At the current node, this round of heavy truck replacement policy subsidies have great strength, and it is expected to substantially boost domestic demand to return to the center, and industry leaders are expected to benefit first.
Zhixin Finance APP learned that Guolian Securities issued a research report stating that on July 31, the two ministries and commissions announced the Notice on Implementing the Updating of Old and Run-down Operating Trucks, clarifying the subsidy standards for scrapping and below the national third emission standards for operating diesel trucks. Among them, for scrapped heavy trucks and the maximum subsidy for purchasing new vehicles is 1.1 million yuan or 1.4 million yuan/vehicle, the subsidy strength exceeded expectations, and the detailed rules for subsidies were quickly implemented, which is expected to accelerate the phasing out of National III heavy trucks. After the implementation of the scrapping and updating subsidy rules, it is expected to stimulate a 30%-40% demand for scrapping and purchasing new vehicles, corresponding to a domestic demand for heavy trucks of 0.09-0.12 million units. At the current node, this round of heavy truck replacement policy subsidies have great strength, and it is expected to substantially boost domestic demand to return to the center, and industry leaders are expected to benefit first.
Guolian Securities' main points are as follows:
The detailed rules for scrapping were updated promptly, and the subsidy strength exceeded expectations.
According to the difference in scrapped vehicle types, early scrapping time, and new vehicle power types, the subsidy standards are implemented differently. Among them, for scrapping only heavy-duty trucks, a subsidy of 0.012/0.035/0.045 million yuan/vehicle is given according to the early scrapping time of 1-2/2-4/4 years or more respectively; for newly purchased national VI diesel heavy-duty trucks that meet the standards, they are respectively given a subsidy of 0.04/0.055/0.065 million yuan/vehicle according to different axle and above models, and newly purchased new energy heavy-duty operating trucks are respectively given a subsidy of 0.07/0.085/0.095 million yuan/vehicle according to different axle and above models. For scrapped heavy trucks, the maximum subsidy for purchasing new vehicles is 1.1 million yuan or 1.4 million yuan/vehicle, and the subsidy strength exceeded expectations. The detailed rules for subsidies were quickly implemented, indicating strong execution, and it is expected to accelerate the phasing out of National III heavy trucks.
Phasing out National III is expected to significantly boost demand for heavy trucks.
Guolian Securities pointed out that as of the end of 2022, the domestic heavy truck inventory is about 8.94 million units. The national standard for implementing National IV emission standards nationwide was July 1, 2013. Considering the sales of new cars and data disclosed by Fangdewang, the comprehensive estimate is that the number of national III and below heavy trucks is about 0.3 million units. After the implementation of the scrapping and updating subsidy rules, it is expected to stimulate a demand for scrapping and purchasing new vehicles by 30%-40%, corresponding to a domestic demand for heavy trucks of 0.09-0.12 million units. In 2023, 0.911 million heavy trucks will be wholesaled, and the boost in demand will account for 10%-13% of the wholesale sales volume in 2023.
Domestic demand will return to the center, and industry leaders are expected to benefit first.
The domestic heavy truck inventory is around 9 million. Considering a replacement cycle of 8-10 years, the domestic sales center is between 0.8-0.9 million units. At the current node, this round of heavy truck replacement policy subsidies have great strength, and it is expected to substantially boost domestic demand to return to the center. In the past three years, exports have brought major increases to the heavy truck industry. In the first half of 2024, the export of heavy trucks has been under slight pressure, with sales reaching 0.1536 million units, a year-on-year decrease of 1.5%. Considering the sales season in the second half of the year, the whole year is expected to achieve positive growth under the high base number of last year. The retail sales of heavy trucks were 0.301 million units, a year-on-year decrease of 5.6%. After the implementation of this policy, it is expected to significantly boost demand and release domestic demand, plus strong demand for exports and natural gas, the industry leaders will fully benefit.
Investment advice: Domestic demand will rise, and industry leaders are expected to exceed expectations in profits.
In the heavy truck industry, companies with engineering machinery have high profit fluctuations and are more suitable for the PB-ROE framework. Under the PB-ROE valuation framework, the increase in ROE often accompanies a rapid increase in PB. The industry leader companies Weichai Power and Sinotruk are still undervalued and are at the historical 20th percentile, with a high safety margin. Considering that the domestic sales volume of the heavy truck industry in 2024 is expected to return to the industry center, the increase in the proportion of exports and natural gas will drive improvements in profit structure, and ROE is expected to continue to rise. We recommend Weichai Power (000338.SZ) and Sinotruk (000951.SZ).
Risk warning: The policy effect is less than expected; and the export sales volume is less than expected.