Wan Liyang Analysis: Heavy truck transmission drives the company's new round of growth

Wanliyang’s traditional products mainly include medium- and light-duty truck transmissions. Among them, China’s mid-to-high-speed transmissions have an absolute advantage: In 2009, the company’s mid-to-large-capacity transmission market shares were 72% and 7%, respectively (if some of the medium-sized cards were considered The transmission was installed on the light trucks by downstream manufacturers. The actual market shares of the company's mid-size and light-duty trucks were 35% and 13% respectively. In the mid-car transmission sector, the company is the largest domestic market share maker.

In the next 3 years, heavy truck transmissions will have explosive growth

The heavy truck transmission industry's competitive structure and profitability are superior to medium and light truck transmissions. At present, Shaanxi Fast is the only one with a market share of more than 80%. Due to its concentration, Shaanxi Fast has strong bargaining power, and its gross profit margin is expected to exceed 30%.

Wanliyang is a new entrant in the heavy-duty truck transmission industry and its share in the next three years is expected to increase rapidly. The advantages of the company's heavy-duty truck transmissions are lower costs. It is expected that each unit price will be 2,000 yuan cheaper than the industry average (Fast's single unit net profit is about 1,700 yuan). The company has completed the research and development of heavy-duty transmissions and matching tests with a number of downstream automakers. At present, it has obtained orders for sales intentions from automakers such as Futian, Dongfeng, Jianghuai, etc., which amount to 80,000 units. With the investment and completion of the company's heavy truck transmission capacity, We expect that in the next three years, the company’s revenue share of heavy truck transmissions will increase rapidly. By 2012, the revenue share of heavy truck and passenger car transmissions is expected to exceed 1/3, while gross profit contribution is expected to account for 40% of gross profit of all products, and its market share in heavy truck transmissions is expected to reach 10-15%.

Light truck transmission is expected to gain greater market share

Since 2009, the company's light truck transmission market share has increased. The company's light truck transmissions are mainly supported by high-end light trucks, such as the Ouma, JMC, and Qingling models. The increase in the share of downstream vehicle products has led to an increase in the company’s product share.

The raised investment project will solve the bottleneck of production capacity of light-duty trucks and guarantee orders. In the context of strong industry demand, the company actually gave up some orders. Among the fundraising projects, the production capacity of light truck transmissions is planned at 180,000 units. The company mainly supports Beiqi Futian, Shandong Wuzheng, Ziyang Nanjun, FAW Hongta, Shandong Shifeng and other manufacturers. It has signed a sales intention contract of 219,000 units. We expect that with the resolution of the capacity bottleneck, future orders are basically guaranteed.

Can effectively resist the risk of raw material price fluctuations

The company's products are raw material-intensive. 90% of the costs are raw materials, mainly steel, pig iron, scrap, and non-ferrous metals, and fluctuations in steel prices will affect the company's short-term gross profit margin. Higher bargaining power and increased self-preparation rate of parts and components help to prevent raw material price fluctuations. From 2007 to 2009, gross profit margin increased from 20.6% to 29.2%, partly due to improvement in product mix--the increase in the proportion of China Card transmissions, while the increase in the self-control ratio of tooth shaft components and higher bargaining power is also the increase in its gross profit margin. The important guarantee. We expect the company's future gross margin of old products to be maintained at 25-30%.

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