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UBS: how to tap gold stocks in the construction machinery industry under overall pressure

UBS: how to tap gold stocks in the construction machinery industry under overall pressure

China Construction machinery information

in China, the prosperity of the construction machinery industry is closely related to the real estate market. Real estate is one of the most important downstream of construction machinery. When the real estate as a whole is cold, the prosperity of the construction machinery industry is difficult to improve

UBS Securities released a research report on the construction machinery industry today, saying that the weak new construction of real estate will suppress the sales of construction machinery and equipment, and the growth rate of fixed asset investment is still declining. It is cautious about the overall industry, relatively optimistic about XCMG machinery and Hengli oil cylinder, and believes that these two stocks will be a bright color under the pressure of the overall industry

real estate dragged down the sales of construction machinery

UBS believes that in the first half of 2014, investment growth in downstream related industries of construction machinery (mining, construction, transportation, warehousing and postal services, real estate, water conservancy, environment and public facilities management) was mixed. Among them, the cumulative year-on-year growth rate of railway investment continued to recover, with an increase of 8.9%, and road investment increased by 10.9%; However, the cumulative year-on-year growth rate of real estate investment continued to decline to 14.1%, down 6.5 percentage points from 20.6% in 2013. The cumulative year-on-year growth rate of total investment in related industries calculated by the bank was only 17.1%, down 3.4 percentage points from 20.5% in 2013, the lowest level since the beginning of 2013

from the perspective of capital, driven by PSL (mortgage supplementary loan) and policy banks, the bank expects medium and long-term enterprise new loans to remain high. On the other hand, banks' risk appetite has rebounded, and the liquidity of the inter-bank market is still abundant. Relatively loose credit conditions should be able to achieve the effect of reducing weight and improving crash safety, which can still support the continued improvement of the economy in the second half of the year

UBS highlighted the adverse impact of the cold real estate on the construction machinery industry. The decline in real estate sales and the sharp decline in new construction area will suppress the sales of construction machinery and equipment

in the first half of 2014, the sales area of commercial housing decreased by 6%, the sales volume decreased by 7%, and the new construction area of housing decreased by 16.5% year-on-year; The cumulative construction area of houses increased by 11.3% year-on-year, significantly lower than the 16.1% growth rate in 2013. Looking forward to the second half of 2014, as the sales area of commercial housing in the second half of 2013 reached 790million square meters, the absolute level is high, so the bank expects that the decline in sales area in the second half of the year is likely to expand, thereby suppressing real estate construction activities of developers

the industry is still declining, and the sales of concrete machinery fell the most.

UBS said that the overall prosperity of the industry has not improved, and the downward trend has not changed. Since April 2013, the monthly sales growth rate of earth moving machinery has changed from negative to positive, among which the sales volume of excavators increased by more than 20% in the fourth quarter of 2013, and the average monthly sales volume of loaders also increased by more than 15% after August. However, since 2014, due to poor real estate sales and new construction, the sales of excavators and loaders fell by 8% and 4% respectively in March 2014, ending 11 months of positive growth. In the following months, the decline continued to expand, with excavator sales falling by 27% and loader sales falling by 20% in July

UBS said that the most serious decline in the industry is the sales of concrete pump trucks, which has not yet improved

since the second half of 2012, the concrete machinery industry has seen a significant decline year-on-year and month on month. From the performance of leading companies Sany and Zoomlion, the decline was obvious. The revenue in the second half of the year was 9.36/6.69 billion yuan respectively, a year-on-year decrease of 8.2% and 33.6% respectively. Correspondingly, the gross profit margin also fell sharply. In 2013, leading enterprises adopted more cautious marketing strategies to control the bad debt risk of accounts receivable. Therefore, the sales of concrete machinery continued to decline sharply. In the second half of 2013, the sales revenue of concrete machinery of Sany Heavy Industry and Zoomlion was only about 8billion yuan, and the comprehensive gross profit margin also fell to a historical low (12% and 21% respectively)

since 2014, both real estate sales and new construction have started to grow negatively, while the main downstream of pump trucks and mixer trucks in concrete machinery comes from the real estate industry. The bank's research shows that the sales volume of concrete machinery of leading enterprises may still decline by more than 30% in the first half of 2014, and the bank expects that the gross profit margin will also be under pressure. The bank believes that due to the weak performance of real estate investment, the sales of concrete machinery will remain low in the next three years

optimistic about XCMG machinery and Hengli oil cylinder

UBS believes that the inflection point of the large cycle of the real estate industry has begun to appear, and the possibility of continued high growth in sales in the future is small. The new construction and construction volume of real estate driven by this will be at a low level, so there is no industrial opportunity in the construction machinery industry. In terms of product classification, the bank expects that cranes with high correlation with infrastructure investment will perform better, so the bank is optimistic about XCMG machinery. In the coming years, the bank believes that core component manufacturers still have greater opportunities for import substitution, and is optimistic about Hengli oil cylinders

UBS believes that XCMG machinery benefits from the "micro stimulus" of infrastructure construction, and the impact of real estate is small

XCMG machinery is a leading domestic engineering crane company, accounting for 50% of the market share. Its pavement machinery and piling machinery are highly related to infrastructure projects such as highway, railway and rail transit. As an important driving force for the "micro stimulus" of the central government, infrastructure construction is expected to benefit the company the most

the company signed the framework agreement on participation in Nicaragua Development Investment Co., Ltd. in the first half of the year, and will become the exclusive supplier of canal engineering equipment, mainly thanks to the rich product categories of XCMG. According to the plan, the total investment of the canal is more than 25billion pounds, and the bank expects the equipment investment to be between%. The Nicaragua canal project is a potential growth point of the company's performance, and if successfully implemented, it will significantly increase the company's net profit. However, the project has great political and financing risks

in the first half of the year, the Standing Committee of Jiangsu provincial Party committee discussed and adopted the "opinions on comprehensively deepening the reform of state-owned enterprises and state-owned assets management system". The bank judged that the promotion of state-owned enterprise reform may promote the development of the company in two aspects: first, high-quality assets within the group are expected to continue to be injected into listed companies; Second, in the case of low management shareholding, it is expected to adopt the equity incentive model to improve the quality of enterprise operation and improve the level of profit margin

the bank maintained the EPS forecast of 0.76/0.87/1.06 of the company and maintained the target price of 9.6 yuan. The bank believes that in the context of the stabilization of the company's fundamentals, the promotion of the canal project and the reform of state-owned enterprises is expected to become a catalyst for stock prices, maintaining the rating of "buying today's major projects and key R & D is tomorrow's core competitiveness"

another promising stock of UBS is Hengli oil cylinder. UBS believes that although its excavator cylinder sales are lower than expected, the new business is still advancing

in 2014, the sales of domestic excavators decreased by 11.2%, of which the decline rates of large/medium/small excavators were -4.8%/-19.6%/-4.4% respectively; The downturn in the industry led to more fierce competition in the industry, and the product price was slightly adjusted, resulting in a 28% drop in the sales revenue of the company's special oil cylinder for excavator in the first half of the year. In the context of the downward cycle of the real estate industry, the bank believes that the company's Excavator cylinder will oscillate at a low level

the company's new business is still in the investment period, and the number of personnel increased by 20% in 2013, resulting in the absolute cost σ S (PA) said that the amount is still rising, and some projects under construction will be gradually converted to fixed assets for depreciation, which will significantly reduce the net interest rate of the company. The bank believes that the company's investment in the pump and valve sector has not yet ended, and the pressure on personnel and depreciation is still large in the future

the company's small excavation hydraulic main pump has completed the performance test of the test bench, and the test is in good condition. At present, it is undergoing durability test; At present, the 8t main valve of excavator is being tested on the test bench and installed. The test results are good, and the operability is still being optimized and improved. The bank believes that the company's pump and valve research and development progress is relatively stable and is expected to become a new growth point of the company in the future

the bank lowered the company's annual EPS forecast to 0.20/0.23/0.30 yuan (formerly 0.51/0.60/0.77). The bank was optimistic about the company's future development prospects of pumps and valves, and lowered the target price to 12.5 yuan (formerly 15 yuan), corresponding to an annual p/e valuation of 63/54/42 times

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