According to a research report by Haitong Securities, excavator sales increased by 75% in December 2016 and 25% for the whole year, which greatly exceeded the expectation of 15% in the middle of the year. The main reason for exceeding expectations was the fourth quarter. Haitong Securities analysts said that they are optimistic about the peak season in the first quarter of 2017, and the construction machinery industry is expected to improve.

【Cause Analysis】

Haitong Securities analyzed that the lag effect of commodity price increases and infrastructure investment began to rise in the third quarter, which greatly enhanced the confidence of industry chain practitioners, and began a cycle of replenishment inventory dominated by structural demand; it is optimistic that the growth rate of Q1 this year will continue to rise. Excavator sales are easily affected by the emotions of practitioners from all parties in the industry chain. At the current point in time, manufacturers, suppliers, distributors and leasers are all optimistic about the peak season after the lunar new year. Judging from the stocking situation of parts factories and some OEMs, the 1q sales growth rate is likely to increase; for this round of construction machinery sector recovery, Haitong believes that there is a certain degree of differentiation, and earthmoving machinery represented by excavators has the fastest recovery rate. Faster, cranes, forklifts, etc., followed by concrete and tower cranes, which are highly related to real estate and have a late peak. Therefore, the most prominent part of the peak season will also be the excavator. To grasp the most flexible target of the sector, Hengli Hydraulics, a manufacturer of special hydraulic parts for excavators, is the first choice, with periodic growth attributes and long-term growth premium.

[Later Outlook of the Industry]

According to the China Securities Journal, many institutions are optimistic about the market situation of the machinery industry in 2017. Emerging industries in the machinery industry are generally favored. Huachuang Securities said it is optimistic about the smart manufacturing sector. Everbright Securities stated that the core of the new round of manufacturing upgrades is the intelligent production process (smart manufacturing) and product intelligence (smart equipment). It is optimistic about the smart logistics and smart packaging sectors with relatively weak early-stage equipment investment and broad market space; the Internet of Things Infrastructure construction is expected to accelerate the popularization of smart products in the mass consumer market, and we are optimistic about service robots and smart instrument leaders.

In addition, national strategic support coupled with the optimization and upgrading of the industry itself will bring benefits to emerging machinery industries such as intelligent manufacturing. The Ministry of Industry and Information Technology and the Ministry of Finance jointly issued the "Intelligent Manufacturing Development Plan (2016-2020)" and proposes to promote the implementation of a "two-step" strategy for smart manufacturing by 2025.

Regarding the hot rail transit in recent years, Tianfeng Securities believes that the potential for urban rail transit construction is great, and the construction peak will be ushered in during the "13th Five-Year Plan" period. The boom of the urban rail transit industry continues to rise, and the growth in the next five years is relatively certain. We are optimistic about related companies such as rail transit industry chain, operation and maintenance, and localization of core components. Some analysts also believe that the new growth point of the railway equipment industry lies in the urban rail transit market and the post-cycle maintenance market. According to the "Three-year Action Plan for the Construction of Major Transportation Infrastructure Projects", the investment in urban rail transit will be 1.6 trillion yuan in the three years from 2016 to 2018, which is double the investment of 800 billion yuan in the three years from 2013 to 2015.

The traditional machinery industry may also usher in better opportunities in 2017, and the cyclical industry recovery is expected to stimulate the growth of related machinery sectors. Everbright Securities stated that the construction machinery industry is at a bottom recovery period. On the whole, the construction machinery industry has gradually entered a bottom recovery period since the second half of 2016. Although there is a significant gap between product sales and historical highs, there has been a significant year-on-year rebound. The first half of the year was the peak season for construction machinery sales. Under the trend of sales rebound, construction machinery companies are expected to lay a good foundation for their annual performance. In addition, due to the continuous growth of infrastructure investment and the continuous upgrading of products during the peak period of construction machinery sales, the industry's moderate recovery momentum can be extended at least in the first half of the year. It is recommended to pay attention to leading companies with brand appeal.

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