Event: On April 2, Zoomlion Heavy Duty Pumps increased prices by 5% and 10%. On April 9, Sany Heavy Industry pumps prices increased by 5-10%. On April 11, Sany Mining The price was increased by 10%, Zhongda Excavation increased the price by 5%, and Liugong Excavator increased the average price by about 5% in early April.
Analysis of the reasons behind the price increase
The price increase verifies the prediction in our March 29th report on the construction machinery series that "the price of some models will be increased in April." We judge that there are three main reasons for the price increase:
(1) The epidemic compresses the construction period, amplifies the pulling effect of infrastructure and real estate investment on the demand for construction machinery, and expands the domestic demand policy. As a result, domestic demand has rebounded rapidly since mid-to-late March. Domestic construction machinery enterprises have continued to overload production, and various models In short supply.
(2) Affected by the overseas epidemic situation, some European and Japanese suppliers have stopped production lines, and the supply chain of core parts has tightened, which has led to an increase in the cost of subsequent parts purchases.
(3) Industry head companies hope to take this opportunity to break the industry's "price war" cycle, enhance the industry ecology, and create a virtuous cycle.
Is price increase short-term? Can it last?
(1) As far as the price of pump trucks is concerned, we judge it to be sustainable, because the industry has formed a duopoly monopoly. The market share of Sanyi China is about 85%, and the two oligarchs have successively raised prices, which is considered a tacit agreement.
(2) As far as the price of excavators is concerned, our judgment is equally sustainable, because most of the agents in the excavator industry do not make money in 2019. As Sany is the leader in the excavator industry, we judge that its best agents are only in 2019. The net interest rate level of about 4%, rather than the Sany brand agents, is expected to not make more than half of the money. In the long run, the survival status of the agents is not conducive to the healthy development of the industry. This time Sany leads the public price increase, we think it is beneficial to dig The symbiosis and co-prosperity of manufacturers and agents of the machine industry chain is conducive to the long-term healthy development of the industry and is a sustainable behavior.
(3) From the perspective of industry demand, affected by the epidemic situation, the investment intensity of April-December 2020 will be amplified (see the calculation of our construction machinery series report for details), and there will be many construction projects from New Year to 2021. In the first half of the year, the demand for construction machinery from March to December 2020 is expected to exceed all expectations. According to the association's data, the excavator industry in March increased 11.59% year-on-year, exceeding expectations; according to Zhonglian official micro information, the sales volume of Zhonglian pump trucks increased by 25% year-on-year from January to March, exceeding expectations. Therefore, no matter from the perspective of the brand competition pattern, the benign development of the industrial chain, or the demand exceeding expectations, we all judge that price increases are not short-term behavior.
Which brands and products may increase prices in the future?
At present, some of the three major types of construction machinery products, concrete machinery, cranes and excavators, are out of stock, and two companies have raised prices for pump trucks and excavators. It is expected that: (1) there will be more excavator brands Increase the price; (2) The car crane is not far from the price increase. At present, the company's daily delivery of car crane heads is about 100 units, far exceeding the normal daily shipment of more than 30 units, and exceeding the peak season delivery level in previous years.
Analysis of the impact of price increases?
The profitability and growth of construction machinery companies has always been the first deciding factor. This price increase, on the one hand, we expect that the profitability of mainframe manufacturers and agents will increase, and the profitability of different agents will vary, depending on their regional market share; on the other hand, we expect domestic parts The share of enterprises will rise further because the tight supply chain caused by the overseas epidemic will accelerate domestic substitution. Even considering the negative impact of the overseas epidemic on the export market, we believe that the increase in the “quantity” and “price” of OEMs in 2020 will exceed expectations, and the increase in the “quantity” of core component manufacturers will exceed expectations. There is room to increase performance.
Investment Advice
The price increase of mainframe manufacturers, at a shallow level, is a response to short-term supply shortages and the tightening of imported components; at a deep level, it reflects the entire industry chain (upstream core components, midstream mainframe manufacturers, downstream agents and end customers) In the first place, the host manufacturer's voice is the strongest.
It is recommended to add the entire segment of construction machinery, especially the mainframe manufacturers. The current valuation does not reflect the industrial chain status of the mainframe manufacturers and is significantly underestimated. We judge that the valuation of the high-quality mainframe manufacturers has entered the upward channel of "over 15 times the PE" The value attributes are becoming more and more prominent. (1) They benefit from the competitive landscape of the domestic market and the optimization of the industry's ecological environment; (2) Benefit from the expansion of new categories. The new category, the corresponding market space is tens of billions of levels; (3) Although the internationalization road has been temporarily affected by the overseas epidemic situation, but the direction is clear, domestic head host manufacturers rely on a more comprehensive product layout and better quality Services, more intelligent and information-based production and operation models, and overseas R & D centers and factories that have been laid out in advance, will eventually become the global leader in construction machinery.
Classification of major companies in the construction machinery industry: (1) Traditional mainframe manufacturers: Sany Heavy Industry / Xugong Machinery / Zhonglian Heavy Industry / Liugong; (2) Machine rental service companies: construction machinery; (3) Core parts companies: Heng Li Hydraulic / Aidi Precision; (4) Emerging host company: Zhejiang Dingli.
Risk factors
Domestic outbreaks have repeatedly occurred, and overseas outbreaks have exceeded expectations.
Appendix I. Impact of the epidemic's reduced construction period on key downstream infrastructure and real estate investment of construction machinery
(1) The proportion of infrastructure in the economy is extremely important
Total fixed assets investment in 2019 was 55.15 trillion (value announced by the Bureau of Statistics), of which investment in manufacturing, infrastructure, and real estate were 21.86, 18.21, and 13.22 trillion (all calculated values, no value announced since 2018), accounting for It is 40%, 33%, 24%, and the proportion of infrastructure and real estate investment is very important.
Among them, infrastructure investment includes ① the production and supply of electricity, heat, gas and water, ② transportation, warehousing and postal services, ③ water conservancy, environment and public facilities management. These three items account for the proportion of infrastructure investment They are 16%, 36%, and 48%. In the construction of transportation, warehousing and postal investment in infrastructure investment in 2019, we expect high-speed rail investment of 656.9 billion (the entire railway investment of 802.9 billion in 2019), urban rail transit investment of 678.3 billion yuan, and high-speed rail and urban rail investment of 1.34 trillion yuan.
Analysis of the importance of new infrastructure. The new infrastructure mainly includes seven major areas: 5G infrastructure, UHV, intercity high-speed railway and urban rail transit, new energy vehicle charging piles, big data centers, artificial intelligence, and industrial Internet. Among them, the intercity high-speed railway and urban rail transportation are included in the traditional infrastructure. As mentioned above, the investment in 2019 is 1.34 trillion, accounting for 2.42% of the fixed asset investment in 2019; we expect that The investment in new infrastructure in the six areas was 1.11 trillion in 2020, accounting for 2.01% of fixed asset investment in 2019; the total investment in the seven major areas of new infrastructure accounted for 4.43% of fixed asset investment.
The new infrastructure is the direction of transformation and upgrading, and the traditional infrastructure is the strength at this stage. To sum up, ① The new infrastructure is a historical upgrade and transformation. On the one hand, the new infrastructure and traditional infrastructure are intersecting. The most important components of the new infrastructure—intercity high-speed railway and urban rail transit—are themselves in the category of traditional infrastructure; on the other hand, the new infrastructure in addition to the intercity high-speed railway and the city In the other six areas other than rail transit, the investment subject is basically manufacturing and service companies. The investment in these six areas has been reflected in past investments in industries such as manufacturing and power, but it is only expected that the seven major areas of new infrastructure in the future Investment growth will be relatively faster. ②Traditional infrastructure is the main force of reverse cycle adjustment, and new infrastructure is the direction of transformation and upgrading. In 2019, the investment in traditional infrastructure exceeded 18 trillion, much higher than the investment in new infrastructure of 1.11 trillion (excluding the investment of 1.34 trillion for intercity high-speed railways and urban rail transit that intersect with traditional infrastructure). To protect employment, traditional infrastructure is the strength; new infrastructure represents the future direction and is expected to continue to maintain rapid growth; traditional infrastructure and new infrastructure coexist and complement each other, both of which correspond to related investment opportunities. New infrastructure should not be the only one. After all, our traditional There are still many shortcomings in infrastructure.
(2) Judging the annual growth rate of infrastructure and real estate investment
The calculation of the effect of local special debt on infrastructure investment. In 2019, local new special debt was 2.15 trillion. According to the assumption of 2020 local new special debt of 3 trillion, we estimate that under the prudent, neutral, and optimistic assumptions, the new special debt will boost the infrastructure investment in 2020 by 0.82%, Growth of 2.75% and 6.87%. Since the epidemic in 2020, the Ministry of Finance and the National Development and Reform Commission have revealed that they will expand the scale of special real estate debt. On February 24, the State Council Information Office held a press conference, and the Ministry of Finance mentioned that it would expand the scale of special real estate debt. At the regular press conference of the National Development and Reform Commission on March 17, Liu Shihu, deputy director of the Investment Division of the National Development and Reform Commission, said that the next step of the National Development and Reform Commission will be to expand the scale of local government special bonds. It is expected that the role of local special bonds in driving infrastructure investment may exceed expectations.
Lowering the proportion of project capital will estimate the capital investment. On November 13, 2019, the National Convention proposed to reduce the minimum capital ratio of some infrastructure projects. 1) Reduce the minimum proportion of capital for ports, coastal and inland shipping projects from 25% to 20%. For infrastructure projects such as roads, railways, ecological environment protection, and social livelihoods that make up for shortcomings, the reduction should not exceed 5 percentage points; Capital. In our sensitivity analysis, we believe that 100% of port, coastal, inland navigation, highway, and railway projects meet the capital reduction requirements. Assuming that the environmental protection and social livelihood projects comply with the prudent, neutral, and optimistic background, the capital can be reduced. The proportion of projects required by the gold ratio is 15%, 20%, and 25%, respectively, then the policy of reducing the capital ratio will drive infrastructure investment by 3.51%, 3.83%, and 4.15%, respectively.
Judge the growth rate of infrastructure investment throughout the year. To sum up, the new local special debt line, local special debt can be used as project capital and reduce the minimum capital ratio of infrastructure projects. These policies combined under cautious, neutral and optimistic assumptions for infrastructure investment in 2020 The contributions were 4.34%, 6.58%, and 11.02% respectively. Due to the above calculations, the endogenous growth of various types of infrastructure investment is not considered, and only the impact of the "leverage angle" is considered. In the context of the impact of the epidemic in the first quarter of 2020, we judge that most of the annual infrastructure investment will have internal Natural growth, so under the neutral assumption, we judge that infrastructure investment in 2020 is 19.40 trillion, a year-on-year growth rate of 6.58%. Currently, the infrastructure investment in January-February is 859.4 billion, down 26.86% year-on-year; the infrastructure investment in March-December is expected to be 18.54 trillion, an increase of 8.89% year-on-year from March-December 2019.
Judge the growth rate of real estate investment throughout the year. Here, directly citing the judgment of the CITIC Construction Investment real estate team, it is expected that the growth rate of real estate development investment in 2020 will be 1.2%.
(3) The impact of the epidemic on infrastructure and real estate investment intensity
Every year during the Spring Festival holiday, workers in infrastructure and real estate projects have to rest for about 0.5 months as a whole, so the annual construction period is about 11.5 months. Affected by the epidemic this year, the construction of the project was basically delayed by about one month, and the actual construction period was only about 10.5 months. The epidemic's compression of the construction period will cause the actual investment intensity this year to increase, driving more demand for construction machinery, because the same investment will require more construction machinery equipment in a shorter period of time. Here we use the monthly average investment growth rate to express, the monthly average investment growth rate = (2020 investment ÷ 10.5) ÷ (2019 investment ÷ 11.5) -1. The average monthly growth rates of infrastructure and real estate investment are estimated to be 16.73% and 10.84% respectively.
The need to emphasize here is that the above analysis perspective is only applicable to the demand analysis of production tools such as construction machinery, and is not suitable for the demand analysis of production materials such as cement and iron and steel, because the hurry of engineering projects will not result in the use of more cement , Steel, etc., the demand for these means of production is linked to the total investment itself, but catching up may have an impact on the prices of cement and steel, and I will not repeat them here.
Attachment 2. Judging the annual growth rate of the three major categories of construction machinery
(1) Judging the growth rate of the excavator throughout the year and April
Estimated sales volume of excavators throughout the year: (1) Domestic demand is on the background of the average monthly growth rate of infrastructure investment and real estate development investment being 16.73% and 10.84% respectively. The domestic sales growth rate is about 10%. (2) Exports are expected to further reflect the impact of the epidemic from the second quarter. On March 27th, in the report "The Epidemic Compresses the Construction Period and Amplifies the Impact of Investment on Construction Machinery Demand", the export growth rate will be revised down from more than 30% to 20. %, Now we further reduce to 0 growth, the implicit assumption here is that the overseas epidemic can be controlled before the end of the second quarter, and the overseas market will gradually return to normal in the third and fourth quarters; domestic sales, export sales, total sales of the excavator industry in 2019 The sales volume were 209,100, 266,235,700 units respectively. It is estimated that the domestic sales, export sales and total sales of the excavator industry in 2020 will be 236,266 and 256,600 units, and the total domestic sales will increase by 8.87% year-on-year.
Forecast of sales of excavators in April: Since March 15th, sales have risen rapidly, and some models have begun to be out of stock. With the recovery rate of key projects basically in place, it is expected that the sales of excavators in April will be comparable to that in March Flat, this will be historic, because in previous years, March was the high point of the year, and April this year may also be a high point. It is expected that the sales volume of the mining machine industry in April will increase by about 55% year-on-year.
(2) Judging the annual growth rate of automobile cranes and concrete machinery
The annual sales volume of car cranes is predicted: the downstream of car cranes is mainly based on infrastructure, as well as real estate, green gardens, municipal projects, etc., and currently exports are relatively small. Although the sales volume of truck cranes declined year-on-year in the first quarter, we judge that as the recovery rate of infrastructure and real estate projects resumes, the truck crane industry is expected to grow by more than 10% in 2020, which is higher than that of excavators. From a micro perspective, leading companies work overtime and overtime, daily shipments hit a record high, and the tonnage structure moves upward. It is expected that the auto crane industry's revenue growth rate will be higher in 2020.
Annual sales forecast of concrete machinery: on the one hand, the sales volume of pump trucks in 2019 is less than 8,000, and there are many short-arm pump trucks, which is far from the sales volume of 12,000 pump trucks at the historical high in 2011. It is expected The sales volume in 2020 is not less than 15%; on the other hand, mixer trucks benefit from overload control, and it is expected that the sales volume will increase by more than 20% in 2020. On the whole, it is predicted that the sales growth rate of the concrete machinery industry in 2020 will be more than 15%, which is higher than that of automobile cranes and excavators.
