In 2023, the revenue of the construction machinery industry increased slightly by 1%, and net profit to mother increased by about 11% year on year. The large gap between revenue and profit growth may be due to the increase in overseas revenue of various enterprises and the increase in revenue from high-margin electrification products.
The Zhitong Finance App learned that Guolian Securities released a research report saying that in 2023, the construction machinery industry's revenue increased slightly by 1%, and net profit to mother increased by about 11% year on year. The reason for the large gap between revenue and profit growth may be due to the increase in overseas revenue of various companies and the increase in revenue from high-margin electrification products. With the deepening overseas layout of leading companies and the gradual increase in the share of electrified products, the profitability of related enterprises has increased. The gross margin of the industry in 2023 was 25.14%, an increase of 3.5 pcts over the previous year. The net operating cash flow of the industry has clearly rebounded, and the quality of operations has gradually improved. With the gradual implementation of domestic policies, construction machinery is expected to usher in a new cycle of upgrading. At the same time, overseas markets are expected to continue to bring in growth, are optimistic about the prospects of the construction machinery industry, and give it a “better than the big market” rating.
The construction machinery industry is still bottoming out, and the trend of narrowing the decline is obvious
Downstream demand for excavators showed no significant signs of improvement in 2023, and the overall industry is still in the bottom cycle. In 2024Q1, China sold a total of 50,000 excavators, a year-on-year decrease of 13.10%; of these, sales volume in March was 25,000 units, a year-on-year decrease of 2.34%. Since the second half of 2021, China's construction machinery industry has entered a downward cycle, and downstream demand has declined markedly. Guolian Securities believes that the industry is still at the bottom of the cycle, but the decline is clearly narrowing.
Leading companies' export business continues to grow
The global infrastructure market continues to heat up and the global layout of domestic brands accelerates. Overseas markets bring important driving force to the industry, and the increase in overseas market share enhances the company's profitability. In 2023, the overseas revenue of major companies continued to increase, and their share of overseas revenue increased. Among them, companies such as Sany Heavy Industries and Zhejiang Dingli already accounted for more than 50% of overseas revenue. Guolian Securities believes that the gross margin of overseas business is high, and the increase in overseas market share enhances the company's profitability.
The policy is expected to push the domestic construction machinery sector into a new cycle of upgrading
The State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”. The policy is expected to push the domestic construction machinery sector into a new cycle of upgrading. We divide the excavator market into domestic market+domestic market, and the domestic market in China is also split into renewed demand+new demand. Guolian Securities predicts that in 2024-2026, China's excavator sales will be 18/20/250,000 units, respectively, and China's excavator sales may be recovering weakly in 2024.
According to the industrial layout situation and the pace of industry cycle recovery, we are optimistic about Anhui Heli (600761.SH), Hangcha Group (603298.SH), Zhejiang Dingli (603338.SH), etc. which continue to increase overseas demand; they are optimistic about deepening the industry layout in the medium term and continue to improve product layout and overseas layout, Sany Heavy Industries (), Hengli Hydraulic (USD), etc. 600031.SH 601100.SH
Risk warning: Macroeconomic environment development falls short of expected risk, risk of overseas market development falling short of expectations, risk of price fluctuation of raw materials, etc., risk of exchange rate fluctuation.