Cummins Engine Drives Profit Recovery of Dongfeng Motor

Benefited from the development of the Dongfeng Cummins Engine in the second half of the year, Dongfeng Motor's net profit in 2009 achieved a slight increase from the same period last year. In 10 years, the company will continue to benefit from the continued prosperity of the heavy-duty truck industry, while the profitability of the headquarters' light-bulb business is expected to be the same as in 2009.

Dongfeng Motor (600006) released its 2009 annual report on March 29th. The company achieved operating revenue of 14.311 billion yuan for the full year, an increase of 15.12% year-on-year; total profit of 421 million yuan, down 2.02% year-on-year; net profit attributable to shareholders of listed companies was 318 million yuan. Yuan, a year-on-year increase of 0.78%, diluted earnings per share of 0.16 yuan.

The recovery of Dongfeng Cummins led to growth in profitability throughout the year. The company holds 50% equity of Dongfeng Cummins, and its profit contribution is mainly reflected by investment income. Dongfeng Cummins Engine is mainly used for heavy truck products, and a considerable proportion of services for the Group's heavy truck business (about 50%). In 2009, Cummins realized a net profit of approximately 537 million yuan, which contributed approximately 269 million yuan to the parent company's profit, with quarterly earnings of 1,400, 5,700, 9,900, and 99 million yuan respectively. It is precisely because of the development efforts in the second half of the year that the company's annual profit growth rate has increased slightly from -31.77% in the first three quarters to a slight increase of 0.78%.

Cummins's profit contribution still has room for improvement. Compared with 2009 and 2008, the investment income from Dongfeng Cummins accounted for 64% of the company's total profit and 92% of the company's total profit. The difference in contribution was mainly due to the fact that the downstream heavy trucks, especially the semi-trailer tractors, recovered at the 2009 node compared to other cars. Subdividing the industry later. The predicted heavy truck industry growth rate in 2010 is about 19%, and is expected to outperform the automotive industry as a whole. Therefore, the profit growth prospects of Cummins engines are still relatively clear.

In 2010, the growth rate of light trucks in the Ministry is expected to lag behind the industry as a whole. Dongfeng Motor's light truck production bases are located in Xiangfan and Changzhou. In 2009, the company's light vehicle sales were 146,000 units, a year-on-year growth rate of 22%. The comparable industry growth rate during the same period was 34%. The main reason for the decline in market share was the company’s The light truck products are positioned in the mid-range and mid-to-high grades. The preparation of low-end economic light trucks, which are the main industry additions, is insufficient, and the county-level and below networks are not sufficiently focused. However, as the prices of steel and other raw materials continued to be low, the company's light truck gross margin was 10.21% in 2009, an increase of about 1.3 percentage points from 2008, and the profitability has improved. It is expected that steel prices will rise to some extent in 10 years, and may slightly reduce the gross profit margin of the company's light truck business; 10 The predicted sales growth of the young card industry and Dongfeng Motor light trucks are 22% and 15%, respectively, and the profit contribution of the headquarters' light truck business It's roughly the same as in 2009.

Zhengzhou Nissan will make efforts in 2011. Zhengzhou Nissan currently has 60,000 units of production capacity, mainly producing pickups, SUVs, and MPVs. In 2009, the company sold 61,400 vehicles, an increase of 20.16% year-on-year, and its capacity utilization rate was at historically high levels. At present, the company is stepping up construction of new production capacity to solve the production bottleneck. The planned investment in 2009 and 10 years is approximately 800 million yuan and 500 million yuan. It is optimistic that by the end of 2010, it will increase about 120,000 new production capacity. With the increase of existing production capacity to 80,000 units through expansion and expansion, the company's total production capacity in 2011 is expected to reach 200,000 units. In 2009, Zhengzhou Nissan contributed investment income of approximately RMB 50 million to Dongfeng Motor. With the significant expansion of production capacity, it is expected that its profit contribution will increase significantly in 2011, but it may decline in 2010 because short-term consolidation of projects under construction will increase the company's cost level.

The third quarterly report shows that Dongfeng Motor achieved operating income of 10.356 billion yuan from January to September 2009, an increase of 5.9% year-on-year; net profit attributable to shareholders of listed companies was 256 million yuan, down 31.77% year-on-year, corresponding to an earnings per share of 0.13 yuan.

As of press time, the company's stock price was 6.30 yuan, down 0.94% from the previous trading day.

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