Construction machinery ushered in a new round of boom cycle

Construction machinery ushered in a new round of boom cycle

As a cyclical industry, construction machinery has not shown its advantages in the previous surge. In the recent market retreat, construction machinery has slowly risen and emerged from an independent market stronger than the market. Since March, the construction machinery industry has rebounded by 15% overall, which is obviously stronger than the 5% increase in the Shanghai Composite Index during the same period. The rebound logic of this wave of construction machinery is mainly due to the double expectations of the industry's performance and valuation boom.

At the beginning of March, crane tower cranes, excavators and cranes were selling well at the construction site of Fengtai Lize Business District in Beijing. This is the epitome of China's early spring.

Since 2016, China's construction machinery industry has embarked on a path of recovery. According to data from 2018, the sales volume of excavators has exceeded 200,000 units-a record high. In the early spring of 2019, the pace of industrial recovery showed signs of acceleration. According to the latest statistics of China Construction Machinery Industry Association, the cumulative sales volume of excavators in January and February 2019 was 30,500 units, a year-on-year increase of 40%. In February, monthly sales were 18,700 units, a significant increase of 69% year-on-year.

The industry's prosperity comes from the country's huge investment in infrastructure. According to the "Government Work Report" of 2019, the railway invested 800 billion yuan, and the highway water transport investment was 1.8 trillion yuan, carrying out a number of major water conservancy projects. In addition, as local government bond financing accelerates, it will also help the growth rate of infrastructure investment continue to increase and drive demand for machinery and equipment. According to Huatai Securities' estimates, under the optimistic expectation, the growth rate of infrastructure and real estate investment will be 10% and 5% respectively in 2019, and the sales volume of the excavator industry may achieve more than 10% growth.

Among the companies that released their 2018 performance forecasts, many companies in the construction machinery industry performed well. However, in the case of increasing concentrator concentration, the most significant improvement in profit is mainly reflected in some leading stocks such as Sany Heavy Industry and Hengli Hydraulic. In addition, XGMA, Dagang Road, Tianyetonglian and other companies' performance forecasts mostly fell or lost, and the industry's performance differences were more obvious.

As a giant in the American machinery industry that has existed for more than 90 years, Caterpillar experienced the Great Depression, the Second World War, and the economic crisis of the 1980s. Based on its 2018 annual results, Caterpillar achieved a net profit of $6.147 billion in 2018, a net increase of several times compared to $754 million in the same period in 2017.