Weifu Hi-Tech's first-half net profit increased by 24% YoY to RMB 1.05 billion

On August 25, 2015, Weifu Hi-Tech released a semi-annual report showing that the company achieved operating income of 3.390 billion yuan in the first half of the year, a decrease of 3.95% from the same period of the previous year, and a profit of 1.158 billion yuan, an increase of 23.74% over the same period of the previous year; The net profit of the parent company owner was 1.046 billion yuan, an increase of 24.44% over the same period of last year.

Weifu Hi-Tech Releases Half Year Report

Investment income drives company profits to grow steadily

In the first half of 2015, the company achieved a net profit of 1.05 billion yuan, an increase of 24% year-on-year; net profit after deducting non-recurring gains and losses was approximately 880 million yuan, an increase of 7.6% year-on-year, accounting for approximately 50% of our full-year profit forecast. Basically in line with expectations; the company's main business income was 3.39 billion yuan, down 4% year-on-year, mainly due to the declining domestic heavy truck industry; the main business gross margin was about 22%, down 2.4 percentage points year-on-year; the period cost rate was about 11.2% , a year-on-year decrease of 1.5 percentage points; in addition, the company’s investment income reached 882 million yuan, an increase of 46% over the same period of last year, which was mainly due to the steady growth of net profit of holding company Bosch Automobile and Zhonglian Electronics, and the company’s sales of Tianqi during the reporting period. Part of the shares (002009) confirmed a one-time investment income of approximately RMB 100 million.

The National IV Upgrade bonus was offset by the sharp decline in the heavy truck market

Driven by the State Fourth Upgrading, the company's business revenue from the automobile exhaust after-treatment system in the first half of the year increased by 57% year-on-year to 1.26 billion yuan, accounting for 37% of the company's main business revenue; in addition, Weifu's holding company, Bosch Auto Diesel Profit increased by 13% year-on-year to 1.24 billion yuan. However, due to the 33% decline in the heavy truck market in the first half of the year, the company's traditional fuel injection system revenue fell by 24% to 1.8 billion, offsetting the dividends from most of the country’s four upgrades.

The continued downturn in the heavy truck industry in the second half of the year and the disappearance of the national bonus for the fourth year next year may be a drag on the company’s performance.

Taking into account the further slowdown of the domestic economy, investment activities such as real estate/infrastructure, etc., we believe that the domestic heavy-duty truck market will continue to slump in the second half of the year. We expect this year's domestic heavy-duty truck industry sales to decline by 20% yoy (implying 17% in the second half of the year). In addition, taking into account the disappearance of the National IV upgrade bonus next year, we expect the company's profit growth rate to slow further to 9% next year.

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