Sales share price drop, construction machinery "lighting" security room

“Insurance housing will be concentrated in the second half of the year, and water conservancy investment and high-speed rail construction will continue to advance, which is the guarantee for the growth of construction machinery performance.” GF Securities (000776) researcher Qiu Shiliang told reporters, “But the current situation will spawn construction machinery. Changes in the industry market, the future construction machinery industry will usher in a new pattern of development in the sales model, domestic and overseas market layout."

On June 23, the Shanghai Composite Index reported 2689.25 points, up 38.93 points, or 1.47%. Among them, the concept of security housing stocks was active across the board, while the construction machinery sector, which continued to decline for nearly two months, also rallied to a low level in the low-valued shouts. The construction machinery sector rose by 2.29% on that day.

In April and May of the previous year, due to overheating of infrastructure investment, real estate control, credit tightening, and Other policy negative factors, the total sales volume of the construction machinery industry fell, resulting in a 20% decline in the entire sector, and some stocks fell more than 25%.

The decline in sales volume and stock price triggered a cyclical debate on construction machinery. Some analysts believe that the industry’s cyclical inflection point is coming. However, Qiu Shiliang believes that the construction machinery industry can resist cyclical fluctuations due to multiple product chains and global resource allocation. Can be verified is that the global construction machinery leader Caterpillar has maintained rapid growth for 10 consecutive years, the year-on-year sales growth of 52% in May this year.

In spite of the overall decline in sales volume of domestic construction machinery, signs of sub-product differentiation have been seen: sales of bulldozers, road machinery, etc. have declined, while sales of concrete machinery and crane machinery have steadily increased.

For example, Zoomlion (000157) (000157.SZ), Sany Heavy Industry (600031) (600031.SH) and other industry leading concrete machinery and cranes, sales growth in the last two months, the company's stock price The decline is more like being "killed" by pessimistic expectations.

Inflection point first appeared?

The first quarter was the traditional off-season sales of construction machinery, but in the first quarter of this year, the market experienced an “anti-seasonal” sales climax.

According to the financial report, Zoomlion’s net profit for the first quarter was RMB 2.024 billion, up 175% year-on-year; the corresponding figures for Sany Heavy Industry and Xugong Machinery (000425, shares) (000425.SZ) were RMB 2.663 billion and 141% respectively. 10.18 billion yuan, 101%, and Liugong also recorded net profit of 610 million yuan in the first quarter, an increase of 56.75%.

However, the situation began to reverse in the second quarter. In April, the sales of all types of construction machinery suddenly fell, with excavators, loaders, and bulldozers falling by 38%, 28%, and 32% respectively. The year-on-year growth rate of bulldozers and loaders dropped from 66% and 37.17% in March to 1.19% and -2.5% in April. In May, sales continued to basically continue in April. Excluding a slight increase in loader sales of 2% year-on-year, the sales of bulldozers and excavators fell by 34% and 10% respectively year-on-year.

The appearance of anomalous signs of “not short off-season and no busy season” has filled the market with the sound of the inflection point of construction machinery. Some analysts said that construction machinery companies overdrawn in the first quarter of this year's second-quarter results.

This year is the final year of the implementation of the 4 trillion infrastructure investment policy introduced in 2008. With the completion of the Wuhan-Guangzhou high-speed rail project, Beijing-Shanghai high-speed rail and other major projects, or in the later stage, the demand for repurchase of equipment by construction machinery merchants in the second half of the year is not strong.

In addition, the regulation of real estate has gradually entered the “deepwater region”, which has formed a superposition effect due to monetary tightening and slowdown in infrastructure investment. The risk of a hard landing of the economy has increased, making the market pessimistic about the outlook of construction machinery.

“It is still too early to say that there is an inflection point in the industry.” Zhan Chunxin, chairman of Zoomlion, said that high-speed rail investment has not been substantially reduced, and water conservancy construction is still in the ascendant. In addition, the construction of affordable housing will start intensively in the second half of the year and the sales of construction machinery will be three this year. The fourth quarter looked up.

According to the analysis of Guodu Securities, this year, 10 million sets of affordable housing will be built nationwide, calculated at 50-60 square meters/set, about 560 million square meters, which is equivalent to 50% of the total area sold in 2010. Therefore, affordable housing can make up for the decline in the newly-started area of ​​commercial housing. It is expected that construction machinery will maintain a growth rate of over 20% in 2011.

The incremental space also comes from the purchase of construction machinery and equipment derived from water conservancy investment. Shenyin Wanguo Securities believes that the Central Document No. 1 in 2011 focuses on water conservancy construction. It is expected that the annual average water conservancy investment will double in 2010 over 2010, and the “Twelfth Five-Year Plan” water conservancy investment will reach RMB 2 trillion, which is 186% higher than the “Eleventh Five-Year Plan”. %, this will have a strong boost to the construction machinery industry.

Under the strong push of “wrong-killing” leading affordable housing construction, construction machinery leading companies, such as Zoomlion, Sany Heavy Industry, and Xugong Machinery, will focus on concrete machinery, lifting machinery and earth and rock machinery. Benefited from.

However, in this wave of decline, these leading companies have been "killed" by the market. From mid-April to the end of May this year, the stock prices of Zoomlion, Sany Heavy Industry, and Xugong Machinery respectively fell by 20.5%, 20.17%, and 27.26% respectively. At present, the dynamic PE of the three companies is respectively 11 times, 12 times, and 12 times, which is close to the historical low point.

However, the difference with the entire industry's second-quarter results is that the performance of leading companies in construction machinery has continued to increase.

Zhan Chunxin told reporters that Zoomlion’s second-quarter results will continue to grow year-on-year and quarter-on-quarter, especially for construction (tower) cranes, which is expected to increase by 80% year-on-year in the second quarter.

Sany Heavy Industry President Xiang Wenbo also revealed that the company's April and May statistics show that the company's second-quarter earnings growth will exceed expectations, especially for excavators, which jumped to second place in April.

The April 2011 statistics are another example of the "wrongful killing" of the leading shares in the construction machinery industry. In April 2011, the country produced 38,600 sets of concrete machinery, an increase of 33.6% year-on-year; and cranes produced 751,300 sets, an increase of 51.26% year-on-year.

In overseas markets, leading companies in the industry also performed well. In the past May, Sany Heavy Industry’s single-month sales of the Brazilian Industrial Park exceeded US$10 million for the first time, and the company’s German Industrial Park opened its park on June 20, and has now completed more than 40 million euros of investment.

Zoomlion also stated that it will focus on overseas sales channels this year and build R&D centers overseas. At the same time, the company's two overseas manufacturing bases are also under construction; Xugong Machinery won the purchase and sales contract of Venezuela Petroleum Corporation with 4.842 billion yuan. .

According to the GF Securities Research Report, companies such as Zoomlion and Sany Heavy Industry, which are mainly engaged in concrete machinery, lifting machinery, etc., are unlikely to be affected by the decline in industry performance in the second quarter.

“The leading enterprises of construction machinery such as Zoomlion, Sany Heavy Industry and Xugong Machinery have low valuations and are expected to take the lead in repairing their value.” CITIC Securities (600030) is an analysis.

The funds that saw the situation have also come back and started to re-establish the industry leader. Since the beginning of June, leading companies such as Zoomlion, Sany Heavy Industry, Xugong Machinery, and XGMA (600815) (600815. SH) have rebounded.

As the industry seeks to differentiate its engineering machinery segment, the process of reshuffling the market is accelerating and the industry's changes are quietly brewing.

“The 4 trillion investment will gradually come to an end, and the factors of policy stimulus will be gradually reduced.” He Qinghua, chairman of Sanhe Intelligent (002097.SZ), analyzes that the construction machinery industry will enter the period of rapid growth from the previous years. During the period of steady growth, the profit margin of the industry will mainly focus on sub-sectors such as concrete machinery, lifting machinery and mining machinery.

Differentiation with the industry is accompanied by a change in the sales model of the construction machinery market. Previously, the construction machinery industry adopted a large number of credit sales and direct sales models. With the advent of industry competition and the advent of an average profit era, the proportion of cash sales and agency sales will increase significantly in the future.

According to Wenbo, the sales revenue of Sany Heavy Industry amounted to 43.9 billion yuan in the previous year, with one-time payments and installment payments accounting for 40%, mortgage sales 45%, and financial leases 15%. In the future, the company will gradually reduce the proportion of credit sales such as instalments and increase the proportion of cash sales.

Zoomlion's overseas market has changed its model of large direct sales in China. It has recruited exclusive agents in dozens of countries including the United States, Australia, Turkey, and India, and its sales ratio has increased substantially.

Changes in the industry structure are also reflected in the reorientation of markets at home and abroad. To date, larger-scale construction machinery companies have regarded the overseas market as a top priority. Prior to this, their eyes were more devoted to the domestic market.

“Now the investment and production capacity of the construction machinery industry is much higher than the actual demand of the domestic market. What the excess production capacity depends on? It can only be the overseas market.” Zhan Chunxin believes that one-third of China’s construction machinery companies’ markets are domestic, 2/ 3 markets abroad.

In fact, the performance of the world's engineering machinery giants relies heavily on overseas markets. According to the Caterpillar Annual Report, the company’s overseas sales revenue in 2010 was US$13.419 billion, accounting for 31.5%, and the Chinese market accounted for a relatively small portion of its total revenue.

In contrast, the overseas market share of Chinese construction machinery leading enterprises is still very small. The financial report shows that in 2010, Zoomlion, Sany Heavy Industry, and Xugong Machinery achieved overseas sales of 784 million yuan, 858 million yuan, and 1.62 billion yuan, respectively, and overseas revenue accounted for 4.87%, 5.07%, and 12.27%, respectively.

In view of this, in addition to overseas plant construction or mergers and acquisitions, construction machinery leaders also pooled Nuggets of H shares to help expand overseas. After Zoomlion successfully landed H shares in December 2010 and raised funds of HK$15 billion, Sany Heavy Industry and Xugong Machinery also accelerated the pace of H-share financing.