Soochow Securities: October Heavy Truck Production, Wholesale, Retail, and Export Data Exceed Expectations, Bullish on Full-Year Sector Performance Driven by National IV Policy Stimulus

Stock News11-26

October data for China's heavy truck industry—covering production, wholesale, retail, and exports—surpassed expectations. Wholesale sales in October reached 106,000 units, up 60.0% year-over-year (YoY) and 0.6% month-over-month (MoM), exceeding forecasts. Terminal sales stood at 70,000 units (+56.6% YoY, -15.9% MoM), while exports hit 33,000 units (+43.8% YoY, +4.8% MoM). Channel inventory rose by 3,200 units, bringing total industry inventory to 115,000 units.

**Sector Overview** - **Production**: 104,000 units (+78.4% YoY, +2.6% MoM). - **Wholesale**: 106,000 units (+60.0% YoY, +0.6% MoM). - **Terminal Sales**: 70,000 units (+56.6% YoY, -15.9% MoM). - **Exports**: 33,000 units (+43.8% YoY, +4.8% MoM). - **Inventory**: Total industry inventory increased by 900 units, with a healthy inventory coefficient of 1.8.

**Segment Performance** - **Construction Vehicles**: Terminal sales of 7,400 units (+63.0% YoY, -14.9% MoM), accounting for 10.5% of the market. - **Logistics Vehicles**: 62,600 units (+55.9% YoY, -16.0% MoM), representing 89.5%. - **Natural Gas Trucks**: Sales surged 137.6% YoY to 21,000 units, with penetration rates hitting 30.1% overall and 48.4% for tractors.

**Market Share Trends** - **Domestic Sales**: FAW Jiefang (21.5%), Dongfeng (17.9%), Sinotruk (17.9%), Shaanxi Heavy-Duty Auto (11.0%), and Foton (13.8%). Foton gained 3.4 percentage points (p.p.) YoY. - **Exports**: Sinotruk dominated with 45.8% share (+4.9 p.p. YoY), followed by FAW Jiefang (18.8%) and Shaanxi Heavy-Duty Auto (18.0%).

**Engine Market** Weichai Power led with 20.5% terminal share (+1.1 p.p. MoM), though down 7.0 p.p. YoY. Its natural gas engine share reached 52.0%, while diesel engines accounted for 11.68%.

**Outlook**: November wholesale sales are projected at 103,000 units (+50% YoY), supported by National IV policy tailwinds. Key picks include Sinotruk (000951.SZ, 03808.HK) and Weichai Power (000338.SZ), with FAW Jiefang (000800.SZ) and Foton (600166.SH) showing earnings recovery potential.

**Risks**: Slower-than-expected domestic demand recovery or sharp rises in natural gas prices.

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