Intelligence Finance app learned that Guotai Junan released research reports pointing out the positive YoY growth of CME's excavator sales in June, among which the domestic sales will increase by about 20%. The update demand for small excavators and infrastructure projects such as water conservancy will boost the domestic demand recovery. Considering that summer is usually the off-season, it is expected that domestic demand will achieve significant positive growth from September to October after summer. The excavator sales are expected to recover, and recommendations include XCMG Construction Machinery (000425.SZ) / Zoomlion (000157.SZ), which have global competitiveness and smooth progress in electrification, Hengli Hydraulic (601100.SH), which has large growth in non-excavator business, and domestic giant Zhejiang Dingli (603338.SH), which has a continuous growth of aerial work platform, and benefits target Guangxi Liugong Machinery (000528.SZ).

CME predicts that the domestic sales of excavators will increase by 20% YoY.

According to grassroots investigation and market research by CME, the estimated sales volume of excavators in June 2024 is about 16,000 units, a YoY increase of 1.5%. Regionally, domestic sales are expected to reach 7,300 units (+ 20% YoY), and the sales of excavators will increase significantly YoY due to the update cycle and the low base in 23 years. The update demand for small excavators is the main driving force for current domestic demand improvement. Export sales are expected to reach 8,700 units (-10% YoY), mainly due to the switching of overseas product structure and the high base in 23 years.

Optimistic about the positive growth of domestic sales in the construction machinery industry in the second half of 2024, driven by the update demand.

At the end of 2023, the issuance of trillions of national debt projects will be implemented, easing the pressure on local funds; the 'Three Major Engineering Projects' in the real estate end will accelerate layout; by 2024, the 'Equipment Update Plan' will be actively promoted. The scale of equipment investment in industries such as industry, construction, and transportation will increase by more than 25% compared with 2023.

From January to May 2024, China's infrastructure investment increased by 7.5% YoY; 9683 new water conservancy projects were started in the first quarter of 24, with a +33.8% YoY growth, and the investment in infrastructure construction helped the recovery of domestic demand. Guotai Junan stated that considering the high point of the previous cycle of domestic engineering machinery and the different service life of large, medium, and small excavating equipment, the estimated demand for excavator updates in 2024 is about 72,000 units, of which small excavators are the main force of current updates.

Steadily expanding overseas markets plus the low base, the export of excavators is expected to turn positive in the second half of the year.

According to the statistics of the China Construction Machinery Industry Association, China's construction machinery import and export trade volume from January to May 2024 was US$22.292 billion, a YoY increase of 2.06%. Among them: imports were US$1.1 billion, a YoY increase of 0.83%; exports were US$211.93 billion, a YoY increase of 2.13%. Domestic construction machinery companies are accelerating their pace of going abroad. North America, Europe and other regions, as well as mining machinery and construction machinery with high admission thresholds and high profit levels, are the targets of attention for domestic complete machine companies with high technical accumulation and breakthroughs in overseas markets.

Risk reminder: Demand for cranes and concrete machinery may not meet expectations, and overseas market expansion may not meet expectations.