According to the financial news app, Wisdom Finance APP, Changjiang Securities released a research report stating that CME estimates that the domestic sales of excavators in China in August are around 6,600 units, an increase of nearly 17% year-on-year, maintaining positive growth for 6 consecutive months, with a clear upward trend in the domestic cycle. Looking ahead, mini excavators are expected to continue high growth driven by the construction of high-standard farmland and water conservancy projects. Mid-sized excavators are gradually expanding their application scenarios and may play a supportive role in demand, while large excavators are expected to recover in demand driven by mining and infrastructure projects, coupled with the low base effect, with expected double-digit growth in domestic sales in the second half of the year. In the medium to long term, as natural updates and equipment renewal policies are gradually implemented at the local level, combined with increasing clarity on environmental protection and electrification trends, the industry is expected to initiate a new upward cycle.

CME estimates that in August 2024, the sales volume of excavators in China will be around 14,300 units, an increase of about 9% year-on-year. The domestic market is estimated to have sales of 6,600 units, an increase of nearly 17% year-on-year, while the export market is estimated to have sales of 7,700 units, an increase of nearly 4%. From January to August, the overall sales volume of excavators in China decreased by about 2.5% year-on-year, with a over 7% year-on-year increase in the domestic market and an 11% year-on-year decrease in export market sales.

The growth of domestic excavator sales is expected to continue, and the upward trend in the domestic cycle is clear. CME estimates that the domestic sales of excavators in China in August are 6,600 units, an increase of nearly 17% year-on-year, maintaining positive growth for 6 consecutive months, with a clear upward trend in the domestic cycle. Looking ahead, mini excavators are expected to continue high growth driven by the construction of high-standard farmland and water conservancy projects. Mid-sized excavators are gradually expanding their application scenarios and may play a supportive role in demand, while large excavators are expected to recover in demand driven by mining and infrastructure projects, coupled with the low base effect, with expected double-digit growth in domestic sales in the second half of the year. In the medium to long term, as natural updates and equipment renewal policies are gradually implemented at the local level, combined with increasing clarity on environmental protection and electrification trends, the industry is expected to initiate a new upward cycle.

Export expectations for excavators in August are positive, with exports expected to gradually recover in the second half of the year. CME estimates that in August, the export sales of excavators in China will be 7,700 units, an increase of nearly 4%. After 14 consecutive months of year-on-year decline since June 2023, this is the first positive growth, mainly benefiting from: 1) the low base effect; 2) overseas destocking approaching completion, leading to a demand recovery for main engine factories; 3) sustained improvement in overseas demand. According to data from the General Administration of Customs, in July, the export volume of crawler excavators from China increased significantly, with growth rates for North America/Middle East/European Union/ASEAN/Russian-speaking countries/India at +102% / +20% / +31% / +23% / 108% / +3% respectively, indicating a comprehensive improvement in demand from major overseas regions. Industry exports are expected to continue to improve in the second half of 2024, with leading companies likely to show faster export growth in the second half of the year. In the long term, with the deepening of Chinese engineering machinery companies' overseas layout, they are expected to gradually break through the high-end markets of Europe and America. For example, the recent appointment of a former Caterpillar senior executive, David Nicoll, as the new CEO of Sany America, is expected to help Sany Heavy Industry make breakthroughs in the U.S. market.

China's first batch of national standards for electric construction machinery has been released, marking a clear trend towards electrification in the industry. On August 5th, the Electric Construction Machinery Standard Stable Chain Experience Exchange Meeting was held in Xuzhou, where the State Administration for Market Regulation (National Standards Commission) released the first 7 national standards for electric construction machinery, which will be implemented immediately, expected to help regulate electric operation in the industry. Major domestic companies are actively expanding into the electric industry. For example, Sany Heavy Industry recently invested 10 million yuan to establish a Shaanxi equipment company, expanding into new energy and charging station businesses. With industry standards gradually being implemented and domestic manufacturers intensifying their efforts, the electrification of engineering machinery is expected to steadily advance, providing a growth pole for leading companies.

The domestic cycle of the engineering machinery industry is on the rise, with continuous global expansion, significant improvement in selected operations, leading export growth, outstanding long-term competitiveness, and valuation advantages in the forefront. Domestically, the recovery trend in domestic demand is clear, with expected continued growth in domestic sales. In the medium to long term, supported by factors such as natural updates in equipment, policy stimulus, environmental protection and electrification, the industry is expected to initiate a new upward cycle. Internationally, short-term demand is marginally positive, with crawler excavators in July achieving positive growth in major export regions. Leading export growth in the second half of the year is expected to surpass that of the first half. In the long term, the trend of globalization remains unchanged. The engineering machinery sector is expected to continue to perform well, with a focus on companies demonstrating significant operational improvement, leading export growth, outstanding long-term competitiveness, and valuation advantages. Key recommendations include XCMG Construction Machinery (000425.SZ), Sany Heavy Industry (600031.SH), Zoomlion (01157,000157.SZ), Guangxi Liugong Machinery (000528.SZ), Jiangsu Hengli Hydraulic (601100.SH), and the bulldozer industry leader.

Risk warning

1. The implementation of policies is not as expected;

2. The expansion of overseas markets is not as expected.