China's Sinotruk races to expand post-quake sales

HONG KONG, May 27 (Reuters) - Top Chinese truck maker Sinotruk aims to lift overall sales by 40 percent in 2008 and capacity by a third in 2009, racing to sate roaring demand for reconstruction after a devastating earthquake.

Double-digit economic growth and booming investment have spurred construction demand in past years, a trend likely to persist though growth is expected to decelerate somewhat in coming years as Beijing re-focuses on consumption-led growth.

Chairman Ma Chunji also said the May 12 earthquake, which killed more than 65,000 and flattened towns in Sichuan province, was a national tragedy but admitted that mammoth reconstruction and rebuilding were expected to boost demand for trucks.

Though rising steel prices have put pressure on auto makers, he said Sinotruk should be able to pass on costs to customers after lifting truck prices by 4 percent this year.

In the meantime, Ma has been fielding calls from everyone from city mayors to corporate chieftains. "Anshan's mayor called me to place orders for four trucks just the other day. He told me that Anshan had adopted one affected township and that he needed the trucks for reconstruction," Ma said in an interview.

China has mobilised more well-off provinces and cities to aid quake-affected areas, such as pairing Shanghai with Dujianyan. Anshan is a city in northeastern Liaoning province.

Himself a former vice mayor of Jinan, Ma said the reconstruction effort in Sichuan alone is expected to take up 120 billion yuan ($17 billion) over the next six years, he estimated, citing expert forecasts based on spending per person.

Shandong-based Sinotruk (Hong Kong) Ltd, ranked among the world's five biggest truck makers alongside Volvo, Daimler and Isuzu, aims to boost maximum capacity to more than 20,000 per month in 2009, he added.

"We had orders for 30,000 trucks in March and 20,000 each in April and May, but the maximum we can produce around the clock with three shifts is just 15,000 a month now," Ma said.

"We have government orders for more than 1,000 trucks to help rescue works and reconstruction is expected to take as long as six years to complete."

Sinotruk and its parent -- China National Heavy Duty, which has a joint venture with Swedish truck maker Volvo to export trucks -- controlled 20.8 percent of China's heavy-duty truck market in 2007. Ma expects that to rise to 21-22 percent this year, and aims to reach 33.3 percent by 2010.

Shares in Sinotruk have traded below their initial public offering price of HK$12.88 since listing in November, on worries that Beijing's nationwide austerity policy and the implementation of stricter Euro III emission standards from July 1 in China could slow growth in the sector.

But the stock has risen nearly half from a record low of HK$6.62 in January.

Combined with its parent, Sinotruk plans to raise sales to 135,000 to 140,000 trucks this year, from 100,619 in 2007.

Sinotruk, which raised $1.2 billion in an initial public offering in November, accounted for 80-85 percent of that.

"We would be very stretched to make 140,000 this year, but we must try to meet demand," Ma said. First-half demand was so strong Sinotruk had to postpone Russian and Middle East orders to the second half. Sinotruk aims to export 25,000 trucks in 2008 versus 15,000 last year.

Analysts said Sinotruk will benefit as China moves to higher emissions standards. Its local rivals have to buy diesel fuel injection pumps from Bosch [ROBG.UL] or Denso at 20,000 yuan per unit, while Sinotruk's own technology cost half that.

"We've sold Euro III trucks since 2006. Our competitors will take at least one to two years to catch up," Ma added.

Euro III trucks cost more than Euro II vehicles.

"We probably can maintain our gross profit margin at 2007's level, or improve slightly," he added.

($1=6.939 Yuan)