Trade-in Subsidy Policy Update: China has updated its trade-in subsidy policy for passenger vehicles, maintaining the subsidy cap but changing the structure for 2026 to be a percentage of vehicle price rather than fixed amounts.

Market Consolidation Impact: The new subsidies are expected to accelerate market consolidation in the entry-level vehicle segment, particularly for models priced below RMB160,000.

Performance of Major Automakers: Major automakers like BYD, Geely, and GWMOTOR are positioned to benefit from scale advantages and cost control, contrasting with smaller competitors facing losses.

Commercial Vehicle Subsidies: Subsidies for commercial trucks and city buses remain unchanged, which is anticipated to benefit companies like YUTONG BUS and SINOTRUK.

JPMorgan's Top Pick: JPMorgan has identified WEICHAI POWER (02338.HK) as a top industrial sector pick for 2026, despite previous concerns over leadership changes following the retirement of founder Tan Xuguang.

Leadership Stability: The appointment of Wang Zhijian as chairman of Shandong Heavy is expected to ensure strategic continuity between WEICHAI POWER and SINOTRUK (03808.HK), alleviating investor concerns.

Market Demand: The report highlights strong demand for heavy trucks in China, particularly in the second half of the year, with expectations for increased sales of liquefied natural gas (LNG) trucks.

Rating and Target Price: WEICHAI POWER maintains an Overweight rating with a target price set at HKD31, indicating potential for re-rating in the market.

Conference Call Insights: SINOTRUK's management reported that the company is on track to meet its annual sales target of 300,000 units and is progressing well towards its sales and profit margin goals for 2025.

Capital Expenditure Plans: The company plans to maintain a conservative capital expenditure of no more than RMB2 billion per year from 2025 to 2027, focusing on establishing overseas production bases in countries like Kazakhstan, Brazil, and Indonesia.

Brokerage Update: BofA Securities raised its target price for SINOTRUK from $24.3 to $29, maintaining a Neutral rating, as they believe the current share price reflects the company's growth potential.

Long-term Outlook: The brokerage remains optimistic about SINOTRUK's long-term export expansion and its strong position in the local market.

Heavy Truck Demand Forecast: Demand for heavy trucks in China is expected to grow by 19% YoY to 1.07 million units this year, with a further increase of 4% YoY to 1.12 million units next year, driven by replacement cycles and overseas market demand.

LNG Truck Market Outlook: The demand for liquefied natural gas (LNG) heavy trucks is anticipated to rise by 2026, supported by favorable vehicle replacement subsidy policies.

Daiwa's Ratings on WEICHAI POWER: Daiwa has given WEICHAI POWER a Buy rating and raised its target price from HKD18 to HKD20.5, citing optimism about the recovery of LNG trucks and increasing demand for high-power engines.

Daiwa's Ratings on SINOTRUK: SINOTRUK has been rated as Outperform by Daiwa, with its target price increased from HKD21.7 to HKD29.4, reflecting a positive outlook despite its high current valuation.

Overseas Demand for Chinese Trucks: Daiwa's research report indicates that overseas demand for Chinese-made heavy trucks will remain strong next year, driven by the US easing cycle and China's trade-in policies boosting domestic demand.

Positive Outlook for SINOTRUK: The broker maintains a positive outlook on SINOTRUK (03808.HK), expecting the company to gain further global market share due to its industry-leading position.

Rating and Target Price Update: SINOTRUK's rating has been reiterated as Outperform, with its target price increased from HKD21.7 to HKD29.4.

Short Selling Data: As of November 5, 2025, SINOTRUK has a short selling amount of $38.00M, with a short selling ratio of 22.110%.