Construction Machinery: The 12th Five-year Investment in Fixed Assets is the Driving Force of the Industry

The average growth rate of production and sales of the construction machinery industry in the past ten years was 20.07%. According to the “12th Five-Year Plan” of the industry, the average growth rate of the industry during the “12th Five-Year Plan” period is expected to be over 17%, and the average annual growth rate of leading companies is 20 %-30%.

The growth rate of the industry during the "12th Five-Year Plan" period will slow down, but it will still be in a golden period of development. The sources of power for industry growth include the increase in the competitiveness of the companies within the industry and the extension of product lines, the progress of domestic urbanization, and the gradual recovery of exports.

Leading companies in the industry rely on their competitive advantages in products, markets, etc., and gain an average growth rate higher than the industry through the extension of product lines, and the degree of industrial concentration is continuously increasing. Scale economy and scope economy are conducive to improving the profitability of the industry and the industrial structure of the industry is continuously optimized.

Fixed asset investment is still an important driver for the development of the industry. The rapid advancement of the urbanization process will guarantee the steady growth of investment in fixed assets across the society. During the 12th Five-Year Plan period, investment in fixed assets is expected to maintain an average annual growth rate of around 20%.

There is huge space in overseas markets. The first-line companies such as Sany, Zoomlion and XCMG accounted for 20%-30% of the export sales revenue, while the current industry's export accounted for only about 10%, and the overseas market has become a new growth point. International companies such as Caterpillar have maintained sustained and rapid development through globalization, and internationalization is an inevitable trend for the long-term development of the industry.

Construction Machinery Subdivision Industry From the perspective of market capacity and industry prospects, we focus on sub-sectors such as concrete machinery, excavators, loaders, cranes, and forklifts.

Industry investment strategy: According to the historical law, the top-line price-earnings ratio of the industry's first-line companies is more than 30 times, the bottom range is about 10 times, and the current valuation of about 20 times is a relatively reasonable range. Taking into account the growth of the industry, we give the industry an investment rating, focusing on leading companies such as Sany Heavy Industry, Zoomlion, Xugong Machinery, and Liugong.