Unstable sales of construction machinery in May

In May, the construction machinery index increased by 1.87% in the same month. The machinery index, the Shanghai Composite Index and the Shanghai-Shenzhen 300 Index rose by 10.51%, 4.17% and 6.22%, respectively, while the Construction Machinery Index substantially underperformed the broader market and industry indices, and the infrastructure investment. Maintaining a relatively fast growth rate, the increase in technology in the second half of the year poses a constraint on the promotion of space.

In April, small excavation and digging are still growing and digging is still falling.

Except for truck cranes, sales of other four major varieties in April were positive compared to the same period last year. From January to April, cumulative sales of excavators, loaders, truck cranes, bulldozers, and road rollers fell by 17.5%, 12.2%, 29.5%, and 16.1% year-on-year, respectively, and a 5.6% increase compared to the first quarter (-25.6%, -19%) , -32.4%, -16% and -6.8%) have been narrowed to varying degrees; in addition to a 21% year-on-year decrease in truck cranes, sales of excavators, loaders, bulldozers and road rollers increased by 5.8% year-on-year in April. 3.9%, 20% and 31%. Excavator tonnage point of view, small digging increased by 20% in April, for two consecutive months of positive growth, digging in positive growth of 10%, large digging still fell sharply 54%.

Infrastructure investment constraints in the second half

From January to April, the growth rate of infrastructure investment by investment representatives in the shipping, warehousing, hydroelectric, water, and water production and supply industries continued to grow at a rapid rate, with a cumulative growth rate of 24.05%. Among them, the value of transportation and warehousing grew by 23.7% year-on-year, and the growth rate continued to pick up. From the sub-industries, the investment in the railway and air transport industries rebounded sharply. The investment in railway transportation increased by 24.6% year-on-year, and the investment in air transport increased by 65% ​​year-on-year.

Electric heating gas and water production and supply industries grew by 30.8% and 13.5%, respectively, and the growth rate has declined, but it is still in a pick-up trend. Infrastructure investment maintains a relatively low base for rapid growth. Infrastructure investment last year improved from June, constraining the growth of infrastructure investment growth in the second half of this year.

The second half of real estate uncertainty investment comes from the sustainability of sales

Real estate investment continued to rebound in the first half of the year and uncertainty in the second half came from the sustainability of sales. From January to April, the growth of real estate investment was 21.1%, which was a rebound from 20.2% in January-March, continuing the upward trend since the end of last year. The new housing starts area and the growth rate of commercial housing sales also improved. New construction and sales of commercial housing increased by 1.9% and 38.0% year-on-year respectively, which were up 4.6 and 0.9 percentage points from January to March respectively. We are relatively optimistic about real estate investment in the first half of the year and uncertainty in the second half of the year comes from the sustainability of sales.

In the second half of the year, the year-on-year figures will continue to improve as the base rate gradually decreases, but downstream demand remains weak. According to the survey, the sales of excavators have cooled in May. Excavator sales are expected to decline in May, and maintain a positive growth year-on-year. Manufacturers and distributors have doubts about the sustainability of infrastructure construction and real estate investment in the second half of the year and are relatively cautious. Since last year from May onwards, the base figure has dropped significantly, and the cumulative year-on-year data is expected to continue to improve, but it does not mean that the downstream demand has improved.

Maintain the industry "neutral" rating. Maintaining our judgment last month, the impact of IPO restart on market style has already begun to appear. The valuation of large-cap stocks in construction machinery has been supported, and is currently in an empty window of disclosure of earnings reports. The weak recovery of the economy shows that the probability of large-scale investment in infrastructure is not high, there is uncertainty in real estate investment, and the improvement in sales volume of construction machinery is limited, which will restrict the upside of the sector. It is recommended to continue to pay attention to the industry-leading Sany Heavy Industry with a low valuation, and the Hengli Oil Tank with relatively good fundamentals and Anhui Heli.

Risk Warning: The magnitude of investment recovery is lower than expected.