event:

According to data from the Construction Machinery Association, in December 2016, domestic excavator sales were 6910 units, a year-on-year increase of 75%, and the growth rate exceeded 70% for 4 consecutive months; the annual sales volume increased by 25% year-on-year. Among them, Sany Heavy Industry sold 1,449 units in December, +104% year-on-year, and the total year-on-year cumulative year-on-year +40.61%; Others: Liugong 328 units, month-on-month 3.14%, year-on-year +132.6%, year-on-year 3539 units, cumulative year-on-year +26.5%; XCMG 43 units, -14% month-on-month, -17.3% year-on-year, 1365 units throughout the year, cumulatively +13.2% year-on-year; XCMG 556 units, month-on-month +1.09%, 128.8% year-on-year, and a total of 5277 units throughout the year.

Investment points

Analyze the construction machinery market by brand, tonnage and sales area

According to brand analysis, the market share of domestic brands has declined slightly, with a market share of 46%; Sany is the leader with a market share of 21%; by tonnage analysis, the sales concentration of excavators is high due to the downstream mining industry, infrastructure, and PPP projects. Digging and big digging are concentrated in 8 provinces and cities, including Shanxi, Shaanxi, Inner Mongolia, Yunnan, Guizhou, Guangxi, Guangdong, and Chongqing. According to the analysis of sales regions, December: Western sales rose 100% year-on-year, and the market share was close to 40%. In 2016, sales in central China increased by as much as 40% year-on-year (the increase was the first), and the market share of central China increased by nearly 30%;

Overall view of the construction machinery industry:

1) Reasons for the rebound in earth-moving machinery data: The sharp rebound in data in recent months is due to the obvious stimulus of national infrastructure investment, which mainly includes the increase in demand for medium and large digging caused by downstream roads, bridges and mining. 2) The industry's view on 2017: Excavators are expected to maintain high growth in the first half of the year, and the demand for Zhongda Digging is expected to increase significantly. The annual growth is expected to be 20-30%, but no new production capacity will be added. 3) Views of other models: cranes and concrete machinery have grown by 10-20% in recent months, and it will take 3-6 months for earth-moving machinery (cranes, bulldozers and loaders) to transfer to these models. Concrete machinery is expected to be 2017 10-20% annual growth.

The difference between our view and the market view: The big opportunity for construction machinery depends on the company's initiative to accelerate the clearing out and transform the business beyond expectations, otherwise it is a thematic opportunity

1) In 2017, the growth rate of real estate investment is expected to drop to between 2-3%. If GDP growth and fixed asset investment need to maintain bottom-line growth, the growth rate of infrastructure investment will need to rise to more than 20%, and infrastructure demand will continue.

2) The industry will continue to recover in a small cycle. Excavator sales are expected to maintain high growth in the first half of the year, cranes will also rebound, and concrete machinery is expected to grow less due to the high relevance of real estate investment and large holdings.

3) The company's balance sheet still needs to be repaired to the equilibrium range, and the industry recovery may bring about a substantial improvement in profitability, and the successful transformation will not bring drag. Recently, we have seen that the industry leader Sany Heavy Industry takes the lead in clearing the burden, transferring the book value of 4.7 billion yuan of non-performing accounts receivable to the group at a price of 3.5 billion yuan to optimize the asset structure of the group, and the proportion of accounts receivable/income is expected to change from At the end of the third quarter of 2016, the proportion of 133% dropped to below 80%. Sany will become the company with the most flexible performance in the industry's recovery, and the company's transformation is also expected to take off. 4) Maintain the previous view: In the first quarter, we are optimistic about the industry's sales recovery and the thematic market of the Belt and Road. We are optimistic about the companies that take the initiative to clear, the proportion of earthmoving machinery and the increasing proportion of exports, the first to promote the initiative to clear [Sany Heavy Industry].

Investment advice and key recommendation portfolio

Investors in pursuit of relative income can be configured, and the first initiative to clear the [Sany Heavy Industry], and the rest are recommended to pay attention to Zoomlion, Liugong, Xiagong, Hengli Hydraulics, etc.

http://www.huiyijx.com Guangzhou Huiyi Heavy Industry Machinery