Reporter | Niu Qichang
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"From the perspective of the whole vehicle, the heavy-duty truck market where Sinotruk and Shaanxi Automobile are located is oversupplied at the terminal. Especially in the second half of 2021, vehicle companies have adopted a series of promotional measures, which have affected their gross profit, which in turn will affect the entire group. On April 1, 2022, Tan Xuguang, who is also the chairman of Shandong Heavy Industry, China National Heavy Duty Truck and Weichai, was in Weichai Power (000338. SZ) said at the 2021 annual results conference.
On the same day, Sinotruk (000951. SZ) disclosed the 2021 annual report shows that during the reporting period, Sinotruk's main revenue was 56.099 billion yuan, down 6.4% year-on-year; the net profit attributable to the mother was 1.038 billion yuan, down 44.79% year-on-year; and the cumulative sales of heavy-duty trucks in the whole year were 202,000 units, down 1.91% year-on-year.
This is also the first time since 2015 that Sinotruk's sales of heavy-duty trucks have declined throughout the year; it is also the first time that Tan Xuguang has faced a decline in revenue and net profit since he became the chairman of Sinotruk in 2018.
Heavy-duty truck market "turned off"
In the past year, the heavy-duty truck market has ended five consecutive years of rapid growth and turned into a downward cycle.
For the decline in performance, Sinotruk mentioned in its annual report that "cyclical fluctuations in the industry, tight global supply chains, high raw material prices, contraction in demand for heavy-duty trucks, and supply shocks" and other pressures.
In 2021, the company sold about 1.395 million heavy-duty trucks in China, down 13.8% year-on-year.
In fact, in the first half of 2021, affected by the policy of upgrading the emissions of China VI and continuing to promote the treatment of excess control limits in the middle of the year, the heavy-duty truck market continued its high-speed growth trend: cumulative sales increased by 28% year-on-year in 2020, and the industry scale once reached a historical peak of about 1.045 million vehicles.
However, this also overdrafted the market demand of the "second half" to a large extent in advance, laying the groundwork for the heavy-duty truck market to enter the downward range.
China National Heavy Duty Truck said that in the second half of the year, due to the early pre-loading of National V vehicles in the first half of the year, the high price of oil and gas, the policy of double limit and double control, and other factors, the terminal demand performance of the heavy truck market was sluggish. According to the statistics of the China Association of Automobile Manufacturers, in 2021, about 1.395 million heavy-duty trucks were sold, down 13.8% year-on-year, showing a trend of "high before and low after".
Losses in the fourth quarter.
From a quarterly point of view, Sinotruk's performance in 2021 also showed a trend of "high before and low after". Among them, the operating income in the first to fourth quarters was 20.678 billion yuan, 19.327 billion yuan, 8.932 billion yuan and 7.162 billion yuan, respectively. Correspondingly, the company's net profit also turned from profit to loss, from 603 million yuan in the first quarter to -113 million yuan in the fourth quarter.
For Sinotruk, 2021 may not be the worst year, because the real test has just arrived.
Interface News noted that since entering 2022, coupled with the repeated factors such as the epidemic, the heavy-duty truck market has not changed its decline, and sales have declined for the 11th consecutive month since May last year. According to data from the First Commercial Vehicle Network, in March this year, the mainland heavy-duty truck market sold about 77,000 units, down 67% from 230,000 units in the same period last year, and a net decrease of 153,000 units. The figure of 77,000 units is also the lowest point in the heavy-duty truck market since 2017, only slightly higher than the 75,000 units in March 2016.
Some insiders believe that in 2022, China's economy is "stable", infrastructure investment and consumption will form a pull on truck demand, and it is predicted that the total domestic demand for medium and heavy trucks in 2022 will be around 1.2 million. But that number is still about 14 percent lower than the 1.395 million units in 2021. The forecast of Sinotruk's management at the performance briefing is more conservative, and it is expected that the annual sales of the heavy-duty truck industry will only be about 1 million units in 2022.
Talking about the reasons for the decline in profits, Sinotruk said in the performance briefing that a major reason is that the price of raw materials has risen sharply, of which the prices of steel, steel plates, copper and other materials have increased significantly, and the cost of single materials for the whole vehicle has risen by about 7,000 yuan.
At the same time, due to the adjustment and optimization of the company's product structure, the company's truck load volume, as a new market product, has increased its market promotion efforts. In addition, R&D expenses increased by 29% year-on-year, and the company also adopted a certain promotional policy to digest inventory.
Sinotruk said that the above reasons have collectively led to a decline in profits, and the company will continue to steadily increase the company's gross profit margin through cost control measures such as efficient research and development, process cost reduction and procurement cost reduction.
Despite the decline in performance, Sinotruk stressed that thanks to the continuous deepening of the market segment, its heavy-duty truck market share has steadily increased in the past year and continues to be in the leading position in the industry.
Among them, the tractor segment market share in the industry mainstream enterprises to increase the first amplitude, especially in the medium and long-distance composite transportation market share is far ahead, of which the Howo TH tractor with high reliability, high comfort and high value has become a blockbuster product; the truck market share has doubled, Howo TX cold chain transportation and Howo N series bulk transportation has become star products; the mixer truck market continues to lead the mixer truck industry product innovation, continue to maintain the industry first.
Related purchases increased significantly
According to public information, the A-share listed company "Sinotruk" refers to China National Heavy Duty Truck Group Jinan Truck Co., Ltd., the controlling shareholder of China National Heavy Duty Truck Group holds 26.78% of the shares, and the actual controller is the State-owned Assets Supervision and Administration Commission of Shandong Province, with a shareholding ratio of 10.85%. The company is mainly engaged in the manufacture and sales of heavy-duty trucks, heavy-duty special vehicle chassis, axles and other auto parts, in addition to occupying a high market share in the domestic market, the company has maintained the first place in the domestic heavy-duty truck export industry for many years.
On September 29, 2019, the Shandong Provincial State-owned Assets Supervision and Administration Commission issued the Reply on Matters Related to the Transfer of 45% of the State-owned Property Rights of China National Heavy Duty Truck Group Co., Ltd. without Compensation, approving the transfer of 45% of the equity held by the State-owned Assets Supervision and Administration Commission of Jinan City to Shandong Heavy Industry Group Co., Ltd. (hereinafter referred to as "Shandong Heavy Industry") without compensation. Shandong State-owned Assets Investment Holding Co., Ltd. holds 20% of the shares of China National Heavy Duty Truck Group, and Shandong SDIC signed a concerted action agreement with Shandong Heavy Industry to entrust the other shareholder rights in addition to the right to asset income in the 20% equity of China National Heavy Duty Truck Group to Shandong Heavy Industry for exercise.
On September 27, 2020, the State-owned Assets Supervision and Administration Commission of Shandong Province issued the Reply on Agreeing to Transfer 20% of the State-Owned Property Rights of China National Heavy Duty Truck Group Co., Ltd. without compensation, approving the transfer of 20% of the equity held by Shandong SDIC to Shandong Heavy Industries without compensation.
On February 25, 2022, the above two equity transfer matters have completed the registration of industrial and commercial changes, and Shandong Heavy Industry has become the ultimate controller of Sinotruk.
Among the top five suppliers of Sinotruk, the purchase volume of Weichai Holdings, a related party, increased by 94% compared with last year.
It is worth mentioning that among the top five suppliers of Sinotruk, Weichai Holdings, as a related party, ranks second only to China National Heavy Duty Truck Group, with a procurement volume of 4.458 billion yuan, accounting for 8.62% of the total annual procurement, a substantial increase of 94% over 2020.
As a heavy-duty truck production unit, Sinotruk needs two major sources of engines: one is China National Heavy Duty Truck Jinan Power Company, a subsidiary of Shandong Heavy Industry Group, and the other is the related procurement of Weichai Power. Weichai Holdings, as the controlling shareholder of Weichai Power, a listed company, like Sinotruk, has the actual controller of Shandong Heavy Industry.
In terms of the proportion of engine assembly, Tan Xuguang revealed at the performance conference that Shaanxi Automobile is basically equipped with Weichai engine, while China National Heavy Duty Truck is Shandeka equipped with Mann engine, and Sinotruk's "Haowo" truck is fully equipped with Weichai engine.
In fact, since the beginning of the transfer of Shandong Heavy Industry, Sinotruk has begun to purchase engines and other parts from Weichai Group, which can also be seen from the recent announcement of H-share China National Heavy Duty Truck (03808.HK).
According to the "Continuous Related Party Transactions" released on March 4, 2022, since 2019, Sinotruk (Hong Kong) has been purchasing parts (including engines) from Weichai Group, of which in 2021, Sinotruk (Hong Kong) has purchased 9.37 billion yuan of parts from Weichai Group.
According to the plan, in fiscal 2022, Sinotruk (Hong Kong) intends to purchase about 99,000 heavy-duty truck engines and 130,000 light truck engines from Weichai Group, which is expected to increase by about 4.692 billion yuan compared with the procurement amount in FY2021. In addition, in terms of engine parts provided by Weichai Group, Sinotruk (Hong Kong) expects to increase demand by about 2.174 billion yuan compared with 2021.
Talking about the reasons for supporting Weichai engines, Sinotruk said that the company's supporting Weichai heavy-duty truck engines follows two principles: one is to make up for the shortcomings of the engine, and the other is to meet the differentiated choices of customers.
"Weichai Engine has its corresponding loyal customers, and through matching, this part of the users can be brought to the complete vehicle products of Sinotruk to achieve increments." For example, in the short-distance resource-based transportation segment of tractors, Weichai Engine has a high market share, and by introducing its engine to make up for the shortcomings of Sinotruk, it has driven the market share of Sinotruk's complete vehicle products to increase. Sinotruk said.