Aug. 28 (Bloomberg) -- Sinotruk (Hong Kong) Ltd., China's biggest heavy-truck maker, boosted first-half profit 40 percent as consumers rushed to buy vehicles before the introduction of a new emissions regulation.

Net income jumped to 767.9 million yuan ($112.5 million), or 0.34 yuan a share, from last year's 549 million yuan, or 0.37 yuan a share, the truckmaker said in a Hong Kong stock exchange statement today. Sales climbed 50 percent to 16.92 billion yuan.

Sinotruk's heavy-truck sales rose 57 percent, more than double the pace of China's industrywide vehicle market, as drivers bought vehicles ahead of the implementation of the Euro III standard last month. The tougher rule, designed to cut pollution, forced the use of more expensive engines and caused Sinotruk to raise prices about 10,000 yuan on average.

``The main risk for this company is a possible slowdown in heavy-truck sales in second half due to the earlier implementation'' of the new standard, UBS AG analysts Henry Wu and Mandy Qu, wrote in a report today. Still, margins will likely improve because of the higher prices and lower ``raw- material cost pressure.'' They maintained a ``buy'' rating and kept their target price unchanged at HK$9.56.

Sinotruk fell 2.8 percent to HK$6.17 in Hong Kong trading. The truckmaker has plunged 52 percent from its November share sale price of HK$12.88, outpacing a 23 percent decline by the benchmark Hang Seng Index. The company raised HK$9 billion ($1.2 billion) in the initial public offering to fund new plants and technology improvements.

Truck Sales

The truckmaker sold a total of 67,694 Howo and other heavy trucks in the first half. Domestic sales rose 59 percent to 59,196, while overseas sales climbed 47 percent to 8,498. The truckmaker had a 21 percent share of China's heavy-duty truck market last year.

China's 10 percent economic expansion rate is also spurring demand from builders, miners and truckers. That has allowed Sinotruk to boost prices at least twice this year to help offset surging costs for steel and other materials, President Cai Dong said in June. The company's trucks start at about 200,000 yuan.

The company aims to cut costs through measures including central purchasing of raw materials, it said in the statement.

The truckmaker plans to sell 33 percent of its vehicles overseas by 2010 as competition from domestic rivals including Dongfeng Automobile Co. make China sales less profitable. Sinotruk sells vehicles as kits to independent assemblers in Indonesia, Vietnam and Morocco. It plans to establish ventures in the Middle East, Africa and Russia by the end of the year, Cai said in June.

To contact the reporter on this story: Tian Ying in Beijing on ytian@bloomberg.net

Last Updated: August 28, 2008 05:22 EDT