Zhongtong Finance APP learned that Haitong Int'l released research reports stating that with the exertion of policy effects and the improvement of market conditions, the domestic sales growth rate of excavators is expected to continue to rise. Additionally, despite the complex and challenging international situation, supported by China's overall advantages in construction machinery technology, products, and services, it is expected that export volume will remain at a high level. Overall, in 2024, the industry will face opportunities and challenges, with opportunities outweighing risks. Recommendations include: Sany Heavy Industry (600031.SH), Zoomlion (000157.SZ), XCMG Construction Machinery (000425.SZ), Jiangsu Hengli Hydraulic (601100.SH), Zhejiang Dingli Machinery (603338.SH).

Haitong International's main viewpoints are as follows:

In September 2024, the domestic sales volume of excavators increased year-on-year, while the foreign sales volume's year-on-year decline narrowed. In September 2024, the major excavator manufacturers collectively sold a total of 15,831 excavator products, a 10.8% year-on-year increase. Among them, domestic market sales were 7,610 units, a 21.5% increase; export sales were 8,221 units, a 2.51% decrease. From January to September 2024, major excavator manufacturers sold a total of 147,381 excavator products, a 0.96% year-on-year decrease. Among them, domestic market sales were 73,945 units, an 8.62% increase; export sales were 73,436 units, a 9.04% decrease.

In terms of structure, the monthly domestic sales accounted for 48.07% in September. In September 2024, the proportion of domestic sales to total sales was 48.07%, while the proportion of export sales to total sales was 51.93%. From January to September 2024, the proportion of domestic sales to total sales was 50.17%, with export sales accounting for 49.83%.

In August 2024, Komatsu China's working hours increased by 3.3% year-on-year and 5.4% month-on-month. In August 2024, Komatsu excavator working hours were 93 hours, a 3.3% year-on-year increase and a 5.4% month-on-month increase.

Pangyuan Leasing tower crane ton-meter utilization rate increased by 1.6% year-on-year and 0.2% month-on-month. In September 2024, Pangyuan Leasing's tower crane ton-meter utilization rate was 55%, a 1.6% year-on-year increase and a 0.2% month-on-month increase.

A series of policies are expected to be released one after another, with the excavator demand expected to marginally improve. On October 12, Minister of Finance Lan Foan pointed out that it is planned to significantly increase the debt ceiling in a one-off manner to replace local governments' hidden debts on a large scale, intensifying support for local debt risk resolution. The relevant policies will be detailed to the public after going through the statutory procedures. It is important to emphasize that this upcoming policy is the most significant measure to support debt restructuring in recent years. In addition, in the real estate sector, by combining the use of local government special bonds, special funds, tax policies, and other tools, efforts will be made to support stabilizing the real estate market. Deputy Minister of Finance Liao Min stated that the Ministry of Finance will mainly consider three aspects in the next step, including allowing special bonds to be used for land reserves; supporting the acquisition of existing houses to optimize the supply of affordable housing; and timely refining relevant tax policies. We believe that with the gradual implementation of subsequent policies, there is potential for marginal recovery in the infrastructure and real estate sectors, which will boost the marginal improvement in excavator demand.

We believe that with the effectiveness of policies and improvement in the market environment, the domestic sales growth of excavators is expected to continue to rise. Furthermore, despite the severe and complex international situation, relying on the overall advantages of China's engineering machinery technology, products, and services, it is expected that the export volume will remain at a relatively high level. Overall, in 2024, there are both opportunities and challenges in the industry, with opportunities outweighing risks. Recommended focus: Sany Heavy Industry, Zoomlion, xcmg construction machinery, Jiangsu Hengli Hydraulic, Zhejiang Dingli Machinery.

Risk Warning: Risks of fluctuations in macroeconomic and market demand, increased market competition, and declining overseas demand.