Core views:

The company has a stable market share in the heavy truck industry in the top three, and the technical level is leading. The truck industry has proven its inflection point for 23 years and will continue to unleash resilience in the next few years. We estimate that sales in the truck industry will continue to grow in the next few years, and the sales center is expected to surpass historical sales highs. According to the China Automobile Association, in the past, the company's market share in the heavy truck industry has been in the top three for 6 consecutive years; at the product structure level, logistics vehicles account for relatively high, and is expected to steadily improve performance in this upward cycle due to the rigidity of logistics demand; at the technical and manufacturing level, it has mastered world-class vehicles and the core technologies of the three major powertrains, from rough raw materials to core components, from key assemblies to complete vehicles; in the commercial vehicle industry, the small and elastic export business base is expected to help the company reach the next level; in the commercial vehicle industry, electrification and intelligent trends are expected to help the company rise to the next level. Next, the company will actively transform; At the corporate governance level, implement equity incentives to motivate employees.

The external environment and internal governance are improving simultaneously, and the company's profitability is expected to increase. 2023 is the first year of the truck industry's upward cycle. Resonance between exports and domestic demand will drive the industry's sales volume to grow year by year. Improved inventory and stable and high-end material costs will all help increase the overall profit margin of the industry. After experiencing a downward cycle, the company's internal governance capacity was further improved. The external environment and internal governance improved simultaneously, and the company's revenue and net profit to mother are expected to improve.

Profit forecast and investment advice: The truck industry is in the early stages of a 3-5 year upward cycle. Currently, total inventory is healthy, promotions are narrow, and sales are expected to continue to grow positively next year. Simultaneous improvements in the external environment and internal governance, and growth in export business are expected to help the company gradually reach a new level in the next few years. We expect the company's net assets to be 241.2/251.0/26.95 billion yuan respectively. Considering that the company's inventory removal will have a lagging impact on profit improvement, we use the PB valuation method and refer to domestic and international comparable company valuation levels. Considering that after the fixed increase is completed, it is expected that the company's new business R&D capacity will improve and production lines will be upgraded. We give the company a 24-year PB valuation of 2.2 times, corresponding to a reasonable value of 11.44 yuan/share, for the first time coverage, and give a purchase rating.

Risk warning: Industry prosperity is declining; raw material prices are rising; industry competition is intensifying.