The off-season of the construction machinery industry is not thin, and the boom continues. In July, sales of excavators, bulldozers, loaders, and truck cranes increased by 54%, 55%, 50%, and 29% year-on-year, respectively, accumulatively by 94%, 82%, 63%, and 47%, respectively. The ultra-predicted growth of the industry was mainly due to the lagged effect of “four trillion” investment, the high growth of real estate investment and the gradual recovery of exports.

Exceed expectations are due to the high growth of large-scale infrastructure investment and real estate investment. According to the National Bureau of Statistics, from January to July, China's investment in fixed assets was as high as 1,986.6 billion yuan, a year-on-year increase of 24.9%. Among them, the total planned investment for newly started projects was 1,8051.3 billion yuan, a year-on-year increase of 26.8%. At the same time, real estate investment also maintained a high growth trend. From January to July, China’s real estate investment reached 2386.5 billion yuan, an increase of 37.2% year-on-year. The steady growth of infrastructure and real estate investment has become the main reason for the high boom of construction machinery.

There is no shortage of driving forces in the industry

Recently, the government introduced regulatory credits and real estate control policies that raise concerns about the development prospects of the construction machinery industry. However, we believe that the major premise of "the urbanization ratio needs to be gradually increased" and "the overseas market space is still very wide" Next, the prospects for the development of China's construction machinery are still considerable, and the recent introduction of “new 36”, regional planning, and affordable housing policies have provided new driving forces for the development of the industry. The specific reasons are as follows:

1, "New 36" guide private capital investment

On May 13, 2010, the “Several Opinions of the State Council on Encouraging and Guiding the Healthy Development of Private Investment” was published. There are 36 “Opinions”. The “Opinions” encourages and guides private capital into six major areas: basic industries and infrastructure, and municipal administration. Utilities and policy-oriented housing construction, social undertakings, financial services, trade and circulation, and defense technology industries. Seven of these are directly related to the downstream demand areas of construction machinery. We believe that the introduction of the "Opinions" will help reduce the dependence of fixed asset investment on local government financing platforms. Private capital is expected to take over the government's "4 trillion yuan", which is a substantial benefit for construction machinery.

2. Regional planning and construction to cultivate more growth poles

Since 2009, on the one hand, in order to cultivate more regional economic growth poles, the State has ensured stable growth of the national economy. On the one hand, in order to promote coordinated regional development and to change the negative impact of regional development imbalances, the State Council has adopted a Unprecedented high frequency introduced 13 regional plans. For construction machinery, the construction of these regional plans will create more growth poles for domestic demand.

3, affordable housing is expected to become a stabilizer for real estate investment

We believe that the government’s policy on real estate is mainly to control housing prices, not blindly suppressing it. At the same time, the new construction of affordable housing is very large. It is expected that the real estate investment in the future will still maintain a stable growth pattern (about 20% in 2010), and the pulling of construction machinery will not decline.

Safe housing is expected to become a stabilizer for real estate investment in 2010. The construction of affordable housing has certain government-dominated features, and its stable growth can effectively hedge the cyclical fluctuations in real estate investment. At present, the proportion of investment in affordable housing accounts for less than 5% of real estate development investment. With the enhanced support of policies, there is great potential for future development. According to the planning of the Ministry of Housing and Urban-Rural Development, 6 million sets of affordable housing will be started in 2010. If estimated by 80 square meters per building area, the construction area will increase by 480 million square meters in 2010. The National Bureau of Statistics announced that the construction area of ​​national real estate development companies in 2009 was 3.2 billion square meters, showing that the proportion of affordable housing in the new plan is still relatively large. According to data released by provinces and cities, Beijing, Shanghai, Chongqing, and Guangdong accounted for more than 40% of new housing investment in affordable housing in 2010. According to the calculation of the proportion of investment in these provinces and cities, the proportion of affordable housing investment in the country will reach 13% in three different situations (5%, 10%, and 30% respectively for other areas). , 17% and 32%. According to the planning of the Ministry of Housing and Urban-Rural Development, the investment in affordable housing in 2010 will increase by 33% year-on-year. Under the neutral assumption, the price of commercial housing in 2010 increased by 5% to 10% year-on-year, and the sales area decreased by about 30% year-on-year, corresponding to an increase of 18% in commercial housing development investment. The growth in overall real estate investment was driven by the steady growth of affordable housing investment. It will reach 20.55%.

4. Post-disaster reconstruction will also stimulate new industry demand

This year, our country suffered from rare floods, and the houses and infrastructure in the disaster areas were seriously damaged. It is expected that in the future, the country will rebuild its homes for the people in the disaster-stricken areas. At the same time, it will also strengthen the management of small and medium-sized rivers, the reinforcement of small reservoirs, and the comprehensive treatment of the ecological environment in the affected areas. We believe that post-disaster reconstruction will drive new demand for construction machinery.

The boom will continue

Taking into account the seasonal factors and the impact of real estate regulation, we maintain the industry’s judgment of high and low prices before the industry’s growth rate in 2010. As the industry’s current economic climate is far better than expected, despite the recent introduction of regulatory credits and real estate control policies, the government has raised concerns about the development prospects of the construction machinery industry, but taking into account “new 36”, regional planning, affordable housing and Export recovery will provide a new driving force for the development of the industry. We are still optimistic about the development prospects of the industry in the second half of the year and in the future.

Although the recent increase in the construction machinery sector is already 40%, the average PE of the industry's leading companies in 2010 and 2011 are still only 12 times and 10 times respectively. The valuation is still at the bottom of historical valuation. Taking into account the new impetus for the development of the industry and the good prospects for development in the coming years, we continue to maintain the investment rating of “Strong Than Market” in the construction machinery industry, and still maintain Sany Heavy Industry [26.00 -1.55%] and Zoomlion [10.05 1.21%] The "Buy" rating of XCMG [34.68 -0.86%], Shantui [13.70 0.07%] and Liugong [23.68 -1.66%] maintained XGMA shares [11.15 -1.15%] and Anhui Heli [15.40 - 0.96%] and Shanhe Intelligence [16.45 0.12%]'s "Overweight" rating.