Machinery / Industrial Parts & Tools

In the face of rising raw material prices and supply chain tensions, combined with the impact of the impact of the decline in the construction of the downstream infrastructure industry due to the disturbance of the epidemic, the construction machinery industry is still in the adjustment cycle since the beginning of the year, and the total sales volume of excavators has dropped for five consecutive years this year.

In April and May, the sales of construction machinery-related industrial chains were still unsatisfactory, and new orders were inferior to the same period in previous years. But many industry insiders believe that the worst may be over. The policy transmission cycle generally lags by 2-3 months, and the construction machinery industry's judgment on the trend of "low before and then high" this year remains unchanged.

Domestic sales declined year-on-year for 14 consecutive months

Construction machinery is mainly used in three downstream fields of infrastructure, real estate and mining, of which infrastructure is the most used. "For architectural decoration, the current situation is not very ideal. May is the peak season in previous years, but this time period this year is not particularly large. Compared with the same period last year, it is worse than the same period last year. The current situation is not optimistic." According to industry insiders in decoration engineering.

"On the one hand, the operating rate of existing projects is not high, and on the other hand, there are not many incremental projects." An insider who is engaged in municipal road and bridge-related engineering projects said.

According to the latest data from China Construction Machinery Industry Association, the total sales volume of excavators in May this year was 20,624 units, a year-on-year decrease of 24.2%. Among them, domestic sales were 12,179 units, a year-on-year decrease of 44.8%; overseas sales were 8,445 units, a year-on-year increase of 63.9%. Domestic sales fell for the 14th consecutive month.

Excavator data is the "barometer" of construction machinery. From January to March 2022, the cumulative sales volume of excavators was 77,175 units, a year-on-year decrease of 39.2%; of which 51,886 units were domestic, a year-on-year decrease of 54.3%; and 25,289 units were exported, a year-on-year increase of 88.6%. In April and May, the year-on-year declines were 47.3% and 24.2% respectively, and the decline began to narrow in May.

Statistics show that in the first quarter of this year, the revenue of the machinery industry fell slightly year-on-year, and the net profit attributable to the parent dropped significantly under the high base last year: in 2022, the total revenue of the machinery industry in Q1 was 354.418 billion yuan, a year-on-year decrease of 0.4%; the net profit attributable to the parent was 22.365 billion yuan. , a year-on-year decrease of 22.39%; net profit after deducting non-return to the parent was 19.06 billion yuan, a year-on-year decrease of 25.68%.

Taking the upstream leader Hengli Hydraulics as an example, this year’s Q1 revenue and net profit dropped by 22.97% and 32.56% respectively. Mainly due to the decline in the prosperity of the downstream industry, the sales of the company's main products declined, of which the revenue of excavator cylinder products fell by 22% year-on-year.

Regarding the sales in Q2, a person from Hengli Hydraulics Securities Department said that it is expected to be worse than the first quarter under the interference of the epidemic (from the second quarter to the present). As for whether the strengthening of infrastructure can drive the industry to warm up, he believes that the current situation of companies in the industry is similar, and the OEMs are the first to feel the changes. There is inventory between the industrial chains. Only after the terminal is sold, the changes in the OEM's orders will be reflected.

A relevant person from a construction machinery OEM said that the poor sales data in the first two months of Q2 has a certain relationship with the repeated epidemics since April, which will have an impact on the operating rate, logistics, and supply chain. But he also said that now the construction machinery industry has reached the bottom.

The industry growth rate changed from negative to positive or extended to Q3

In the first five months of this year, the sales data of excavators can be described as "hot outside and cold inside". According to industry insiders, the sales situation in foreign markets this year is indeed good, but the main market for machinery leading enterprises is in China, and the future growth rate depends on the recovery progress of the domestic market.

On April 26 this year, the 11th meeting of the Central Financial and Economic Commission was held. The meeting pointed out that infrastructure construction should be comprehensively strengthened. From the perspective of the industry, this is a high-level setting for infrastructure construction, and it is crucial to stabilizing the fundamentals of the economy.

In this regard, the insiders of the above-mentioned road and bridge project analyzed that it will take some time from the policy release to the specific implementation. It is now the beginning of June, and there will be a certain time difference. In addition, a construction machinery equipment leasing company said that the repeated epidemics caused many projects to stagnate, which directly led to a decline in the equipment rental rate. The company's operation in the first half of the year was not good. Now that the epidemic is under control, it must be stronger than the first half of the year.

A few days ago, Zoomlion held its annual shareholders meeting. The price of bulk raw materials and transportation costs have risen significantly, putting the industry's gross and net profit margins under greater pressure. The company has carried out a related diversified layout around the main business of equipment manufacturing. Last year, the company's emerging sectors accounted for more than 1/5 of the company's revenue, an increase of nearly 6 percentage points compared with 2020.

The relevant person in charge of Zhonglian believes that the national macroeconomic cross-cycle adjustment and "stabilizing growth" measures have been implemented, from the national economic development policy, monetary and financial support, to the increase in business orders of engineering construction companies and the formation of physical workload, to building materials and even The new purchase of construction machinery and equipment objectively requires a conduction process.

XCMG Machinery, which is close to Zoomlion in terms of market value, also stated at its performance meeting in mid-May that domestic epidemic fluctuations will have a certain impact on the first half of the year, but the company expects that infrastructure investment and major projects will only be delayed, not reduced, and will increase. It is expected that in 2022, it will show a trend of lows and highs. Some of the market influencing factors are continuous, and some are phased. For example, the cost of freight and storage has more than doubled, but it will return to normal.

According to an analysis by Essence Securities Research Report, the recovery of industry demand depends on the strength of infrastructure policies. According to the calculation of the monthly sales volume of excavators in the past five years, under the neutral expectation (the annual industry growth rate will decline by 10%), it is expected that with the release of the previous backlog demand and the relief of the pressure from the high base, the industry growth rate is expected to decrease from negative in August. Correct. The reporter learned that another brokerage machinery researcher has a relatively more optimistic view, believing that as the "damping" of the epidemic is reduced, June will be an inflection point for upward sales.