27 August, 2025

SINOTRUK (3808 HK)

AVOID: Window dressing financials

Mark Webb

Heavy truck maker Sinotruk appears to be supporting sales by extending ever-greater amounts of credit to customers. The negative cash flow implications have been masked by (i) a large supplier financing programme which was equal to 61% of equity by YE24 and (ii) misallocating operating cash outflows to investing activities in connection with supplier deposits and restricted cash. Finally, Sinotruk may be understating warranty provisions, although the impact on earnings is probably relatively small. According to Bloomberg, Sinotruk’s shares trade on 9x FY25e PER. However, given window-dressing and possible earnings inflation, we recommend AVOID.

This in an extract from SUPPLIER FINANCING: Embellishing cash flow and understating debt, 27 Aug 2024

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