In terms of the $5 trillion equipment renewal campaign, agriculture ranked second among the 7 major areas to focus on.
The Zhitong Finance App learned that Dongwu Securities released a research report saying that in terms of the 5 trillion equipment renewal campaign, agriculture ranked second among the 7 major areas to focus on. The bank believes that large-scale equipment renewal and trade-in will become a new engine for the agricultural machinery industry: from a demand perspective, a new round of policy support will help to quickly stimulate consumption intentions and enhance investment confidence; from a supply perspective, a new round of policy stimulation of demand will indirectly improve the profitability of agricultural machinery enterprises, thus ensuring that agricultural machinery enterprises have sufficient capital to invest in the direction of independent innovation, raise the level of high-end and intelligent agricultural machinery equipment in China, and promote the upgrading of China's agricultural machinery industry.
The views of Soochow Securities are as follows:
Demand for agricultural machinery replacement is highly dependent on subsidies, and policy support has injected new momentum into the development of the industry
Agricultural development is related to the national economy and people's livelihood, and agricultural machinery is a powerful tool for promoting high-quality agricultural development. After years of development, China's agricultural machinery market has basically been modernized, but at this stage, China's agricultural machinery market still has two major problems: ① large but not strong: the main manifestation is that the industrial level is not high, and the level of intelligent and high-end agricultural machinery is still low; ② weak demand: domestic agricultural machinery purchase subsidies and other policies have been implemented in 2004 to stimulate industry demand. The industry has experienced the stimulus of agricultural machinery purchase subsidy policies for about 20 years, and industry subsidies declined year by year in 21-23. We believe that large-scale equipment renewal and trade-in will become a new engine for the agricultural machinery industry: from a demand perspective, a new round of policy support will help to quickly stimulate consumption intentions and enhance investment confidence; from a supply perspective, the new round of policy stimulation of demand will indirectly improve the profitability of agricultural machinery enterprises, thus ensuring that agricultural machinery enterprises have sufficient capital to invest in the direction of independent innovation, raise the high-end and intelligent level of agricultural machinery equipment in China, and promote the upgrading of China's agricultural machinery industry.
Referring to Central Committee Document No. 1, a new round of policy support may be biased towards equipment shortfalls
Regarding the policy's subsidy direction, we can refer to the Central Committee Document No. 1. Document No. 1 of 2024 describes agricultural machinery as “vigorously implementing actions to repair shortcomings in agricultural machinery equipment”. The shortcomings of agricultural machinery equipment in China are mainly large-scale high-horsepower high-end intelligent agricultural machinery equipment and small machinery suitable for hilly mountainous areas (one big, one small). ① Large-scale high-horsepower high-end intelligent agricultural machinery equipment refers to the intelligent and digital upgrade of agricultural machinery based on technologies such as Beidou, 5G networks, and big data, including large-scale intelligent agricultural machinery products such as smart tractors and smart rice transplanters. China's large-scale high-end agricultural machinery has been monopolized by foreign agricultural machinery giants for many years, and there is an urgent need to break through the “stuck neck” key technology. ② In terms of the application of small machinery in hilly mountainous areas, with reference to the Central Committee Document No. 1 of previous years, the country included accelerated research and development of hilly mountain tractors in the Central Committee's No. 1 document for three consecutive years, showing that the central government attaches great importance to agricultural mechanization in hilly mountainous areas. “One big, one small” equipment is an important gripper for our country to achieve food security. It may be the focus of the new round of policy subsidies.
Investment advice:
Looking ahead to 2024, the adverse factors of demand overruns caused by all three countries are expected to completely subside. Under the stimulus of a new round of subsidies, demand for renewal and replacement will be stimulated, and industry demand is expected to rise. In addition, in the context of increasing technical requirements in the four industries of the country, agricultural machinery is rapidly concentrating on the market share. It is recommended to focus on Yituo shares (601038.SH) (the first to localize high-horsepower tractors), Weimar Agricultural Machinery (301533.SZ) (focusing on mountainous hill agricultural machinery), and Zhonglian Heavy Industries (000157.SZ) (agricultural machinery revenue of 2.1 billion yuan in 2022, focusing on the development of intelligent agricultural machinery), Weichai Power (000338.SZ) (acquired Revo CVT agricultural machinery in 2022) and Weichai Power (000338.SZ) (acquired Levo CVT agricultural machinery in 2022), and have obvious advantages in agricultural machinery Entered Weichai), Jifeng Technology ( 300022.SZ) (The largest domestic agricultural machinery chain enterprise)
Risk warning: The risk of macroeconomic fluctuations, policy support falls short of expectations, and the competitive landscape of the industry increases the risk.