Sinotruk’s 2024 net profit of RMB5.86bn (+10% YoY) is +3%/-4% versus our/Bloomberg consensus estimate. Sinotruk proposed a final dividend of HK$0.55/shr. This, together with the interim dividend, implies a payout ratio of 55% (up from 50% in 2023). In the post-results call, management expects that HDT industry sales will be 0.9-1.0mn units in 2025 (0-10% YoY). Management revealed that the company’s export sales will drop in 2025E, which is consistent with our view that exports will come under pressure given the high base in Russia market. We slightly revise down our 2025E/26E earnings forecast by 2%/3%, mainly due to lower assumptions on export volume and low margin of engines. Our new TP of HK$20.5 (previously HK$21.4) is based on 5x EV/EBITDA (equivalent to the historical average). Maintain HOLD. We prefer Weichai (2338 HK / 000338 CH, BUY) due to more growth drivers.
　　HDT: Sinotruk delivered 243k units of HDTs, up 7% YoY (China: 109k units, +13%; Exports: 134k units, +3%) in 2024. ASP increased 5% YoY to RMB346k/unit. Segment profit only increased 1.4% YoY to RMB4.4bn as the segment margin narrowed 0.57ppt to 5.2%. In 2025E, we forecast 3% HDT sales volume growth, driven by 12% growth in China but partially offset by a 5% decline in exports.
　　LDT: LDT sales increased 4% YoY to 100k units, with ASP increased 4%. Segment loss narrowed to RMB215mn in 2024 (from RMB623mn). In 2025E, we forecast 5% LDT sales volume growth with segment margin potentially turning to positive.
　　Engine: Total engine volume (95% internal sales) dropped 15% YoY to 109k units in 2024. Segment profit dropped 4% to RMB1.97bn. In 2025E, we forecast 5% engine sales volume growth with segment margin largely stable at ~14%.
　　Auto finance. The segment revenue grew 7% YoY to RMB1.48bn in 2024. We calculate it represented ~11% of interest margin. The segment profit grew 5% YoY to RMB807mn, with segment margin slightly narrowed 1ppt YoY to 54.6%. Going forward, we expect the segment to be relatively stable.
　　Upside risks: (1) Stronger-than-expected replacement demand; (2) further expansion of new overseas markets.
　　Downside risks: (1) further weakness in export sales; (3) lack of demand recovery in China.