Soochow Securities released a research report stating that in the long term, electrification is expected to become the breakthrough point for construction machinery to achieve overtaking on a curve. The current electric products technology has already begun to achieve breakthroughs, and is bullish on the broad development space brought by the increase in electric penetration rate.
Zhong Tong Cai Jing APP learned that Soochow Securities released a research report stating that in the long term, electrification is expected to become the breakthrough point for construction machinery to achieve overtaking on a curve. The current electric products technology has already begun to achieve breakthroughs, and is bullish on the broad development space brought by the increase in electric penetration rate. Recommends Sany Heavy Industry (600031.SH), XCMG Construction Machinery (000425.SZ), Zoomlion (000157.SZ), Guangxi Liugong Machinery (000528.SZ), Jiangsu Hengli Hydraulic (601100.SH), Zhejiang Dingli Machinery (603338.SH), and recommends paying attention to Shantui Construction Machinery (000680.SZ).
The main viewpoints of Soochow Securities are as follows:
Electric loader penetration rate is accelerating, and the electric excavator has achieved the breakthrough of 0-1.
Since 2023, with the breakthrough of electrification technology and the decline of battery prices, the payback period of electrification construction machinery has been greatly shortened, and the industrialization process has made great breakthroughs, especially in the excavator and loader industries. (1) Loader: In 2022-2023, the electric penetration rate of loaders increased from less than 1% to 3.5%. In May 2024, the sales volume of electric loaders totaled 1250 units, and the penetration rate was 12.7%, up by 10.3pct year-on-year, accelerating the electrification process. LiuGong Machinery, a domestic loader leader. (2) Excavator: At the end of June 2024, Sany Heavy Industry released its first overseas medium-sized electric excavator in the Netherlands and obtained 20 signed presale orders, marking a new breakthrough for domestic brands in the European electrification market.
In 2023, the sales volume of electric loaders increased by 67% year-on-year. In May 2024, XCMG Construction Machinery sold 500 electric loaders per month, with over 100 exported, leading enterprises driving the scale of the domestic and foreign markets to expand rapidly. (2) Excavator: By June 2024, Sany Heavy Industry had released its first overseas medium-sized electric excavator in the Netherlands and obtained 20 signed presale orders.
There is a large market space for electrified construction machinery. After the breakthrough of technology, it can usher in a wave of development.
Currently, the global electrification rate of construction machinery is less than 1%. We determine that after the breakthrough of technological innovation and the achievement of full cost reduction, the penetration rate of electrification is expected to reach over 30%. Taking excavators as an example, in 2023, China's excavator sales volume was about 195,000 units. If the electrification rate reaches 30% in the future, it will bring an annual demand of about 60,000 units of electrified excavators. From January to May 2024, the sales volume of electric excavators in China was less than 40 units, and the market space is vast. The core factors hindering the improvement of the electrification rate of construction machinery are the low transmission efficiency of the electric product, high cost, and poor economy. The core issue of current construction machinery R&D is to use the electric transmission system to replace the hydraulic transmission system to improve the overall transmission efficiency. However, the price of the electric transmission is expensive, and the industrialization is in the initial stage. The large-scale application plan is not mature yet. We determine that after the breakthrough of the transmission efficiency bottleneck of electric products, the cost of electrified construction machinery will be greatly reduced, and the economy will be highlighted, ushering in a wave of development of electrified construction machinery.
Domestic brands are expected to replicate the Komatsu path and achieve overtaking on a curve through the breakthrough of electrification technology.
Reviewing Caterpillar and Komatsu's global strategies, we can see that technological innovation is the winning weapon for overtaking on a curve. The most typical example is that in the 1980s, Komatsu, through mastering the world's leading hydraulic technology, greatly eroded Caterpillar's market share in the US market. We believe that domestic brands are expected to replicate the Komatsu path and achieve a new round of overtaking on a curve relying on globally leading electrification technology. Specifically, the advantage of domestic brands in electrification is reflected in two aspects: 1) Electrification will become the unique label of domestic brands: the construction machinery industry has a certain consumer goods attribute, especially in the European and American markets, brand loyalty is highly valued. China has the world's most complete and leading electrification industry chain, and China's electrification construction machinery is scarce in the global market. 2) Electrification is the key to breaking through the after-sales service bottleneck: Electrification is often linked to intelligence. The large-scale promotion of electric products has increased the difficulty of construction machinery after-sales and maintenance, and Chinese brands are expected to become one of the few entities that can provide complete electrification after-sales and maintenance solutions, greatly reducing the difficulty of after-sales market construction.
Investment advice:
In the long run, electrification is expected to become a breakthrough path for the construction machinery industry. Currently, electric products have already begun to achieve breakthroughs in technology. Bullish about the wide development space brought by the improvement of electrification penetration rate, recommending Sany Heavy Industry, XCMG Construction Machinery, Zoomlion, Guangxi Liugong Machinery, Jiangsu Hengli Hydraulic, Zhejiang Dingli Machinery, and suggest paying attention to Shantui Construction Machinery.
Risk warning:
Domestic macroeconomic fluctuations; intensified industry competition pattern; international trade disputes; electric technology breakthroughs fall short of expectations.