Guosen: The overseas heavy truck market has vast potential, and the boom in overseas expansion is expected to last long-term.

Guosen has released a research report stating that the sales of heavy trucks in our country are entering a new growth period, and the outward expansion of heavy trucks is showing a vigorous development trend. In terms of sales structure, the proportion of tractor units is increasing while the proportion of heavy truck chassis is decreasing, reflecting a shift in our heavy truck market from being driven by infrastructure to being driven by logistics. There's a cyclical nature to the domestic demand for heavy trucks, influenced by economic development, product iteration, and elimination policies. Currently, we are in a phase of recovering domestic demand for heavy trucks. The growth of heavy truck exports is rapid, with Africa and Southeast Asia being the top two regions for our exports, both of which continue to grow quickly. The concentration of the five major heavy truck manufacturers is high. Key points from Guosen include: The African market is the largest region for our heavy truck exports and a major area of incremental growth, with significant market potential. From the perspectives of per capita GDP and heavy truck ownership per thousand people, the African market is at the same stage as our country was in the early 21st century. Infrastructure investment in Africa is significantly lagging behind the levels seen in our country in the early 21st century, and there is still room for further exploration of infrastructure and logistics demand for heavy trucks. Currently, Africa's mining sector is thriving, and mining development is expected to drive infrastructure growth; logistics will provide long-term heavy truck demand, but it requires improvements in infrastructure conditions and sustainable economic development as a foundation. Chinese heavy trucks have shown a trend of volume growth in East and West Africa, and quality enhancement in North and South Africa, also displaying a certain level of concentration. In terms of market size, it is estimated that current heavy truck sales in Africa are in the range of 200,000 to 250,000 units, with an estimated ownership of approximately 1.6 million units by 2025. Competition-wise, China is projected to export over 140,000 heavy trucks to Africa by 2025, positioning itself among the mainstream products in the local market and benefitting fully from market growth. It is calculated that the annual sales in the African heavy truck market have the potential to double in the next five years. Southeast Asia is the second-largest base market for our heavy trucks and is experiencing high growth; Latin America and Europe have mature heavy truck markets, with Brazil and Europe being potential incremental markets. The Southeast Asian heavy truck market is more mature than that of Africa, with infrastructure and logistics jointly driving the export growth of our heavy trucks in Southeast Asia, making growth highly certain; the concentration of our heavy truck exports across Southeast Asian countries is relatively high. Europe and Latin America are mature markets; in terms of market size, the projected sales volume for heavy trucks in Europe (EU30) is approximately 300,000 units by 2025, while the Latin American market is estimated to be in the range of 180,000 to 200,000 units. In terms of competition, local brands in Europe account for over 90% of the market share; in Latin America, our heavy truck market share is still below 20%, mainly in regions outside Brazil, where the market remains dominated by European brands. Within Latin America, Brazil and Mexico are the core markets for heavy trucks, and our heavy truck export volume is growing rapidly in countries outside these two; Chinese automotive companies are actively establishing production capacity in Mexico. Brazil and several other countries have high tariff barriers, necessitating local production capability for automotive companies, which Chinese firms are currently promoting. The European heavy truck market has a high average selling price, with local heavy truck companies having deep technological deposits and significant brand influence, resulting in a very low proportion of external brands; the premium on electric heavy trucks in Europe is significant, and this may present opportunities for Chinese automotive companies. Investment Recommendations: Focus on leading companies and those with high growth rates in heavy truck exports. Within the trend of heavy truck exports, we are optimistic about industry leader Sinotruk Jinan TruckH and the manufacturing arm for overseas expansion Sinotruk Jinan TruckA. We are also optimistic about the comprehensive commercial vehicle company BAIC Foton Motor, which is experiencing high growth rates. Attention should be given to heavy truck engine leader Weichai Power. Risk Alerts: Risks of product sales falling below expectations and profitability being lower than anticipated; risks of intensified competition in the domestic and international heavy truck industries; risks of changes in local policies in overseas regions; risks of force majeure; risks related to overseas development not meeting expectations; risks of companies being unable to control costs effectively.