Breaking News:

The Ministry of Industry and Information Technology has published its No. 27 announcement today. According to this announcement, all State III automotive diesel engines will NOT be allowed to be produced since Jan. 1st, 2015. And this means that the State IV standard diesel engine’s market share will rise dramatically in Y2015.

CICC Comments:

We estimate only ca. 40% HDT (Heavy Duty Truck) will meet State IV standard this year, but this ratio will rise to 70%~80% next year.

We reiterate our BUY rating for Weifu High-tech (000581 CH) and maintain the TP of 35 RMB for Weifu High-tech A, HK$35 for Weifu High-tech-B (200581 CH).

We maintain our earnings forecast 1.47/1.86 RMB for 2014/15 respectively, which means a 30%+ net profit growth rate in 2 successive years.

Translation of the MIIT announcement

In order to control air pollution, reduce the automotive emission and protect the consumers’ right, MIIT decides to abolish the catalogue of State III automotive diesel engines on Dec. 31st, 2014. No State III automotive diesel vehicles is allowed to sell since Jan. 1st, 2015. We kindly inform all auto OEMs to make preparation for this upgrade and schedule the State III vehicle inventory.