Can high-growth engineering machinery continue to be tested?

In the first quarter of this year, the construction machinery sector delivered a beautiful performance forecast. Although the performance far exceeded the market's previous expectations, the secondary market did not usher in a hot market. "The recent sluggish performance of construction machinery has fully reflected the market's concern about whether the sector can maintain a higher growth," said Guo Yaling, an analyst at CITIC Securities.

The first-quarter results far exceeded expectations. "Traditionally speaking, the first quarter is the off-season of construction machinery every year, but this year's sales of construction machinery have exceeded market expectations," Guo Yaling told reporters.

In March, XGMA sold a total of 1,389 excavators, and in the entire year of 2010 XGMA also sold more than 2,800 excavators. From the performance forecast of each listed company in the first quarter, it can be seen that the sales of construction machinery are hot.

In the first quarter, Sany Heavy Industry’s net profit increased by more than 135%; Hebei Xiangong’s net profit increased by 497.85% to 697.13%; Zoomlion’s net profit increased by approximately 130% to 170%; Xugong Machinery’s April 11 evening. The pre-increase of performance was 98% to 117%, and the profit realized was between 1 billion and 1.1 billion yuan. The earliest announcement of the sales situation in the first quarter was that Liugong’s production and sales of all types of engineering machinery surpassed 20,000 in the first quarter, which doubled year-on-year, including loaders. The single-month production and sales volume of excavators, forklifts and forklifts hit record highs in March.

“Before the market has been worried that the real estate regulation will lead to the overall decline in demand for construction machinery, so it has been expected is not high, and even the buyer agencies at the end of last year, said that the sales of construction machinery may have negative growth year-on-year earlier this year,” analyst at Founder Securities Li Hao is a statement.

Continuity of high growth will be tested Although the performance of listed companies in construction machinery generally precipitously increased in the first quarter, the secondary market's stock price performance was not enough. According to statistics from Wind, the Shenwan Class 2 General Machinery Index only rose slightly by 2.27% during the seven trading days of the month, while the Shanghai Composite Index rose by 4.17% over the same period.

Although Qiu Shiliang of GF Securities (39.90-1.31% shares) gave the “buy” rating to the sector in a recent research report, he believes that affordable housing will be a key factor in ensuring that construction machinery will continue to maintain high growth in the second half of the year.

However, some buyers have different opinions. Recently, some fund company analysts surveyed by XCMG are obviously bearish on the trend of construction machinery market. Most of them think that the second quarter may become an inflection point for the high growth of this sector. Their starting point is mainly based on the fall in the growth rate of investment in fixed assets, and the subsequent impact of the country's macro-control will be reflected in the real economy one after another, effectively reducing the demand for construction machinery.

There are signs that the economy may face the risk of falling back in the second quarter. According to the previously released economic data, the PMI for February was 52.2%, which was a further drop from 52.9% in January. Among them, the non-manufacturing PMI (commercial activity) index was 44.1%, which has fallen below the critical point of 50%. In addition, according to statistics from Wind, the total investment in new projects started in the first two months of 2011 decreased by 23.6% year-on-year, and the number of fixed assets investment projects decreased by more than 15,000. Nisshin Securities believes that from the aggregate point of view, there is a possibility that the growth rate of investment in fixed assets will further decline in the second quarter.

Guo Yaling expressed his agreement on the above viewpoint. At the same time, he stated that the decline in the growth rate of construction machinery in the second quarter will be a high probability event, but it depends on whether the rate of decline will exceed the market's expectations. This will also ultimately determine whether the current valuation of the sector is Reasonable, and whether there will be subsequent investment opportunities. After the hot sales in the first quarter, the average PE of listed companies in the first and second-tier construction machinery is about 19 times, which is relatively low compared to other cyclical industries. However, historically, the average valuation of construction machinery is average. Stay about 15 times.