On March 5, the A-share construction machinery sector rose by 4.55%, leading the market, with several stocks in the sector, such as Shantui and Liugong, hitting the daily limit. Below, we analyze the logic and sustainability of this rise.
1. Drivers of the Rise
1. Policy and Demand Resonance
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1) Government Work Report Boosts Confidence: The government work report clearly states “promote the stabilization of the real estate market” and “increase urban village renovation,” directly boosting expectations for construction machinery demand. The policy emphasizes equipment upgrades and the cultivation of emerging industries, indirectly promoting infrastructure investment.
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2) Industry Data Exceeds Expectations: The China Construction Machinery Market Index (CMI) increased by 13.53% year-on-year and 5.44% month-on-month, reaching a nearly one-year high. After the Spring Festival, equipment operating hours increased by 6.67% year-on-year, with sales of loaders and forklifts expected to surge by 37.86% and 18.21%, respectively..
3) Seasonal “Spring Surge” Effect: Historical data shows that the construction machinery sector typically experiences excess returns in March and April due to the peak construction season and policy window. The industry’s rebound from the bottom, combined with policy and data resonance, strengthens market expectations for the “spring surge” trend.
2. Support from Overseas Markets and Industry Upgrades
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1) Export Growth: Leading companies have nearly 50% of their revenue from overseas markets, where gross margins are higher than domestic ones. Coupled with expectations of interest rate cuts in the U.S. and growing demand from developing countries, this forms a performance support.
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2) Technological Transformation: The trends of intelligence and electrification are driving the industry towards “new productive forces,” aligning with policy directions and indicating clear long-term growth potential.
2. Core Stocks and Investment Strategies
1. Core Stock Opportunities
Shantui (000680.SZ)
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Logic: A leader in the bulldozer sector, Shantui has made significant progress in expanding overseas markets (products cover over 80 countries), with year-on-year net profit growth and leading the industry in export earnings.
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Catalyst: Orders from the Russian and Ukrainian markets are increasing, and internationalization efforts are deepening; the Changsha International Construction Machinery Exhibition may unveil a new generation of intelligent equipment.
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Risk: Fluctuations in domestic real estate demand may impact short-term performance, requiring attention to the pace of order fulfillment.
Sany Heavy Industry (600031.SH)
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Logic: Over 50% of revenue comes from overseas, benefiting from infrastructure demand in developing countries; the electrification transformation is accelerating, with sales of new energy equipment expected to exceed 30%.
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Catalyst: The Changsha International Construction Machinery Exhibition may unveil a new generation of intelligent excavators.
XCMG (000425.SZ)
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Logic: Deepening state-owned enterprise reforms have significantly reduced costs and increased efficiency; overseas market layout is improving, with market share in Asia, Africa, and Latin America continuing to rise.
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Catalyst: Plans to spin off its excavator business for independent listing, raising expectations for valuation reconstruction.
Liugong (000528.SZ)
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Logic: A leader in the loader sector, with a year-on-year sales increase in February; strategically focusing on intelligence and collaborating with Huawei to develop autonomous mining solutions.
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Catalyst: Plans to launch its first fully electric loader within the year to capture the green infrastructure market.
Xiamen XGMA (600815.SH)
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Logic: A regional leader in infrastructure, benefiting from the construction of the “Haixi Economic Zone” in Fujian; recently provided financing guarantees for quality customers, enhancing order acquisition capabilities.
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Risk: High price-to-earnings ratio, requiring caution regarding performance realization not meeting expectations.
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2. Investment Strategy: Cautious High Pursuit
Why do we say to be cautious in pursuing high? Because the construction machinery sector has risen about 30% from its low point, so although it led the market yesterday, it has actually been rising for some time, and we need to consider the degree of market realization; additionally, I believe that the rise in the construction machinery sector is also partly benefiting from the strong performance of the robotics sector, as in terms of sector classification, the robotics concept belongs to the general equipment and specialized equipment, which are all part of the larger machinery manufacturing sector. Therefore, if we want to look at sustainability, we should pay more attention to the core market sentiment of the robotics sector.
3. Risk Warning
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Real Estate Demand Below Expectations: If real estate sales do not recover sufficiently, it will drag down domestic demand for construction machinery.
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External Policy Disturbances: Global trade frictions (such as increased tariffs on China by the U.S.) may affect the growth rate of the export market.
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Valuation Adjustment Pressure: Some stocks have risen too much in the short term, requiring caution regarding profit-taking by investors.
4. Conclusion
The construction machinery sector is benefiting in the short term from policy catalysts, data recovery, and seasonal factors, showing strong upward momentum; in the medium to long term, the logic of overseas expansion and technological upgrades needs to be validated. Investors can layout along the “leading + segmented innovation” main line, focusing on Shantui (internationalization and intelligence), Sany Heavy Industry (electrification transformation), and other targets, paying short-term attention to policy implementation and quarterly performance, while focusing on globalization and intelligent transformation targets in the medium to long term.