Exports boost the performance of construction machinery companies. Will domestic demand bottom out in 2024?
In the first half of this year, the construction machinery industry showed polarization: most of the "big players" in the industry's overseas expansion expected growth, while the operations of manufacturers focusing on the domestic equipment rental market were not very optimistic. Industry insiders believe that expansion of overseas market share in the second half of the year will still be an important source of incremental performance; as large-scale equipment updates continue to advance, domestic demand is expected to gradually step out of the bottom of the cycle.
Overseas markets remain the engine for performance growth
Currently, 4 of the 12 A-share listed companies have released first-half performance forecasts. Among them, Liugong expects H1 net profit attributable to its parent to increase by 45% to 70% year-on-year; Shantui Group expects H1 net profit attributable to its parent to increase by 25% to 50% year-on-year; Xiamen Engineering expects H1 to turn losses into profits; Construction Machinery expects H1 losses; Hong Kong stocks China Lonking expects H1 net profit to increase significantly, with a year-on-year increase of 33% to 50%. Although the above-mentioned enterprises present an uneven pattern, they all have one common characteristic - export business accounts for a high proportion of their revenue structure. As the domestic construction machinery market enters the stock era, overseas markets have become the main growth point for China's construction machinery.
◆Zoomlion’s overseas revenue ratio will reach nearly 50% in the first quarter of 2024. The relevant person in charge of the company told reporters that overseas markets are still blue ocean markets for Chinese construction machinery. Judging from the proportion of major export markets, there is still a lot of room for improvement in product category expansion in many countries.
◆The relevant person in charge of LiuGong believes that the overall demand in overseas markets is slowing down, but the total volume is still at a historical high, there are still many opportunities in market segments, and there are still demand supports for infrastructure and mining in various overseas regions.
◆XCMG Machinery’s international business revenue will account for 40% in 2023 and 44% in the first quarter of 2024. When the company accepted the survey, it believed that during the 14th Five-Year Plan period, the sales volume of domestic brands in overseas markets is expected to maintain a growth trend and is an important growth point for the construction machinery industry.
Different from the above three companies whose performance is expected to increase, Construction Machinery stated in its first half performance loss announcement that "in the first half of 2024, the domestic tower crane rental market will continue to suffer from insufficient demand, affected by factors such as the reduction in the number of newly started projects and insufficient operating rates. As a result, equipment rental prices and utilization rates have hovered at low levels, resulting in the company's semi-annual losses."
Industry insiders say that the growth rate of leading companies is generally 10 to 20 percentage points higher than the industry average. In the future, overseas market share will mainly be concentrated among leading construction machinery companies, and it will be difficult for smaller companies to adapt to competition.
What cannot be ignored is that the uncertainty in overseas markets has intensified. In particular, countries such as the European Union, the United States and the United Kingdom have frequently launched anti-dumping investigations on my country’s construction machinery products.
"In the medium to long term, global trade frictions may accelerate the construction and deployment of overseas production capacity by Chinese companies." A relevant person in charge of Sany Heavy Industry said.
At present, in order to cope with potential trade risks, leading domestic companies including Sany, Zoomlion, XCMG and other domestic companies are promoting the construction of overseas manufacturing bases, promoting the localization of companies in overseas markets through direct construction of factories overseas, or acquisitions and mergers.
Equipment update dividends may be released faster in the second half of the year
In addition to exports, the recovery process of domestic demand is also one of the factors affecting performance. According to the latest data from the China Construction Machinery Industry Association, the domestic construction machinery market sales data in June this year showed a differentiated recovery. Among them, loaders, excavators, and forklifts achieved year-on-year growth, while most other products are still in a downward period, mainly real estate-related products. There is pressure for recovery; loaders, excavators, and forklifts are the first to recover due to their more dispersed downstream.
Recently, the device update policy has been tightened. The National Development and Reform Commission and the Ministry of Finance issued "Several Measures on Increasing Support for Large-Scale Equipment Renewal and Trade-in of Consumer Goods", coordinating and arranging about 300 billion yuan of ultra-long-term special government bond funds, and increasing support for large-scale equipment renewal and trade-in of consumer goods, which will effectively leverage Social fixed asset investment.
Sany Heavy Industry personnel said that some construction machinery and equipment, such as National I and National II models, have reached the point of equipment replacement. The introduction of the policy is expected to increase the enthusiasm of enterprises and promote the process of replacing old equipment with new ones.
After entering the second half of the year, the policy side may be expected to accelerate the clearance of "National One and Two" models and the switch to "National Three and Four". Dealers have reported that SANY, Liugong and other brands are selling local National IV equipment every day, and the sales of new National IV machines have increased compared with the same period last year.
Many people in the construction machinery industry chain believe that this year is expected to be the year when the domestic market bottoms out. With large-scale equipment update policies, a new round of update and replacement cycles is expected to be gradually launched next year.
