Based on the bulldozer field, we will build a leader in the earthmoving machinery industry. The company is a leading enterprise in the bulldozer industry in China. It has formed a comprehensive product chain with six series of main engine products and construction machinery parts for bulldozers, rollers, graders, pavers, milling machines, and loaders. According to the company's announcement, the company's domestic bulldozer market share has remained above 60% for many years, and sales of ultra-high-horsepower models have surpassed major imported brands to achieve localized replacement. The company's overseas markets are growing rapidly, the product structure continues to be optimized, cost reduction and cost control efforts have been continuously increased, business performance has achieved continuous and steady growth, profitability has been continuously enhanced, and the quality of operation has been consolidated and steady.

The size of the bulldozer market is expected to gradually pick up, and the industry concentration is high. According to QY Research, global bulldozer sales are expected to reach $3.63 billion in 2025. Bulldozer exports have maintained rapid growth. Russia and Indonesia are the top two exporters of bulldozers in China; the domestic bulldozer market has declined due to weakening investment in real estate and other fields, but with the issuance of trillion treasury bonds, infrastructure investment is expected to continue to increase, and domestic demand is expected to usher in a marginal improvement. The bulldozer market concentration is high, with a CR5 of 87% in the global market. The top three companies in the world are Caterpillar, Shantui, and Komatsu. Overseas mining and infrastructure investment is driving demand for high-horsepower bulldozers to continue to rise, and product structure optimization is expected to further enhance the competitive advantage of leading companies.

Overseas exports and high-horsepower products contributed to performance growth, and state-owned enterprise reforms unleashed operational vitality. In 2023, the company's overseas revenue increased by 33.73% year-on-year, accounting for 55.77% of total revenue; the gross margin of overseas business was 24.05%, 13.13pct higher than that of domestic business. The company's products are exported to more than 160 countries and regions, and the overseas channel layout is gradually improving. The company's product technical strength is leading the industry, and domestic production has gradually been replaced in the field of high-horsepower equipment for mining. The increase in the share of high horsepower is expected to further increase the company's profit level. The company relies on its parent company, Shandong Heavy Industries Group, to form collaboration in terms of capital, technology, talent and channels; the company's state-owned enterprise reform continues to advance, which is expected to further stimulate the company's development momentum.

Investment advice: The company's overseas business continues to grow rapidly, the product structure is continuously optimized, and profitability is constantly increasing. The resources of the company and the parent company have formed effective collaboration, and state-owned enterprise reforms have continued to advance, continuously creating competitive advantages in the entire industry chain in the field of earthmoving machinery. We expect the company's net profit to be 1.03 billion yuan, 11.90 billion yuan, and 1,338 billion yuan respectively in 2024-2026, and the current stock price corresponding to PE is 12.37, 10.43, and 9.27 times, respectively. Covered for the first time, the company was given an “increase in weight” rating.

Risk warning: Investment in infrastructure, real estate, and mining falls short of expectations; irrational market competition; deterioration of the overseas trade environment; sharp rise in raw materials and shipping prices; sharp fluctuations in the RMB exchange rate; risk of lifting the ban on restricted stocks, etc.