BSC forecasts slowdown in truck market

Wednesday, Feb 17, 2016 16:56

Truck enterprises earn among the best in 2015 thanks to higher sales. — Photo
HA NOI (Biz Hub) — Stocks of truck enterprises were among the most attractive, thanks to higher sales, last year.

However, the research done by BIDV Securities JSC (BSC) on the 2016 outlook forecasts that shares of truck firms will not be attractive this year.

Tran Thanh Long, from BSC's head of analysis office, said the automobile industry was still growing, but the truck segment would experience a significant slowdown as the local demand was mostly met last year.

Long said the strong demand for trucks last year was caused by tightening of regulations about the curb weight of trucks, with oversized trucks being strictly banned, forcing their owners to buy larger vehicles.

Three enterprises - Hoang Huy Investment Services (HHS), TMT JSC automotive (TMT) and Truong Long Engineering and Automotive JSC (HTL) - gained the most from the strong demand for trucks.

The total turnover of the three enterprises amounted to VND8.57 trillion ($382.7 million) last year, a 2.2-times increase compared to the previous year.

Regarding net profits, HHS earned VND481 billion ($21.4 million), 3.5 times more than the previous year; TMT earned VND186 billion ($8.3 million), three times more than the previous year; and HTL got VND135 billion ($6 million), two times more than in 2014.

Their shares in the local stock market were listed among the maximum sold on the market. Shares of HHS, which imports Dongfeng heavy trucks, reached their peak last June.

However, the demand for trucks, especially heavy trucks, would not be that strong in 2016, Long said, as most of the larger trucks had met the local demand. At the same time, Long said, the increasing duties and taxes for imported cars would make imported trucks no longer attractive.

The downtrend was revealed in the last quarter of last year after truck sales peaked in Q2, local statistics showed.

In Q4, HHS' sales fell 50 per cent from Q2, while HTL's fell 18 per cent from its peak.

The Q4 after-tax profit fell, as a result. As reported, HHS earned VND64 billion ($2.8 million) in profit, while Truong Long earned VND33 billion ($1.47 million) and TMT got VND8 billion ($357,000) in the quarter, marking not only significant falls from the peak in 2015, but also a sharp reduction year-on-year.

The BSC expert said the consumption in 2016 would be motivated by the expiry of registration of 19,000 trucks this year, an increase of 26 per cent from last year.

BSC also recorded changes being made in business strategies to resolve the problem, noting that HHS expanded its distribution of tractors, and TMT established a bus assembly plant in Hung Yen Province and co-operated with India's Tata in distributing cars in the market.

However, the securities company still does not expect strong growth in the shares of the companies this year. — VNS

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