Key investment points:
Market style: it shows high-low switching and underestimates the value. The construction machinery industry is expected to benefit
Recently, affected by the tightening expectation of the Federal Reserve’s monetary policy, the yield of 10-year Treasury bonds has been rising, and the overvalued industries with high interest rate sensitivity have dropped significantly; On the other hand, with the rise of stable growth expectations, undervalued industries were boosted. The market style shows obvious high-low switching. Under the current style, construction machinery with “steady growth + undervalued value” is expected to benefit.
Valuation dimension: the growth of the industry is greater than the periodicity, and the construction machinery industry has room for valuation improvement
In 2021, under the downturn of fixed asset investment, the index of construction machinery industry dropped by nearly 30%. At the same time, the valuation went down. By vertical comparison, the current construction machinery industry is at the quantile level of undervalued value within 30%; In horizontal comparison, the valuation of China’s construction machinery industry is significantly lower than that of foreign countries, which may be mainly due to the weak periodicity of foreign leaders. We believe that China’s leaders can also better restrain the cycle and achieve growth through globalization, service and other means, so as to enjoy the valuation premium.
Profit dimension: multi factor catalysis, profit is expected to improve marginally
Demand side: steady growth accelerates new demand. The performance of construction machinery industry is highly related to the financial cycle. At present, steady growth accelerates, and the industry is expected to be catalyzed; At the same time, low-carbon accelerates to open up the demand space for Industry renewal.
Cost side: commodity prices fall, and the cost pressure of the industry is expected to ease; The import substitution of core parts such as hydraulic parts is accelerated, and the lower cost of domestic parts is also expected to be alleviated. At the same time, leading enterprises continue to increase R & D investment, promote digital transformation and boost the efficiency of the industry.
Quantitative perspective: EPS growth macro desensitization, short-term market momentum turning, pricing logic returning to growth, macro environment stabilizing, long-term interest rate and credit forming strong support; The EPS growth rate of construction machinery industry is gradually macro desensitized, and the industry valuation premium trend is upward; The policy face ushered in a turning point, which will drive the real estate market to warm up; The short-term market momentum has turned, and the action volume under the influence of the early boom has been digested by the market. In the future, the industry pricing logic will shift to long-term growth again.
It is recommended to pay attention to individual stocks
At present, the construction machinery industry presents the trend of globalization, low-carbon and intelligence, which is conducive to the further improvement of the concentration of leading industries. At the same time, the domestic substitution of core parts represented by hydraulic parts is accelerated. We suggest paying attention to the three taps Sany Heavy Industry Co.Ltd(600031) (600031. SH), Zoomlion Heavy Industry Science And Technology Co.Ltd(000157) (000157. SH), XCMG machinery (000425. SZ) and hydraulic parts taps Hengli hydraulic (601100. SH) and Yantai Eddie Precision Machinery Co.Ltd(603638) (603638. SH).
Risk tips
(1) the steady growth was lower than expected, and the growth rate of fixed asset investment continued to decline; (2) Real estate regulation intensified, and the new construction of real estate was less than expected; (3) Repeated epidemic situation and blocked export; (4) The cost of raw materials such as steel continued to rise; (5) The localization and replacement of core parts are not as expected.
