Heavy Trucking and Double Financing: Capital Competition before the Winter


"If I heavy truck this industry, I can only configure one stock. Which one would you recommend me to choose?"

On November 8th, in response to a senior analyst from the visiting automotive industry, the investment director of a large fund management company in Beijing asked questions.

Two days ago, Weichai Power (000338.SZ), a leading vertically integrated company in the heavy truck industry in the country, issued a resolution on the resolutions of the board of directors and proposed to publicly issue no more than 60 million A shares. The funding is not more than 5.58 billion yuan.

The investors who want to get the answer are Hong Kong investors.

Recently, the Hong Kong Stock Exchange reported that China National Heavy-duty Truck Group Co., Ltd. (Lower Weighing Truck Group) has been listed on the red chip through the hearing and it is expected that the size of the fundraising will reach 800 million - 1 billion U.S. dollars.

As the heavy truck manufacturer whose production and sales volume has leapt to the top in the country, CNHTC Group will strive to win the favor of most of the investors in the next Hong Kong roadshow.

Occasionally or necessarily?

In the face of full implementation of the “National III” emission standard for commercial vehicles on January 1, next year, the heavy truck industry boom may face a “critical” moment of a straight decline, and the financing actions of the heavy truck “both” may invariably be intriguing: What is hidden?

Not only the capital market, but also for the entire heavy truck industry where competition has gradually become fiercer, this is a topic worthy of pondering.

Capital competition

“If the Hong Kong Red Chip listing of the CNHTC Group is originally expected, it would be totally unexpected for Weichai Power to suddenly choose the A-share issuance at this time.” On November 8th, the automotive industry researcher of a domestic joint-venture securities company told this reporter that As he was preparing to participate in the Hong Kong Roadshow of the CNHTC Group, he also had no time to comment on the information of Weichai Power's issuance of A shares.

However, in his opinion, as the sole supplier of powertrain (engine + transmission + axle) in the heavy truck industry, Weichai Power has obtained the most lucrative profits from the entire value chain of the heavy truck industry for several years. Although in the past few years, it has frequently attacked the capital market and conducted a series of acquisitions and mergers, its overall financial status can still be said to be the best in the industry. It is the company that does not have the most money.

According to the issuance announcement of Weichai Power, the net proceeds raised from the issuance will not exceed 5.58 billion yuan. It is planned to invest in the construction of three projects and increase the number of three controlled subsidiaries.

"If the issuance of the issuance can be smoothly implemented, the company's share capital will expand by about 11.5%, but since the project invested in the proceeds is equivalent to the reconstruction of a Weichai, its performance is expected to increase by more than 50% or even higher." Researcher Zhang Xin of Guotai Junan Automobile Industry Comment in his own report.

Compared with the sudden increase in the number of shares of Weichai Power A shares, CNHTC's Hong Kong red chip listing is even more eye-catching.

A person close to CNHTC underwriter CICC said that the amount of capital raised by CNHTC Group may increase by more than the previous forecast of US$800 million, and it will increase to over US$1 billion (approximately HK$7.8 billion).

Therefore, CNHTC's current offering is expected to refresh the fund-raising record of Mainland auto companies listing in Hong Kong. It is understood that CNHTC will launch an international road show on November 12 and start the Hong Kong public offering around November 15 and plans to list it at the end of November.

"This is undoubtedly a 'capital contest' in the field of heavy trucks." Senior Automobile Industry Analyst of the original Tianxiang Investment Consultant Co., Ltd., Chen Qining, who is currently in the Lotus Bank of Taiwan Fund, told this reporter that despite the heavy truck group It was in Hong Kong that IPO shares were acquired. Weichai Power was in the issuance of A-shares, but the trend of industrial competition between heavy-duty "double-hung" companies extending to capital competition has become irreversible.

Chen Qining believes that next, the two heavy truck giants will choose what strategy to convince investors to ultimately choose their own stocks will be more challenging.

Heavy truck industry in the winter or coming?

"The top two companies in the industry with the same industry comprehensive strength choose to issue shares almost at the same time. This should be the first time in the capital market." A fund manager of the Changsheng Fund, which has long tracked the automotive industry, believes that, in general, the industry's The two giants have issued shares one after another. On the surface, the industry is currently in a booming phase.

However, if you think in reverse, is this a sign that the industry will have a periodic reversal? For fund managers who always pay attention to risk, similar rounds of questioning always come quickly.

The auto industry's report for the period from January to September shows that from January to September, domestic sales of automobiles were 6.458 million, an increase of 24.5% year-on-year. At the same time, the sales of heavy trucks from January to September totaled 375,000 units, an increase of 152,000 units year-on-year, an increase of 68.2%.

"This year's heavy truck industry is simply beyond the imagination." Chen Qining told this reporter that taking into account the cyclical industry tends to quickly decline once peaked, he will show his worries about the future of the heavy truck market next year. .

Relevant statistics show that since September this year, the heavy-duty truck industry showed a declining trend compared with the same period of last year despite a year-on-year increase.

The automotive industry analysts of the joint venture securities companies mentioned above also expressed their lack of confidence in the outlook for the automotive industry next year. "On January 1, 2008, implementation of the 'State III' emission standard could lead to a decline in heavy truck sales and even the entire automotive industry." The researcher said that according to the experience of European and American countries implementing the "Euro III" emission standard, the heavy truck industry The sales volume will therefore appear as a landslide of up to 30%.

In his view, this year's huge growth in heavy truck sales is largely due to customers' early consumption, in order to avoid the impact of the implementation of "National III" emission standards in large areas next year.

Wang Zhihui, the automotive industry researcher of China National Heavy Duty Truck Group’s lead underwriter, forecast in his own report that the average composite net profit growth of CNHTC from 2006 to 2009 will reach 38%, but for the heavy truck industry next year, Express caution.

"If we say that next year when the macro economy runs steadily and there is no significant increase in investment in fixed assets and the growth rate of freight cannot maintain growth, the possibility of cyclical adjustment in the heavy truck industry is still very high." Chen Qinien believes that heavy truck industry will be the next year. The trend needs to arouse great attention from all walks of life. Investors should not be entirely confident that this year's heavy truck industry will continue to maintain high growth next year.

According to his observations, in recent months, the growth rate of domestic cargo shipments announced by the National Bureau of Statistics has already peaked and began to decline.

“The speed of freight growth will directly affect the sales of heavy trucks. Judging from the current situation, the continuous high-level operation of fixed asset investment this year has attracted the attention of the government. Next year, the country’s macro-control of fixed asset investment may continue to strengthen. All factors are telling investors that they must not be overly optimistic about the market next year,” said Chen Qiaoning.

In the interview, CITIC Securities Li Chunbo and Guo Xue Securities’ chief analyst Zhao Xuegui also said in an interview with this reporter that due to the implementation of the “State III” emission standard and the fact that this year's heavy truck industry is generally ahead of schedule, the heavy truck industry will be basically Will not reproduce this year's glory.

However, taking into account that the current preparation of oil products and related "State III" measures is still insufficient, the possible implementation of "State III" will be implemented in large areas next year. Therefore, they believe that next year's heavy-duty truck market is unlikely to have large industry growth, nor will there be a major industry downturn.

"What I have learned is that if all vehicles in the next year use the oil of 'State III', Sinopec and PetroChina will surely be in a difficult situation." Li Chunbo believes that there should be at least one transitional period for the implementation of "State III", not all of them. The cities are strictly enforced.

However, during the interview, the National Development and Reform Commission and the State Environmental Protection Administration did not provide a transitional period for the implementation of the “National III” emission standard.

Heroes "hegemony"

"Anyway, the two giants have chosen to fully consider financing at this time." Chen Qiaoning told this reporter that in the next year, the industry may be affected by the "National III" and the decline will occur before financing. For both sides, it is a strategy that "does not change."

"For heavy trucks with a relatively high debt ratio, the success or failure of this red-chip listing may be even more critical." Chen Qining believes that in the past 2007, despite the historic increase in the heavy-duty truck industry, CNHTC Group has also become the first company to produce and sell heavy trucks, and firmly controls the advantages of the heavy truck industry downstream.

However, due to the profits of the heavy truck industry in the “highlands” over the past few years, a company controlled by the upper reaches of the industrial chain such as engines, transmissions, and axles has been in control. Therefore, CNHTC has always had the problem of high asset-liability ratios and excessive financial pressure. There has been a lack of funding.

“This time, if you can successfully get back one billion US dollars in Hong Kong, it will greatly reduce the financial situation of the company.” Zhao Xuegui pointed out that in addition, after getting enough money, the heavy truck group will be It will use the entire vehicle to drive the engine and transmission, and lay the foundation for the plan to open up the entire industry chain of heavy trucks.

On the contrary, it is not. If we say that this Hong Kong red chip listing, heavy truck group failed to achieve the expected amount of fundraising, next year heavy truck market sales fell, then for the CNHTC, this is undoubtedly not a good thing.

“Because the investment of CNHTC Group's engine and transmission will bring a huge financial burden to the company, if the downstream vehicle is experiencing sales decline, the expansion of CNHTC will inevitably be affected.” Researcher of the joint venture broker mentioned above is sharp Pointed out.

However, Zhao Xuegui believes that if SUCCESS succeeds in financing, the market will not be expected to decline next year, and everything will be another landscape. "With the successful breakthrough of CNHTC in the upstream of the heavy-duty truck industry chain of engines and transmissions, CNHTC Group will be able to take full advantage of the advantages of the entire vehicle to occupy the leading position in the heavy-duty truck industry."

At present, Weichai Power is a leading vertically integrated company in the heavy-duty truck industry. With its huge strength in the field of powertrain, we can say that Weichai Power is currently the happiest company in the heavy-duty truck industry.

However, this shifts. Weichai Power, which hopes to use the powertrain to drive the entire vehicle and expand from top to bottom, will not be able to make a difference in the downstream of the entire vehicle industry chain in the next few years. Its current huge competitive advantage is clearly gone forever.

"Whether it is the current lack of money or lack of money, in the face of possible reversal of the industry cycle, financing is very important." Chen Qining thinks.

"At present, in the heavy-duty truck industry, it is expected that the final boss will be the two of them. If I answer that heavy truck industry, which stock will be allocated, it must be one of the two." Tell our reporter.


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