CICC released the machinery industry performance forecast for the first quarter of '24, indicating that in terms of export demand, companies that exceeded expectations in the first quarter were concentrated on companies with high exposure to overseas exposure. The increase in the share of overseas revenue and the depreciation of the RMB exchange rate led to an increase in profit margins.
The Zhitong Finance App learned that CICC released its machinery industry performance forecast for the first quarter of '24, indicating that in terms of export demand, companies that exceeded expectations in the first quarter were concentrated on companies with high overseas exposure. The increase in overseas revenue share and the depreciation of the RMB exchange rate led to an increase in profit margins, such as construction machinery, forklifts, hardware tools, high-displacement motorcycles, etc. In terms of technology upgrades, focus on order demand and profit increases brought about by technological upgrades, such as coal mills, forklifts, etc. In terms of equipment renewal demand, the focus is on mature industries, and the release of replacement demand or backlog demand drives revenue growth. Examples: ships, rail transit, etc.
The main views of CICC are as follows:
Real estate infrastructure equipment: 1) Construction machinery. The decline in domestic demand narrowed in the first quarter, and the increase in overseas share led to some companies' profits exceeding expectations. Demand for excavators improved in March. The correction in domestic demand was mainly driven by an increase in demand for small-scale excavators. In January-March, however, CICC pointed out that the Middle East and Eastern Europe region continued its momentum, benefiting from an increase in the share of overseas revenue and depreciation of exchange rates, and profits of some companies exceeded expectations. 2) Rail transit equipment. The number of EMU deliveries increased in the first quarter, and high-profit products led to corporate profit growth.
Special equipment: Demand is fragmented, and the profitability of the industry is increasing in demand for technological reform and renewal. 1) In industries where supply exceeds demand, such as photovoltaic equipment, the overall profit level declined in the first quarter. 2) However, in industries with demand for technological reform and renewal, downstream demand maintains marginal prosperity, and profitability benefits from the increase in raw material prices and the share of high-margin products, such as ships, coal mills, etc.
Consumer products: Channel dewarehousing completed, favorable exchange rates lead to increased profitability. CICC said that the channel inventory removal, which began in mid-2022, was basically completed in early 2024. Based on last year's low base, revenue from consumer products improved in the first quarter. Since the main markets for consumer products are concentrated in Europe and America, and the industry maintains high gross margins against the backdrop of the appreciation of the US dollar exchange rate, CICC expects profit elasticity to exceed revenue elasticity in the first quarter. Examples: hardware tools and high-displacement motorcycles.
General equipment: The general sector's overall revenue and profits are weak, export exposure is high, and there is strong demand from industries with domestic alternatives. 1) Overall general sector revenue and profits are weak. The first quarter revenue of the machine tool/robot/tool industry was about -5%/-5%/-10% compared to the same period last year. Considering increased competition in the industry, profit was weaker than revenue. 2) Exports account for a relatively high share, such as forklifts, lasers, and industries with domestic replacement needs such as scientific instruments, are in high demand, and profitability is increasing.
Recommended targets:
1) Based on the profitability brought about by export demand, we recommend Anhui Heli (600761.SH), Superstar Technology (002444.SZ), Chunfeng Power (603129.SH), Zhejiang Dingli (603338.SH), and Haitian International (01882). It is recommended to focus on Hangcha Group (), Nuoli (USD), and Jerry (002353.SZ). 603298.SH 603611.SH
2) Based on focusing on order demand and profit increases brought about by technological upgrades, we recommend Zheng Meiji (601717.SH), and it is recommended to focus on Tiandi Technology (600582.SH) and Sany International (00631).
3) From the perspective of equipment renewal requirements, we recommend China Shipping (600150.SH), Times Electric (03898), and China Express (688009.SH). It is recommended to focus on Yangzijiang.
risks
Overseas demand fell short of expectations, shipping costs increased significantly, and raw material costs rose.