China Yuchai International Ltd. Q3 FY2020 earnings call

• 2020 started with despair due to COVID-19 impacting the Chinese economy, including the automotive industry. • Second half 2020 revenue up 18.1%, engines sold up 31.8%. • Engine sales growth in truck markets offset bus segment decline; off-road market also saw significant growth. • Commercial vehicle unit sales (excluding gasoline/electric) up 35.4% in second half 2020, with truck unit sales rising 43.4% and bus down 4.6%. • GYMCL's engine unit sales to on-road commercial vehicles up 23.5% and off-road up 51.0%, led by agriculture segment growth. • Gross profit up 4.9% but gross margin down due to sales mix and material costs.

In the second half of 2020, revenue increased by 18.1% to RMB10.6 billion (US$1.6 billion) compared to RMB9.0 billion in the second half of 2019. The total number of engines sold by GYMCL during the second half of 2020 was 217,138 units, an increase of 31.8% from 146,789 units in the second half of 2019. Gross profit increased by 4.9% to RMB1.7 billion (US$262.3 million) compared to RMB1.6 billion in the second half of 2019. Gross margin was 16.1% compared to 18.1% in the second half of 2019, mainly due to changes in sales mix and higher material costs.

• No formal forecasts or guidance provided, but first 2 months of 2021 looked positive with better order numbers. • Expectation of pre-buy effects due to National VI A emission standard implementation in July 2021. • Anticipated lower R&D spend on National VI in 2021 compared to previous years.

• JV losses due to high costs of precious metals (platinum, rhodium, palladium) and issues with new product replication, which were expected to be resolved in 2021.

Q: Could you talk about what your expectations are for the current year in terms of volumes, the unit volume sales and also the mix of that?

A: While no forecasts, first 2 months of 2021 looked positive with better order numbers, likely due to pre-buy effects from National VI A emission standard implementation. Product mix: agricultural segment growth with lower margin compared to truck segment, and expectation of lower growth in heavy/medium duty trucks leading to possible lower gross margins.

Q: Approximately what percent of the RMB1.2 billion R&D spend was spent on new energy vehicles, including transmission and green hydrogen initiatives?

A: Less than 20% of R&D spend was on new energy, with most spent on National VI and related development in the last 3 years.