CICC published a research report maintaining its 2025/2026 earnings forecasts for SINOTRUK (03808) unchanged. The current stock price corresponds to 7.9x/7.0x 2025/2026 P/E ratios. The firm maintains its outperform rating and, considering the upward shift in sector valuation levels, raises its target price by 11.9% to HK$27.21, corresponding to 9.7x/8.6x 2025/2026 P/E ratios, representing 23.7% upside potential from the current stock price.

The company announced its interim results, with 1H25 revenue up 4.2% YoY to RMB 50.88 billion and net profit attributable to shareholders up 4.0% YoY to RMB 3.43 billion, in line with expectations.

**Heavy Truck Leader Benefits from Industry Beta, Unit Profit Maintains Historical Highs**

According to China Association of Automobile Manufacturers data, 1H25 heavy truck industry wholesale sales increased 7% YoY to 539,000 units. SINOTRUK's 1H25 heavy truck sales rose 9.2% YoY to 137,000 units, maintaining its industry-leading market share, with domestic sales/exports up 19.3%/0.8% YoY to 68,000/69,000 units respectively.

CICC's calculations show that SINOTRUK's 1H25 heavy truck unit revenue declined RMB 15,400 YoY to RMB 320,900, while heavy truck unit profit decreased RMB 1,245 YoY to RMB 25,100, still at historically high levels. The firm believes the decline in unit revenue was mainly due to: 1) increased proportion of low value-added products such as cargo trucks and construction vehicles in domestic sales; 2) decreased proportion of high-end markets like CIS countries in exports.

**Robust Profitability, Continued High Dividend Returns to Shareholders**

SINOTRUK's 1H25 gross margin increased 0.4ppt YoY to 15.1%, while period expense ratio decreased 0.1ppt YoY to 7.7%, demonstrating proper cost and expense control.

By business segment: 1) Heavy truck business revenue increased 4% YoY to RMB 44.2 billion, with operating profit margin remaining flat at 6.0%. 2) Light truck and bus business revenue rose 7% YoY to RMB 7.3 billion, with operating loss margin improving 0.5ppt YoY to -2.4%, mainly due to increased upfront investments in light truck electrification and overseas expansion. 3) Engine business revenue increased 8% YoY to RMB 7.6 billion, with operating profit margin up 0.5ppt YoY to 18.2%, primarily driven by improved engine self-supply ratio. 4) Financial services revenue declined 21% YoY to RMB 590 million, with operating profit margin up 3.4ppt YoY to 49.8%, mainly affected by financial subsidiary adjustments.

The company's board announced an interim dividend of HK$0.74 per share, representing a 55% cash dividend payout ratio.

**Optimistic About 2H25 Fundamentals Continuation, Accelerated Electrification and Intelligence Layout Opens Growth Space**

Looking ahead, CICC believes that trade-in policies, strong export demand, growth in new energy and other niche markets, and infrastructure construction recovery will support 2025 heavy truck industry sales growth of 10% YoY to 1 million units, with SINOTRUK benefiting from industry dividends for steady growth.

According to compulsory traffic insurance data, 1H25 new energy heavy truck industry registrations surged 186% YoY to 79,000 units, with SINOTRUK Group's new energy heavy truck registrations up 226% YoY to 9,157 units, capturing 11.6% market share and ranking fourth in the industry. CICC believes the company can achieve electrification volume growth leveraging its strong R&D capabilities, product understanding, scenario adaptability, and comprehensive dealer service network.

Additionally, the company's autonomous driving business has deep layout in two major markets: closed-area low-speed logistics in ports and mines, and high-speed trunk logistics, with related products achieving batch delivery and reserving cutting-edge autonomous driving technologies.

**Risk Factors:** Policy stimulus effects below expectations, industry production and sales below expectations, heavy truck export volatility, intensified competition.