Construction machinery industry bottom demand expectation policy fine-tuning

The excavator industry sales in the first quarter were not optimistic. In January, sales were released. Statistics from all provinces showed a 53% year-on-year decrease. From the perspective of the amount of orders received at the show, it is expected that demand will be weak in February and March. After the quarter, there will be some improvement, mainly on the expected relaxation of credit and various policies. Excavator sales are expected to be ±5% throughout the year, and there is a more optimistic view that an expected growth of around 10%.

The insufficiency of project funds resulted in a substantial decline in the number of starts. The start of projects in the east was the worst, and the construction of projects in the Midwest was slightly better than that in the east. According to market research conducted by an agent's sales staff, currently about 50% of the companies are still in holiday shutdown status. The concrete mixing plant in Suzhou, Changzhou is still closed for vacations. It started to work after last year's fifth year of Spring Festival, and this year it postponed to Only after the fifteenth began to resume work; due to the relatively large number of planned water conservancy projects in the central provinces of Hubei Province, and the project funds are in good condition (currently 50% of the funds are in place), the demand for construction machinery has improved from the previous quarter, but it still dropped sharply year-on-year; Sichuan Project The start of work is not as good as last year, but there are a large number of planned projects.

Excavator demand structure, relatively low demand for digging and large excavation, and poor demand for excavation. This is mainly due to the fact that the current project is mainly focused on the transformation of water conservancy, rural areas, and urban areas. Large-scale mine mining also has certain project increments, and infrastructure projects such as real estate and railways directly related to the demand for excavation are under-employed, resulting in relatively weak demand for excavation. This will probably be a major feature of the sales structure this year.

With tight credit, the pressure for back-payment of equipment sales has increased, and the overdue rate has generally risen. As the government tightened credit and macroeconomic control in April and May last year, the downstream capital lag often lags behind for two months, and terminal sales are strained in July and August. The overdue sales rate of equipment has gradually increased, and the overdue rate remains at the end of the year. High, the current overdue rate is at the level of 20-25%, and the agent exists to fund the customer. In January 2012, industry sales dropped by about 60% year-on-year, partly due to the Spring Festival and weather conditions. More due to the long period of delay for many construction projects last year, many users did not expect this year, and most of them were in a wait-and-see period.

Excavator sales continued to slump, and the trend of domestic alternative foreign brands continued. During the survey, we generally feel that most foreign brands are not optimistic about the improvement of market demand this year. Judging from the number of exhibitions that have already been held during the New Year's Day, the number of foreign trade brands has dropped by 30-50% year-on-year. Some dealers have taken the initiative to reduce this year's sales target. The rate of decline is about 10%; while the targets set by domestic brand dealers and manufacturers this year still maintain a relatively high growth rate. Compared with its market share, foreign brands value the growth of earnings and performance.

Equipment leasing equipment rental is currently in the balance of profits and losses, maintaining positive cash flow more difficult. The prices of equipment rental in different regions are different. Take 20-25T excavator rental as an example. The hourly rental fee (including fuel costs, labor wages and maintenance costs) is 260-280 yuan for Anhui, and 260-280 yuan for Wuhan. Chengdu is about 300 yuan, deducting fuel costs, driver salaries, maintenance and other costs, customer equipment rental fees can only repay monthly mortgage payments or rental payments.

The recovery period of the equipment is longer and the risk of payment increases. At present, the payback period of equipment is 3-4 years, and only about half a year to one year before and after 2000. Moreover, the company’s credit sales period reached 3-4 years, customer equipment returned to the current period of 3 or 4 years, customer equipment operations at the break-even point, the long credit period led to increased risk of payment.

Dealers have high inventory pressure and operating cash flow is under pressure. Due to poor demand this year, in order to complete the annual sales target, most agents adopt a buyout method, so there are currently 2.5-3 months of inventory, and individual severe inventory is 4-5 months. After the New Year's Day, some agents used more cash to pay the total price in order to repatriate funds to increase the price reduction.

Maintain the industry "synchronous market-A" rating. The overall judgment that the current funding is tight, and the under-employment of downstream projects is a key factor affecting the industry's sales. Under the main tone of existing policy control, excavator sales are expected to remain unfavorable in February and March. Credit relaxation expects the support sector to experience a sharp rebound. In the future, we expect the implementation of policy expectations and the project funds to drive demand in the industry. We are cautiously optimistic about the construction machinery industry in 2012, and the excavator industry growth is within ±5%. We maintain Industry "Sync Market-A" rating.