Construction machinery industry demand in June is sluggish

In June, the construction machinery sector continued to run through the machinery index and market. In June, the construction machinery index decreased by 21.2% in the same month. The machinery index, the Shanghai Composite Index, and the Shanghai and Shenzhen 300 Index respectively fell by a total of 18.%, 12.8%, and 15.4% in the same period. The construction machinery index significantly underperformed the broader market and industry indices.

Infrastructure investment maintains a rapid growth rate, and the increase in base number in the second half of the year imposes constraints on the promotion of space. The growth rate of infrastructure investment continues to rise, but there is limited room for improvement. From January to May, the accumulative growth rate of infrastructure investment represented by the production and supply of electric gas and water, transportation and warehousing, and water conservancy industry investment was 24.12%. Infrastructure investment is still underpinning the economy. It is expected that this year will still maintain a certain scale of investment. However, from the year-on-year growth rate, infrastructure investment last year began to exert its force in June. Therefore, infrastructure investment growth in the second half of this year will have limited room for improvement.

Real estate starts new low growth rate stable. From January to May, the growth of real estate investment slowed down, and the area of ​​new start-ups and sales of commercial housing also declined slightly. Since the middle of 2012, investment data has gradually bottomed out, and the year-on-year growth rate will converge. From a single month perspective, new start-ups, construction, and completed areas in May all achieved a positive quarter-on-quarter increase of 5.3%, 8.9%, and 16.3% respectively, indicating that the current attitude of developers is still relatively positive. With less than expected property regulation and real estate sales momentum is still good, the growth rate of new real estate may be stable.

In May, the sales of major types of construction machinery continued to grow year-on-year, and the cumulative decline further narrowed, in line with expectations. In May, the sales volume of excavators and loaders increased 6% and 13.67% year-on-year, respectively, and cumulative sales from January to May decreased by 14% and 7.36% respectively year-on-year, further reducing the decline. In May, sales of road rollers increased by 7.69% year-on-year, 1~5. Monthly cumulative sales increased by 6.09% year-on-year, further increasing the increase. In May, the sales of bulldozers fell 2.99% year-on-year, and cumulative sales from January to May fell 7.84% year-on-year, further reducing the decline.

Excavator structural point of view, real estate investment in May to promote sales growth in digging has accelerated. As real estate and infrastructure investment continued to pick up, the small dig in May increased by 17% year-on-year (20% in April), and the increase in excavation accelerated, up 12% year-on-year (up from 10% in April). Coal mining investment in fixed assets is still at a low point, and sales volume for excavation is still weak, down 38% year-on-year.

Maintain the industry "neutral" rating. The market began to enter the disclosure period of the interim report, and the market’s concern about the expectation of a sharp decline in the leading mid-year report for construction machinery increased. At the same time, the new government is more tolerant of economic growth, the economic restructuring is expected to increase, the probability of large-scale investment in infrastructure is not high, new construction of real estate is at a low level, and the demand for engineering machinery industry driven by investment may remain sluggish. Maintain the “neutral” investment rating of the industry, and suggest to focus on individual stocks whose interim report may exceed expectations.

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