The Zhitong Finance App learned that Huachuang Securities released a research report saying that the large-scale equipment renewal action plan clarifies the target and direction of equipment renewal in the construction machinery industry. It is expected that more detailed supporting policies will be introduced in the future to strictly restrict the use of old equipment and at the same time encourage the replacement of more efficient and intelligent new equipment. From the perspective of construction machinery itself, the service life is usually about 8 years. Taking excavators as an example, they are currently at the starting point of equipment renewal in the previous upward cycle. It is expected that more equipment will enter the normal replacement cycle in the future, and industry demand will improve.
Matters: Recently, the Ministry of Housing, Urban-Rural Development issued the “Notice on the Implementation Plan for Promoting the Renewal of Construction and Municipal Infrastructure Equipment”, which clarifies that construction equipment should be updated and eliminated in accordance with the “Technical Specification for Inspection of Machinery and Equipment at Construction Sites” and other requirements, and construction machinery and equipment (vehicles) with high pollution, high energy consumption, severe aging and wear, and poor technology, including excavators, cranes, loaders, concrete mixers, lifts, bulldozers and other equipment (vehicles). Encourage the upgrading and purchase of new energy, new technology construction machinery, and intelligent construction equipment such as intelligent lifts and construction robots.
The views of Huacheng Securities are as follows:
The phasing out of outdated devices will be accelerated, and demand for updates is expected to boost.
In recent years, construction equipment technology, such as excavators, has been rapidly being upgraded. Although old equipment has shortcomings such as high emissions and pollution, high maintenance costs, low energy efficiency, and poor safety for personnel, the scale of construction machinery holdings in China is still growing. According to data from the China Construction Machinery Association, as of 2022, the number of major construction machinery products in China was 8.56 million to 9.27 million units, an increase of about 3% over the previous year, and some equipment is in overtime. The elimination and withdrawal of old equipment will also surely bring some demand for updates. It is expected that with the transmission of the policy, the demand for equipment renewal is expected to increase.
Emission standards may be strong restrictions, and it is expected that they will be promoted on a wider scale throughout the country.
Although there are no mandatory scrapping regulations, most cities have guided the upgrading of terminal equipment through increased emission standards. Among the country's major provincial capitals, most cities have banned the use of equipment with national emission standards 2 and below in the core area since 2020. It is expected that more cities will introduce corresponding regulations in the future. This policy guides large-scale equipment updates, and is guided by energy consumption, emissions, and technical standards. It will inevitably take policy and regulatory efforts to eliminate and limit the entry of old construction machinery with high emissions and high energy consumption, and encourage construction companies and leasing companies to trade in old equipment that does not meet environmental regulations. This is of great significance in removing backward production capacity and reshaping the healthy ecology of the industry.
Domestic sales of excavators improved in March, and industry sentiment improved steadily.
Downstream construction continued to improve as the resumption of work and production progressed after the holiday season, improved construction conditions, etc., and domestic sales of excavators showed a recovery trend in March. According to statistics from the China Construction Machinery Industry Association on major excavator manufacturers, in March 2024, domestic excavator sales were 15,188 units, up 9.27% year on year, and the cumulative decline narrowed sharply in the first quarter. The domestic construction machinery market has undergone continuous downward adjustments, and the bottom is now clear. It is expected that as demand for downstream equipment gradually recovers and demand for industry renewal gradually rises, the industry is expected to bottom out and rebound.
With the help of equipment renewal policies, demand for construction machinery is expected to continue to recover.
The large-scale equipment renewal action plan clarifies the target and direction of equipment renewal in the construction machinery industry. It is expected that more detailed supporting policies will be introduced in the future to strictly restrict the use of old equipment, and at the same time encourage the replacement of more efficient and intelligent new equipment. From the perspective of construction machinery itself, the service life is usually about 8 years. Taking excavators as an example, they are currently at the starting point of equipment renewal in the previous upward cycle. It is expected that more equipment will enter the normal replacement cycle in the future, and industry demand will improve.
1) Traditional construction machinery: We recommend Sany Heavy Industries (600031.SH), an excavator leader and global leader. It is recommended to focus on Xugong Machinery (000425.SZ), which has continued to deepen reforms of state-owned enterprises and is leading in scale; Liugong (000528.SZ), which has excellent performance in the first quarter and continues to gain strength in national four products; Zoomlion Heavy Industries (000157.SZ), which has obvious direct sales channel advantages and rapid overseas growth; and Hengli Hydraulic (601100.SH), a leader in construction machinery core components;
2) Forklifts: We recommend Anhui Heli (600761.SH) with a perfect industrial chain and high overseas growth. It is recommended to focus on Hangcha Group (603298.SH), which has excellent product structure and excellent profitability;
3) Aerial work platform: We recommend Zhejiang Dingli (603338.SH), which is significantly leading the industry in terms of arm-type product release and profitability in the Phase V factory.
Risk warning: Large-scale equipment renewal policies fall short of expectations, and domestic fixed asset investment falls short of expectations.