Zhitong Finance APP was informed that Orient Securities issued a research report saying that the sales volume of excavators in May was slightly better than expected, domestic sales were in line with expectations but the decline was still relatively large, and exports increased more than expected. The year-on-year slump in domestic sales is related to the switching of national standards and the fact that real estate demand has not yet penetrated to the start-up end. It is expected that in 2023, the domestic demand of the construction machinery industry will decline slightly on the basis of 2022, while the overseas market will maintain a growth trend but the growth rate will slow down. The bank believes that the current prosperity of the construction machinery industry is still in the bottoming stage. With the restoration of the industry's prosperity, the industry concentration is expected to further increase. Suggested attention: Sany Heavy Industry (600031.SH), Zoomlion (000157.SZ), Hengli Hydraulics (601100.SH), Construction Machinery (600984.SH).

The main views of Orient Securities are as follows:

Domestic sales of excavators in May were in line with expectations but were still weak, and export sales exceeded expectations.

According to statistics from the China Construction Machinery Industry Association, in May 2023, 16,800 excavators of various types will be sold nationwide, a year-on-year/month-on-month decrease of 18.5%/10.5%, respectively, and the total sales volume is slightly better than CME's previous expectations. In terms of different markets, domestic sales in May were 6,592 units, which was in line with CME's previous expectations, and fell by 45.9%/30.7% year-on-year and month-on-month respectively, continuing the trend of year-on-year declines in April. The bank believes that there are two main reasons for the sharp decline in domestic sales of excavators in May. On the one hand, after the switch of the national standard at the end of last year, customers' acceptance of the new National IV machine still needs to be further guided; At the end, it is difficult for investment to effectively boost the demand for new construction in the short term. In terms of exports, 10,217 excavators were exported in May, exceeding CME’s previous expectation of 9,000 units, an increase of 21.0%/10.4% year-on-year/month-on-month, and export sales accounted for 60.8%. From January to May 2023, a total of 93,100 excavators were sold nationwide, a year-on-year decrease of 23.9%; of which, domestic sales were 44,900 units, a year-on-year decrease of 43.9%; exports were 48,100 units, a year-on-year increase of 13.9%, and export sales accounted for 51.7%.

The pace of recovery at the start-up end has been suspended, and downstream demand has remained stable.

Judging from the equipment start-up data, the operating hours of Komatsu China’s excavators in May were 100.6 hours, a decrease of 1.7% year-on-year, and a slight increase of 0.4% from the previous month; 3.7/-0.4pct. 23M4-5 The data of the two major start-ups remained stable month-on-month, and the absolute value was still at a low level over the years. The bank believes that the reason may be that real estate demand has not yet been transmitted to the start-up end, and the recovery pace of start-ups remains to be seen. From the perspective of downstream prosperity, downstream demand remains relatively stable, infrastructure investment continues to grow well, and real estate investment and start-ups continue to decline: From 2023M1-4, the cumulative amount of infrastructure investment completed increased by 10.8% year-on-year, and the growth rate for seven consecutive months exceeded 10%; real estate development investment completed a cumulative decline of 5.8% year-on-year, and the cumulative area of new housing construction fell by 19.2% year-on-year, both of which expanded compared with the previous month.

Policies are favorable to downstream demand, forward-looking indicators continue to improve, and the inflection point still needs to be patiently waited for.

The bank believes that with the implementation of the China Securities Regulatory Commission's adjustment and optimization measures for real estate equity financing, the recovery of infrastructure and real estate is expected to increase, and the bottom-up effect of real estate infrastructure will gradually emerge, which is expected to stimulate a rebound in downstream real estate demand. The policy support will benefit the downstream operating rate to pick up, and the domestic construction machinery market is expected to speed up the recovery. From the perspective of forward-looking indicators, in May 2023, the new RMB medium and long-term loans of non-financial enterprises will be 0.77 trillion yuan, a year-on-year increase of 38.7%; the sliding average year-on-year growth rate of new RMB medium and long-term loans of non-financial enterprises in December will be 75.3% , maintained positive growth for eight consecutive months, and the growth rate gradually accelerated. The continuous marginal improvement in capital is expected to boost downstream demand and help the industry usher in an inflection point of prosperity.

But at the same time, the bank needs to face up to the current problems in the industry. The bank believes that the switch of emission standards in the short term will disrupt the market sales in 22Q4 and 23Q1, while the stimulus and transmission time of credit growth remain to be seen; in the medium and long term, The bank believes that the relative surplus of excavator holdings is the main reason for the sluggish domestic demand. When the downstream demand rises, it may first be that the second-hand mobile phone market becomes more active. Penetrating into the sales of new machines requires greater stimulus or a more substantial demand recovery. . The bank judged that with the continuation of counter-cyclical regulation and the low base effect starting in 22Q2, the growth rate of domestic sales is expected to usher in recovery; due to the decline in the prosperity of some overseas regions and the high base of the same period last year, the sales growth rate of the excavator export market in 2023 will gradually slow down. Overall, the inflection point of the industry remains to be seen.

Risk warning: The policy of stabilizing growth is not as strong as expected, the growth rate of infrastructure and real estate investment is lower than expected, the price of raw materials is rising, and the domestic epidemic situation is repeated.