Construction machinery stocks welcome buying points

Release date 2024-11-20 15:28:24 Reading 4

　　 used excavator for saleConstruction machinery stocks welcome buying points, and the implementation of debt policy drives the industry's recovery

　　The fundamentals of construction machinery companies are improving, and most companies with a market value of over 10 billion yuan and an increase in gross profit margin have received increased holdings from funds.

　　Since the beginning of this year, the detailed rules for equipment renewal subsidies have been implemented in various regions, promoting the replacement of old and existing equipment. The repair of downstream infrastructure investments such as water conservancy has also improved the prosperity of the construction machinery industry. Recently, the Standing Committee of the National People's Congress deliberated and passed the resolution on the replacement of existing implicit debt by the local government debt limit. This major policy will benefit the payment collection of construction machinery projects and improve the project capital turnover. With the continuous improvement of macro fundamentals, the construction machinery industry will usher in a good buying time.

　　Single quarter performance has increased significantly, and most of the companies have performed well in the market

　　In the third quarter of this year, used excavator for salethe prosperity of the construction machinery industry first suppressed and then rose. According to data from the China Construction Machinery Industry Association, the monthly operating rate of major construction machinery products in July was 64.9%, a decrease of 2.27% compared to the previous month; The monthly operating rate of the main products of construction machinery in August was 61.9%, a decrease of 1.64% compared to the previous month; The monthly operating rate of the main products of construction machinery in September was 64.2%, an increase of 3.74% compared to the previous month. After entering the fourth quarter, the monthly operating rate of the main products of construction machinery continued to increase month on month, with October data at 65.1%, a month on month increase of 1.31%.

　　Consistent with poor data performance in the first two months of the third quarter of this year, most construction machinery companies used excavator for sale in the A-share market have performed averagely in terms of fundamentals. According to data from Dongfang Fortune Choice, among 33 A-share construction machinery companies (classified by Shenwan), 29 companies experienced a month on month decline in revenue, with only Tuoshan Heavy Industry, Shaoyang Hydraulic, Zhongji United, and Helen Zhe achieving month on month revenue growth; In terms of quarter on quarter net profit attributable to shareholders, except for Wantong Hydraulic, Huadong Heavy Machinery, Zhongji United, Shantui Co., Ltd., Zhejiang Dingli, and Helen Zhe, which achieved quarter on quarter growth in net profit attributable to shareholders, the remaining 27 companies all experienced a month on month decline.

　　 used excavator for saleAmong the 33 construction machinery companies, only Zhongji United and Helen Zhe were able to achieve both quarter on quarter growth in revenue and net profit attributable to shareholders. Among them, the former saw a quarter on quarter growth of 10.35% and 19.27% in revenue and net profit attributable to shareholders, while the latter saw a month on quarter growth of 60.82% and 186.32%, respectively. Or it is precisely because of the excellent performance of the two quarterly financial indicators, from September 18th to November 11th, the China International Joint Range rose by 30.53%, and the Helen Zhe Range rose by 124.66%.

　　Compared to the overall poor performance of the quarter on quarter data, the year-on-year data of 33 construction machinery companies is significantly better. According to statistical data, in the third quarter of this year, 20 out of 33 construction machinery companies achieved year-on-year revenue growth in a single quarter. Among them, the highest year-on-year growth was achieved by Huadong Heavy Machinery and Weiwan Sealing, with revenue growth of 182.46% and 137.83% respectively in the third quarter; 22 companies achieved a year-on-year increase in net profit for a single quarter, with the highest growth rates being Weiwan Sealing, Xiagong Co., Ltd., and Zhongji United, which increased by 272.97%, 196.5%, and 166.07% respectively.

　　 used excavator for saleGood quarterly financial data has brought attention to market funds. Taking East China Heavy Machinery as an example, not only did its revenue and net profit attributable to shareholders increase by 80.39% and 141.63% year-on-year in the first three quarters, but its single quarter revenue and net profit also increased by 182.46% and 102.78% respectively year-on-year in the third quarter. During the period from September 18 to November 11, the range increase was as high as 138.02%, making it the best performing company in the construction machinery sector at present. Similarly, Tongli Corporation also achieved year-on-year growth rates of 48.01% and 52.88% in revenue and net profit for the third quarter, with a range increase of 107.75% supported by performance

　　It should be pointed out that the above outstanding companies have a total market value of less than 10 billion yuan, while companies with a total market value of over 10 billion yuan did not demonstrate the strength that industry leaders should have during this round of market growth, such as Hengli Hydraulic, Hangcha Group, Anhui Heli, etc. Not only did their revenue and net profit attributable to shareholders perform average in the first three quarters, but their performance in the third quarter was also not outstanding (see Table 2). In this round of market growth, the market performance was significantly weaker than the industry average (the construction machinery index rebounded by 26.52% from September 18 to November 11).

　　Overseas business focuses on improving gross profit margin performance

　　In fact, among the leading construction machinery companies with a market value of over 10 billion yuan, more than half of them achieved an improvement in gross profit margin in the first three quarters. Statistics show that among the 11 construction machinery companies with a market value of billions, 6 companies have seen an increase in gross profit margin compared to the end of last year, accounting for 54.55%. Among them, the company with the most improvement is Liugong, whose gross profit margin has increased from 20.82% at the end of last year to 23.48% at the end of the third quarter of this year; The company with the largest decrease in gross profit margin is Zhejiang Dingli, which dropped from 38.49% at the end of last year to 36.15% at the end of the third quarter of this year, a decrease of 2.34 percentage points.

　　Of course, 12 companies with a market value of less than 10 billion have also seen an increase in gross profit margin, accounting for 54.55%. Among them, the companies with the largest increase in gross profit margin are Xiamen Engineering Group Co., Ltd. and Wantong Hydraulic. Compared with the end of last year, the data at the end of the third quarter of this year increased by 9.5 percentage points and 5.23 percentage points, respectively; The construction machinery and Tianyuan Intelligence experienced the largest decline, with a decrease of 10.96 percentage points and 3.16 percentage points respectively.

　　For a long time, used excavator for salethe gross profit margin of most construction machinery companies' overseas business has been significantly higher than that of their domestic business. For example, industry leader Sany Heavy Industry had a gross profit margin of 31.57% for its overseas business and 23.03% for its domestic business in the middle of this year; The gross profit margin of Liugong's overseas business in the middle of this year is 29.09%, and the gross profit margin of its domestic business is 18.15%; Shantui Group's overseas business gross profit margin for the middle of this year was 22.06%, and the domestic business gross profit margin was 10.31%. In such a gross profit margin structure, in order for a construction machinery company to achieve an increase in gross profit margin, on the one hand, it is necessary to improve efficiency in cost management, and on the other hand, it is also related to the increase in the proportion of overseas revenue. For example, Sany Heavy Industry, whose overseas revenue accounted for 59.08% of its operating revenue at the end of last year, increased to 60.77% in the middle of this year (the construction machinery company did not disclose overseas revenue data in its third quarter report), and its gross profit margin also increased from 27.71% at the end of last year to 28.24%, with a third quarter report of 28.27%; Liugong's overseas business accounted for 41.65% at the end of last year and 48.02% in the middle of this year. With the increase in the proportion of overseas business, the gross profit margin has also risen from 20.82% at the end of last year to 23.4% in the middle of this year. The latest third quarter report data is 23.48%.

　　 used excavator for saleFor companies whose gross profit margin has increased in the third quarter report, institutions represented by funds will mainly focus on companies with a market value of over 10 billion yuan, and hold less or no attention to companies with a market value below 10 billion yuan. Among the six billion dollar companies with increased gross profit margins, the fund increased its holdings in five of them, with Liugong showing the largest increase in holdings. The fund's holdings increased by 12.53 percentage points

　　In addition, it is worth mentioning that among the billion dollar market value companies that achieved an increase in gross profit margin in the third quarter, LiuGong and Zoomlion Heavy Industry Science and Technology also received institutional research in the fourth quarter, with research conducted once and three times respectively. In the survey, Liu Gong explained the reasons for the increase in the domestic excavator market share of the companies that the institutions are concerned about. He said, "The increase in the company's excavator market share comes from comprehensively outperforming the industry in small, medium, and large excavators, and the market share has achieved significant growth, all of which have contributed to the overall increase in market share

　　Similarly, Zoomlion also explained the overseas business concerned by the organization, saying that "in the first three quarters of 2024, the company's overseas revenue accounted for 51.31%, with a year-on-year growth of 35.42%. From a regional perspective, the countries along the" the Belt and Road ", namely Southeast Asia, the Middle East and Central Asia, are closer to China and are the first regions to be explored by the company. In the first three quarters, the company's overall average growth in these three regions still maintained steady growth, which is better than the industry average; South America, Africa, and South Asia are also large developing markets with overall rapid growth in the first three quarters, becoming new drivers of overseas business growth; The European and North American markets experienced rapid growth in the first three quarters, and the company has accelerated its customer breakthroughs in these markets since the beginning of this year

　　 used excavator for saleDebt restructuring measures bring opportunities for performance correction

　　According to statistics, among the 33 A-share construction machinery companies, 10 have asset liability ratios exceeding 50%. Among them, the latest debt ratios of Shanhe Intelligent and Construction Machinery have reached 77.87% and 73.98%, respectively. If we compare the debt ratio data of the third quarter of this year and the end of last year, there are 15 companies whose debt ratios have increased compared to the end of last year. The companies with the largest increase are Weiwan Sealing and Huadong Heavy Machinery, which have increased by 17.7 percentage points and 5.43 percentage points respectively.

　　The increase in the asset liability ratio of construction machinery companies is closely related to the occupation of a large amount of funds by customers. According to statistical data, at the end of the third quarter of this year, the accounts receivable to revenue ratio of 33 construction machinery companies increased compared to the end of last year, with the largest proportion being construction machinery, which increased by 90.6 percentage points.

　　In terms of companies that have significantly increased their accounts receivable ratio, most of them are companies with a market value of less than 10 billion yuan. However, for companies with a market value of over 10 billion yuan, except for Zoomlion and XCMG Machinery, whose accounts receivable ratio increased by 24.9 percentage points and 21.3 percentage points respectively compared to the end of last year, the remaining companies have less than 20 percentage used excavator for sale points, and some companies have less than 10 percentage points. This data indicates that leading companies have strong cash management and risk resistance capabilities.

　　Recently, the 12th meeting of the Standing Committee of the 14th National People's Congress reviewed and approved the most powerful debt reduction measures in recent years, and the scale of debt reduction exceeded market expectations by 12 trillion yuan. According to the arrangement, all newly added debt limits will be designated as special debt limits, approved once and implemented over three years, with an annual amount of 2 trillion yuan from 2024 to 2026. Starting from 2024, China will allocate 800 billion yuan annually from newly added local government special bonds for five consecutive years, specifically for debt conversion, with a cumulative replaceable implicit debt of 4 trillion yuan. Add in the 6 trillion yuan debt limit approved by the Standing Committee of the National People's Congress this time, and directly increase the local debt resources by 10 trillion yuan. At the same time, it is also clear that the implicit debt of 2 trillion yuan for shantytown renovation due in 2029 and beyond will still be repaid according to the original contract.

　　With the implementation of the 12 trillion yuan debt conversion plan, the phenomenon of high debt and high accounts receivable ratio in construction machinery enterprises will be improved to some extent, especially for enterprises with a market value of less than 10 billion yuan. used excavator for saleDuring the debt conversion cycle, with the improvement of accounts receivable ratio, the company's capital utilization efficiency will be greatly enhanced, which is expected to bring about performance correction and a decrease in asset liability ratio.

　　 used excavator for saleRegarding the impact of the debt policy, Pacific Securities pointed out in a research report that it is expected that with the gradual implementation of the debt policy, it will be beneficial for the repayment of construction machinery projects, improve project capital turnover, drive the growth of physical workload, and increase the operating rate, thereby driving the demand for construction machinery equipment. At the same time, combined with the large-scale equipment trade in policy and the continued favorable real estate policy, it is optimistic that the demand for construction machinery equipment will continue to improve.

　　Zheshang Securities also pointed out that with the significant reduction of debt pressure, it is expected to promote more resources from local governments to flow into key areas such as people's livelihood, consumption, and investment, used excavator for saleand the relevant sectors along the cycle are expected to benefit first. Considering the expected improvement in domestic real estate and infrastructure policies, earthmoving machinery (excavators, loaders, bulldozers, etc.) has taken the lead in recovery, and demand in some overseas regions has moderately recovered. The export market is improving, and some leading manufacturers have a lower performance base in the second half of 2023. It is expected that the performance of construction machinery leaders will accelerate in the second half of 2024

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