Guangzhou Automobile Group and Japanese Hino.
“However, the production of new domestic heavy-duty truck engines will be put into operation after 2012. It should be said that Weifang’s market dominance will not be threatened in the near future.†One analyst pointed out that it is worth noting that it includes Valin, The rise of the "third tier" such as the Universiade, JAC, etc., due to the weak supporting capabilities of such newly-emerged heavy truck companies, Weichai Power will continue to maintain its voice in the field of heavy trucks in the future.
At present, Weichai Power's annual profit is more than 6 billion yuan, while the capacity investment is only about 1.5 billion. Weichai Power, which holds large sums of cash, is eager to use capital to expand the industrial chain. In 2005, Weichai Power achieved a 51% stake in Shaanxi Zhongqi and Fast by acquiring the Hunan Torch. This acquisition laid the foundation for the company's rapid development in the past five years.
In the entire industry chain, in addition to upstream opportunities for Weichai Power, high-end heavy trucks may be the best opportunities for the downstream.
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