It is still a long time before Shanghai Diesel's share price is overvalued by SAIC commercial vehicles

In 2008, the actual operating status of Shanghai Shichai Group did not show a fundamental improvement. In 2008, it achieved only EBIT 21.7 million, a year-on-year drop of 60%. If the impact of 35 million investment gains and 25 million minority shareholders’ profits and losses were excluded, Shangchai’s shares had a loss of 31 million yuan.

The profit contribution of SAIC’s commercial vehicle segment to Shangchai’s shares should be after 2010. Before the matured heavy-duty engine products with 12L or more of Shanghai Diesel Engine Co., Ltd., the demand for Huizhong and Hongyan will not increase rapidly, and the contribution of light engines to Shanghai Diesel shall be after 2010. The overall contribution of SAIC's commercial vehicle segment to Shanghai Diesel Still need time.

In 2009, diesel engine sales fell by more than 10%, but a slight increase in gross profit margin led to an increase in performance. We estimate that the demand for heavy trucks and construction machinery will decline by more than 10% in 2009. Construction machinery and heavy truck engines will account for about 75% of the total sales. It is expected that the sales volume of Shangchai will decline by 10-15%; due to the sharp decline in the prices of raw materials such as steel, Shanghai Diesel The gross profit ratio of share products will increase from 15.6% to 16.5%, and Shanghai Diesel's 2009 performance will increase.

The stock price of Shanghai Diesel Technology Co., Ltd. is seriously overvalued, giving a sell rating with a target price of $5. Shangchai shares EPS 0.10 yuan, 0.12 yuan, and 0.14 yuan in 09-11, and the current stock price is 10.55 yuan, which corresponds to 106 times of PE in 2009. Considering the substantial impact of SAIC's commercial vehicle business on Shanghai Shichai Co., Ltd. after 2010, the share price of Shanghai Diesel Seriously overestimate, give a sell rating, target price 5 yuan.

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