epidemic situation does not change the leading advantage, review and outlook of construction machinery industry
Contrast & other; Severe acute respiratory syndrome (SARS) & throughout; We believe that there are three major differences in the impact of this outbreak on the construction machinery industry: 1) differences in the economic cycle. It is now in the post-urbanization era, and counter-cyclical investment may be more inclined to stabilize demand; 2) differences in the development stage. The construction machinery industry has entered a period of stable development, and the industry has certain anti-risk capability; 3) competition pattern is different, the strength of domestic brands has been significantly enhanced, and the market share and degree of internationalization have been greatly improved. The advantages of domestic leading companies will not be changed due to the epidemic, benefiting from the improvement of industry concentration and profitability repair, performance still has room for growth. Recommend sany heavy industry, liugong, hengli hydraulic.
economic cycle differences: in the era of rapid urbanization vs. post-urbanization, counter-cyclical investment focuses on stable demand
The previous round & other; Severe acute respiratory syndrome (SARS) & throughout; Meanwhile, China is in the process of rapid urbanization. In 2003, supported by the country's proactive fiscal policy and prudent monetary policy, infrastructure and real estate investment maintained steady growth. Severe acute respiratory syndrome (SARS) & throughout; The outbreak was short-lived and limited. Behind the current outbreak, China's urbanization rate has exceeded 60%. With reference to the historical data of the United States and Japan, the urbanization rate may significantly slow down in the future. In this context, we believe that the subsequent counter-cyclical investment will be more inclined to stabilize demand. In 2020, real estate demand may be delayed, dragging down new construction; Infrastructure investment growth is expected to increase, the outbreak disturbance is limited.
difference in development stage: in the period of rapid growth vs stable development, the industry has stronger resistance to risks
In 2003, China's construction machinery industry was in a period of rapid growth, with the sales of major varieties maintaining a rapid growth, with the growth of Excavator/loader/wheel crane/pump Truck rising 72%/61%/51%/121%, respectively. The revenue and net profit of domestic leading brands maintained a relatively high year-on-year growth. From 2017 to 2019, the domestic construction machinery industry is expected to enter a period of stable development after three consecutive years of high growth. Among them, Excavator market may fluctuate slightly, lifting machinery and Concrete Machinery market is still expected to maintain growth. construction machinery sales season or move back, the industry's existing capacity and inventory is relatively abundant, the pace of subsequent resumption of work will depend on the outbreak relief and downstream construction.
differences in competition pattern: the strength of domestic brands has increased significantly, and the market share and degree of internationalization have increased significantly
The competitiveness of domestic construction machinery products has been greatly improved. Compared with imported or joint venture brands, domestic construction machinery products have higher cost performance and more intelligent advantages. Compared with 2003, the product series is also more complete. From the perspective of operating income, the gap between domestic leading brands and global leading brands has narrowed considerably. In terms of product share, domestic brands have greatly surpassed international brands in the domestic market. From the perspective of internationalization, the overseas distribution of domestic brands has been improved, the scale of overseas income has been greatly increased, and the export market share has been continuously increased.
the short-term impact of the epidemic, not to change the pace of the domestic leader's global expansion, optimistic about the long-term growth space
As of the closing price on February 11, 2020, the average PE value of domestic construction machinery manufacturers in 2020 is 9.1 times, which is at a historically low level and lower than the valuation of caterpillar/komatsu PE in the same period (13.3 times). The construction machinery industry is expected to achieve steady development in 2020, which will help maintain stable valuation. The advantages of leading companies will not be changed due to the outbreak. Thanks to the improvement of industry concentration and the repair of profitability, there is still room for growth. The global leader, optimistic about the long-term growth space, recommend sany heavy industry, liugong, hengli hydraulic.
Risk warning: the progress of outbreak control is not as expected; Infrastructure and property investment fell short of expectations; Large fluctuations in raw material prices; Industry competition environment deteriorates, price war breaks out widely.
