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Weichai Power (2338.HK) issued A shares to incorporate the Hunan Torch (000549.SZ), which will achieve multiple effects such as the listing of Weichai A shares, the reform of the Hunan Torch Stock Exchange and the integration of the Hunan Torch Business. If it can be successfully completed, it will not only be an innovation in the A-share market, but also a win-win situation for different categories of investors in the Hunan Torch, and it will surely be a very important move affecting the auto industry, especially the auto parts and heavy truck industry. .
The automotive industry is far-reaching
With the continuous growth of China's economy during the “Eleventh Five-Year Plan†period and the continuous advancement of industrialization and urbanization, the production and sales volume of heavy trucks will also continue to rise rapidly. From 2005 to 2008, the average growth rate of domestic heavy trucks will reach 15-20%.
One of the most obvious signs of changes in the sales structure is the rapid growth in the demand for heavy trucks over a distance of 200km. The trend for heavy trucks (above 15T load capacity) to gradually replace medium-duty trucks. With the development of expressway network effects and rising oil prices, users are increasingly concerned about transportation efficiency and economic efficiency. The heavy truck market structure tends to be high-speed and heavy-duty. The market share of the Steyr platforms based on relatively mature domestic technologies and supporting systems has increased significantly. Shaanxi Heavy Duty Truck and Jinan CNHTC have performed outstandingly.
At the same time, exports have become an important driving force for the growth of the industry. China's equipment to meet the global low-end market has become a trend, the price advantage of domestic heavy trucks created by domestic and foreign price differences in the labor, land, environment and other factors are very different, will evolve into a strong domestic domestic and international market expansion of heavy truck products Competitiveness. The heavy truck industry in China has initially assumed the conditions for undertaking the gradient transfer of the world's heavy truck industry and then dominating the developing country market through an internationalization strategy.
At the end of 2005, Weichai Power acquired the Hunan Torch, Weichai Power, Fast Transmission, Shaanxi Auto Heavy Truck, and Hande Axle have formed the highest quality heavy truck resource industry chain in China, undoubtedly in the power system, transmission system, and vehicle. The infrastructure components such as the bridge system form the largest industrial cluster in China with the most complete product lines and the best synergies.
Weichai has the highest market share in the heavy truck power sector with a payload of over 15 tons, and reached nearly 70% in 2005. It is the highest-yield high-speed engine in China and even in the world. Its product premium capability and company profitability are extremely strong.
Fast has more than 90% share of heavy trucks with a payload of over 15 tons. Shaanxi Zhongqi has become the best growing company and key player in the heavy truck market.
It is particularly worth proposing that Weichai Power has become a power system manufacturer that can provide a full range of products and services for commercial vehicles, construction machinery and other fields, and has become the most competitive in China because it owns the Fast Transmission and Hande Axle. And we are committed to becoming a general power group with international competitiveness.
Synergy effects appear quickly
The most significant effect of this merger is to facilitate the further integration of industrial resources. Prior to this, in terms of equity structure, company management, and profit composition of the Hunan Torch, Weichai Power's impact on Shaanxi Heavy Duty Truck and Fast and other companies is limited, and Weichai Power can only complete the acquisition of the Hunan Torch. Based on the principle of marketization, it will operate its holding subsidiaries to support its growth. After the absorption and merger, the shareholding ratio was increased to 51%, eliminating the intermediate links of the Hunan Torch, and the management model will also be more conducive to win-win cooperation.
As an industry investor, Weichai Power is not only focusing on its brands, existing businesses and resources, but also the synergy between Weichai Power and Hunan Torch Business. We believe there are at least the following aspects:
1. Combining a gearbox with Faster gears as an important accessory and Weichai Power's engine products into a powertrain to build one of the largest and best powertrain system manufacturers and suppliers in China, further enhancing product development capabilities and bargaining power. Ability and profitability.
2. Enhanced international technical cooperation capabilities and joint technological development levels. In the future, the company will broaden and strengthen its international technical cooperation with international advanced auto parts and vehicle companies, such as MAN, EATON, and Cummins, complete the upgrading of products and technology reserves, and rapidly increase the overall competitiveness. Joint technological development will enable heavy trucks and powertrains to make a difference in technology sharing and product quality improvement.
3. The integration of sales system will reduce the cost while providing consumers with the best service quality. Weichai Power, Shaanxi Auto, and Fast have jointly built more than 1,700 service outlets nationwide and become China's largest commercial vehicle service network. The advantages of online sales and services will provide strong support for the long-term development of the company.
After the acquisition, the remaining issues of the Hunan Torch will also be well resolved. The high costs of the company's management headquarters will be greatly reduced, and non-automotive industry investment with poor profitability will also be integrated and handled so as not to affect the company's future development. The coordination between Weichai’s relatively abundant financial strength and the tight funding needs of the company’s companies will further reduce financial costs.
In the first half of 2006, the strategic synergy effect has been initially highlighted, and Shaanxi Automobile heavy trucks achieved sales of 14,936 vehicles, an increase of 71%, and the growth rate is the highest in the country.
View related topics: Assembling: Auto Parts Giants Hunan Torch