According to the news from the IntelliNews app, Soochow Securities issued a research report stating that, under the trend of tightening of environmental policies in 2024, the penetration rate of high-value lithium electric forklifts replacing stock nation II and below diesel forklifts and the internal sales of nation IV diesel vehicles are expected to continue to grow with optimized structure. Additionally, the Plan for Promoting Large-scale Equipment Renewal and the Trade-in of Old Items for New Ones put forward the key industry equipment renewal program to implement energy-saving and carbon-reducing renovations by sector. As the policy is implemented, the forklift industry is expected to benefit. Furthermore, the program also proposed to promote energy-saving and carbon-reducing renovations by sector. The forklift industry is expected to benefit as the policy is implemented. Overseas economic conditions have not declined, and domestic forklifts with short delivery periods and leading lithium conversion logic have increased their sales through higher market shares.

In the short term, it is expected that in 2024: (1) China will benefit from environmental and equipment update policies. Under the trend of tightening environmental policies, the penetration rate of high-value lithium electric forklifts replacing stock nation II and below diesel forklifts and the internal sales of nation IV diesel vehicles are expected to continue to grow with optimized structure. Additionally, in March 2024, State Council issued the plan for promoting large-scale equipment renewal and the trade-in of old items for new ones, pushing forward key industry equipment renewal programs with sectors implementing energy-saving and carbon-reducing renovations according to their own industry strategy. The forklift industry is expected to benefit as the policy is implemented. (2) Overseas economic conditions have not declined, and domestic forklifts with short delivery periods and leading lithium conversion logic have increased their sales through higher market shares.

In the medium term, it is expected that: (1) there is still room for lithium conversion in the domestic industry. In 2023, the rate of electrification in China’s balanced cars is about 29%, which is lower than the overseas level of 44% (calculated by the sales in the first three quarters). The price of a lithium electric forklift is about twice that of a fuel car, and the gross margin is higher than that of a fuel car. (2) there is a large room for increasing international market shares. The overseas forklift market is about 120 billion yuan in 2023, and the domestic dual leaders, Anhui Heli and Hangcha Group, each have only 5% market shares. In 2023, the overseas lithium rate reached only 13%, and there is ample room for improvement. Following improvements in cost-performance ratio, delivery time, and the lithium industry chain, Chinese brands are expected to have opportunities for major growth.

Anhui Heli Co., Ltd. and Hangcha Group, as the dual leaders in the domestic industry, have complete product matrices, leading advantages in channel construction and lithium conversion progress, and strong growth certainty. It is recommended to keep an eye on them.

Risk warning:

The risk of intensified market competition. There is fierce competition in the industrial vehicle industry, and the homogeneity of products is relatively serious, with relatively low technical barriers. Currently, the domestic market is dominated by Hangcha Group and Anhui Heli, and if other engineering machinery manufacturers enter the industry in the future, the competition structure may deteriorate. Faced with the fierce competition of domestic and foreign enterprises, the company must maintain core competitiveness in its advantage products, adjust product structure and marketing strategies in time, or there is the risk of a decline in market share.

The risk of fluctuating raw material prices. The fluctuation of raw material costs is highly relevant to the company's profitability. Since 2021, raw material prices such as steel have risen sharply, causing certain negative impacts on the company's profit. If factors such as geopolitical issues in the future lead to a significant increase in raw material prices again and the company does not take measures such as hedging in advance to control risks, the volatility of its performance will be significantly enhanced.

The risk of macroeconomic fluctuations. The company's products are widely applicable to various sectors of the national economy, and the downstream markets involve various industries such as manufacturing, transportation, warehousing, postal, and wholesale and retail trade, which are closely related to the overall operation of the economy. However, the global political and economic situation is complex and changeable, and the outbreak of covid-19 at home and abroad has occurred multiple times and in an intermittent manner, which to a certain extent has affected global supply chains, transportation, and logistics, among other things. If macroeconomic fluctuations affect the prosperity of the industrial vehicle industry and are less favorable for the company's operational stability.

The risk of foreign exchange rate fluctuations. The company's international development is accelerating, and the overseas sales of its products are increasing year by year, while its performance is increasingly affected by fluctuations in exchange rates. If the exchange rate has clear fluctuations in the future and the company fails to take preventive measures such as hedging to control risks, the volatility of its performance will be significantly increased.