Recently, we visited the company and communicated with relative employees on its business operation status. Our analysis is as follows:
The worst situation of demand probably has gone.
Benefited by government’s policy of infrastructure stimulus package, its sales volume is expected to be equal to that of the previous year.
The company’s export will be hard to get substantial progress.
Worst situation for product cost had gone
Its EGR product is still competitive in the market.
As a bellwether of heavy truck industry, we are optimistic with its future development, and predict its EPS in 2008-2010E to be Rmb1.25, Rmb1.71 and Rmb2.13, representing P/E ratio of 15x, 11x and 9x, and its rating is hereby upgraded from “Overweight” to “Buy”.