Excavator sales are expected to rebound due to: substitution of exports, increasing efficiency through electrification, and domestic real estate and infrastructure policies.
According to a research report by China GTJA, China's engineering machinery import and export trade volume in January-May 2021 was USD 22.292 billion, an increase of 2.06% year-on-year. Among them: Imports were USD 1.1 billion, up 0.83% year-on-year; exports were USD 21.193 billion, up 2.13% year-on-year. The bank believes that excavator sales are expected to rebound due to the substitution of exports, increasing efficiency through electrification, and support from domestic real estate and infrastructure policies. The bank recommends XCMG Construction Machinery (000425.SZ) and Zoomlion (000157.SZ), which have global competitiveness and smooth progress in electrification, as well as Jiangsu Hengli Hydraulic (601100.SH), which benefits from non-excavation business; and Zhejiang Dingli Machinery (603338.SH), China's leading giant in aerial work platforms. The bank also recommends Guangxi Liugong Machinery (000528.SZ) as a beneficiary.
According to China GTJA's view:
CME expects domestic excavator sales to increase by 20% year-on-year.
According to CME's grassroots investigation and market research, it is estimated that excavator sales in June 2024 will be approximately 16,000 units, up 1.5% year-on-year. Regionally, domestic sales are expected to be 7,300 units, up 20% year-on-year, as the updated demand for small excavators is the main driving force for domestic demand improvement. Export sales are expected to be 8,700 units, down 10% year-on-year, mainly due to the impact of overseas product structure switching and the high base number of 2023.
Bullish on the growth of domestic engineering machinery industry in the second half of 2024, driven by updated demand.
By the end of 2023, the issuance of a trillion yuan government bond project will ease local funding pressure; the real estate end is accelerating the layout of the three major engineering and construction projects; the Equipment Update Plan in 2024 is actively promoted, and by 2027, equipment investment in industries such as industry, construction, and transportation is expected to increase by more than 25% compared to 2023. From January to May 2024, China's infrastructure investment increased by 7.5% year-on-year. During the first quarter of 2024, 9,683 new water conservancy projects broke ground, an increase of 33.8%, and infrastructure investment helped domestic demand recover. Considering the high point of the previous cycle of domestic engineering machinery and the different service life of large, medium and small excavating equipment, our calculation shows that the demand for excavator updates in 2024 will be approximately 72,000 units, of which small excavator will be the main force of current update demand. Considering that the summer is traditionally a weak season, it is expected that positive growth in domestic demand will be achieved from September and October after the summer.
With steady overseas market expansion and a low base number, excavator exports are expected to turn positive in the second half of the year.
According to statistics from the China Construction Machinery Association, China's engineering machinery import and export trade volume from January to May 2024 was USD 22.292 billion, an increase of 2.06% year-on-year. Among them: Imports were USD 1.1 billion, up 0.83% year-on-year; exports were USD 21.193 billion, up 2.13% year-on-year. Domestic engineering machinery companies are accelerating their overseas expansion. North America and Europe and other regions have high entry thresholds and high profit levels for mining machinery engineering machinery, and domestic manufacturers with high technological accumulation and breakthroughs in overseas markets are being closely watched.
Risk reminder: Demand for cranes and concrete machinery may not meet expectations, and overseas market expansion may not meet expectations.