According to the news obtained from the Intelligent Financial APP, Soochow Securities released a research report stating that the bottom of the construction machinery industry's beta marginal has turned upward, and is expected to welcome resonation of both domestic and foreign sales. In the long run, electrification is expected to become the way out for the global construction machinery industry. Bullish on the broad market space brought by the increase in electric penetration rate. Continues to recommend Sany Heavy Industry (600031.SH), XCMG Construction Machinery (000425.SZ), Zoomlion (000157.SZ), Jiangsu Hengli Hydraulic (601100.SH), Zhejiang Dingli Machinery (603338.SH) and Guangxi Liugong Machinery (000528.SH), and suggests paying attention to Shantui Construction Machinery (000680.SZ).

The main viewpoints of Soochow Securities are as follows:

CME predicts that the YoY growth rate of excavator exports in July will be +7%, the first positive growth in 24 years.

CME predicts that the sales of all kinds of excavators in July 2024 will be 14,000 units, up by 11.1% YoY, including 6,000 units sold domestically, up by 17%, with a narrowing YoY growth rate of 8 percentage points. The main reason is that the new government bonds project requires construction to start before the end of June, and June's sales formed a high base while some of the following demand was overspending; 8,000 units will be exported, up by 7%, marking the first YoY growth in 24 years. From January to July 2024, the overall sales volume of excavators fell by about 3% YoY, and the decline narrowed continuously. Among them, the domestic market grew by nearly 6% YoY, while the export market declined by 11% YoY. The data improved from January to June. Looking to the future, the downstream infrastructure investment in China will continue to improve, and with the continuous promotion of large-scale equipment updates, the excavator market is expected to gradually emerge from the bottom of the cycle; in overseas markets, benefiting from the destocking of domestic brand inventory in overseas markets, the low base of export volume in the same period last year, and the moderate recovery of demand in some overseas regions, the export market is expected to continue to grow.

The industry is experiencing resonance both domestically and internationally as domestic sales are building a bottom and overseas markets expand.

The last upswing cycle for the construction machinery industry was from 2016 to 2020. According to the 8-year service life, the sales equipment in the last cycle is currently at the mass replacement stage. A series of policies such as large-scale equipment updates have promoted the industry's recovery, bringing about dual resonance of large-scale equipment updates and industry self-updates. In terms of export, domestic companies continue to expand in the advantage regions of countries along the Belt and Road, and also continue to make breakthroughs in the European and American markets. China's international competitiveness of domestic brands is highlighted. The foreign construction machinery market is three times the domestic market, and the current market share of leading companies in overseas markets is around 5%, while the overseas leader Carter's has a share of more than 15%, indicating that there is still more than doubling space for domestic leaders.

The market space for electrified construction machinery is vast, and breakthroughs in technology are expected to usher in a surge of development. Since 2023, with the breakthroughs in electrification technology and the significant drop in battery prices, the economy of electrified construction machinery has greatly improved, leading to a large-scale breakthrough in industrialization. At the end of June 2024, Sany Heavy Industry releases its first overseas medium-sized electric excavator in the Netherlands and has received 20 contractual orders. The electric excavator realizes a breakthrough in the high-end market with a penetration rate from 0 to 1. Currently, the electrification rate of the global construction machinery is less than 1%. A significant increase in economy will follow once the bottleneck of transmission efficiency in electrified products is broken, which will lead to a surge of electric construction machinery.

We believe that the electrification of construction machinery will become a global breakthrough in the long run and bullish on the broad market space brought about by the increase in electric penetration rate. We continue to recommend Sany Heavy Industry (600031.SH), XCMG Construction Machinery (000425.SZ), Zoomlion (000157.SZ), Jiangsu Hengli Hydraulic (601100.SH), Zhejiang Dingli Machinery (603338.SH), and Guangxi Liugong Machinery (000528.SH), and suggest paying attention to Shantui Construction Machinery (000680.SZ).

Investment advice

Soochow Securities released a research report stating that the bottom of the construction machinery industry's beta marginal has turned upward and is expected to welcome resonance of both domestic and foreign sales. In the long run, electrification is expected to become the way out for the global construction machinery industry, bullish on the broad market space brought by the increase in electric penetration rate. Continues to recommend Sany Heavy Industry (600031.SH), XCMG Construction Machinery (000425.SZ), Zoomlion (000157.SZ), Jiangsu Hengli Hydraulic (601100.SH), Zhejiang Dingli Machinery (603338.SH) and Guangxi Liugong Machinery (000528.SH), and suggests paying attention to Shantui Construction Machinery (000680.SZ).

Risk warning

Downstream investment falls short of expectations, industry cyclic volatility, international trade disputes, and breakthroughs in electrification technology are less than expected.