Currently, domestic construction machinery has already achieved localization in the main engine market, but the after-sales market lacks sufficient attention. Strengthening after-sales markets such as maintenance and parts replacement is key to enhancing revenue stability and sustainability.
According to the Securities Times app, Sinolink Securities released research reports stating that the Komatsu model of a century-old heritage and successful global expansion experience is worth learning for domestic manufacturers. Since the 1970s, Komatsu has actively promoted a global strategy, with overseas revenue accounting for nearly 90% now, achieving revenue growth of over 185 times. By studying Komatsu's market performance in different regions worldwide, stock price fluctuations, historical development stages, and the successful experiences of globalization and product line expansion, valuable insights are provided for the future development of the domestic construction machinery industry, including regional layout, product technology enhancement, and downstream market expansion.
Sinolink Securities' main points are as follows:
Century-old heritage Komatsu model, enduring global expansion.
Since the 1970s, Komatsu has been focusing on globalization, with continuous growth in revenue scale, ranking second in the global construction machinery industry for many years, second only to Caterpillar. Komatsu Manufacturing was established in 1921 and has persistently expanded globally. Overseas revenue has grown from 18.5 billion yen in 1966 to 3,428.2 billion yen in 2023, achieving revenue growth of over 185 times in the past 57 years, with overseas revenue accounting for nearly 90% in 2023.
From a short-term perspective, in Q2 2024, Komatsu's traditional regions of North America, Europe, and Japan saw slower growth, while emerging markets such as China, the Russian-speaking region, and Oceania performed well with Q2 2024 year-on-year growth rates reaching 14%, 53%, and 55%.
Stock price review: High elasticity determines the valuation premium during the upward phase. The current rally is contributed by exchange rates and price increases.
Horizontal comparison: From January 2015 to October 24, the compound annual return rates of Nikkei 225, Komatsu, Hitachi Construction Machinery, Kubota, Sumitomo Heavy Industries, and Tadano were 8.48%, 9.21%, 6.97%, 2.94%, 3.64%, -2.41% respectively. Komatsu significantly outperformed other Japanese construction machinery manufacturers. In terms of valuation, Komatsu has higher revenue and profit growth rates during the upswing period, determining that Komatsu will enjoy a significant valuation premium in the upswing period of the construction machinery industry in 2017 and 2021.
Vertical comparison: The first two rounds of increase were driven by cyclical upturns, and the stock price increases from 2022 to 2024 were driven by price increases and exchange rates promoting performance growth, not valuation-driven. In 22-24 H1, the contribution of exchange rate/sales volume/price to Komatsu's profit was 48.2%/23.0%/43.9%, 17.1%/-4.5%/30.0%, 14.0%/-19.1%/16.3% respectively. The company's performance growth in 23 and 24 H1 mainly came from exchange rate settlements and product price increases, indicating that this round of stock price increase is driven by EPS.
Historical review: Globalization and iterative product line expansion are the main themes of the 'Komatsu Model'.
Komatsu's development history is a 'model' of globalized construction machinery and product iterative expansion.
Phase one (1921-1970): Geographically, after the war, it adapted to Japan's economic and policy development, seizing local opportunities; product focus on tractors and bulldozers.
Phase two (1970-1985): Geographically, taking advantage of diplomatic opportunities to lay out globalization; in terms of products, advancing hydraulic technology, leveraging technical advantages to seize opportunities in the United States.
Phase three (1985-2001): Promoting globalized production capacity layout to cope with exchange rate disadvantages, focusing on Asia, opening up the Chinese market to deal with the domestic economic downturn.
Phase four (2002-present): Adjusting operational strategies, reducing production to cope with two crises, acquiring and integrating to broaden the product portfolio of mining machinery, achieving long-term growth.
Inspiration: How did the "County Small Iron Plant" grow into a construction machinery giant, and what can domestic manufacturers learn from it
Regional Layout: (1) Domestic: From 2007 to 2009, the shipment value of excavators in Japan declined by 67%, but Komatsu's domestic revenue only declined by 38%, mainly due to the 50% revenue share from the after-sales market business. The after-sales revenue of construction machinery throughout its lifecycle is higher than equipment sales revenue. Currently, domestic construction machinery has already achieved domestic substitution in the main engine market, but the after-sales market is not given enough attention. Focusing on maintenance and repair, spare parts, and other after-sales markets is key to enhancing revenue stability and sustainability. (2) Overseas: In traditional regions like the USA, domestic manufacturers still need to improve their product strength, relying on differentiated products and cost-performance ratio to open up the market; in emerging markets like Southeast Asia, increasing after-sales service, maintaining the second-hand market, and strengthening cooperation with local dealers are core strategies to further increase market share.
Product Technology, Downstream Expansion: (1) Product Technology: Komatsu promotes the durability of medium-sized bulldozer products to match Caterpillar through the "A Plan," stabilizing its leading position in the Japanese bulldozer market. In 1977, Komatsu's bulldozer revenue in Japan was 2.5 times that of Caterpillar Mitsubishi. The "B Plan" enabled Komatsu to enter the threshold of large mines in Europe and America. For domestic construction machinery manufacturers, it is still necessary to control core component capabilities, improve product durability and reliability, leveraging product strength to unlock the overseas market. (2) Downstream Expansion: In 23 years, Komatsu, Zoomlion, XCMG's revenue from mining machinery business was 8.651, 0.8, 5.86 billion yuan, accounting for 44%, 2%, and 6% of total revenue respectively. Komatsu's mining machinery development is more mature. Domestic construction machinery manufacturers have basically completed the layout of mining machinery product lines. In the future, they need to continue to promote largescale, stability, and durability under harsh working conditions, as well as select suitable targets for mergers and acquisitions to advance the overall mining solutions supply capability.
Investment advice:
It is recommended to pay attention to domestic leading companies in globalization advancement and diversified product layout such as Sany Heavy Industry (600031.SH), XCMG Construction Machinery (000425.SZ), Zoomlion (01157,000157.SZ), Guangxi Liugong Machinery (000528.SZ), and Shantui Construction Machinery (000680.SZ).
Risk Warning: Industry demand fluctuations, raw material price fluctuations, intensified industry competition, and freight rate fluctuations.
