Basic conclusion
Recently, the RMB has continued to weaken against the US dollar. We believe that the impact of exchange rate fluctuations on the machinery industry is as follows:
1) the income of export-oriented companies is expected to increase: the overseas income of shenwanyi mechanical equipment sector in 2021 is 250514 billion yuan. Assuming that the RMB depreciates by 5%, the income can be increased by 12.526 billion yuan under the condition that other factors remain unchanged.
2) the gross profit margin or product sales volume of export-oriented companies is expected to increase: in most cases, the increase of the exchange rate of the US dollar against the RMB makes the export-oriented machinery and equipment companies increase their income under the condition of constant cost, so as to improve the level of the company’s gross profit margin; In a few cases, export-oriented companies will transfer part of the profits from exchange rate fluctuations to downstream customers, and the cost performance of products will be improved, which is expected to drive the growth of product sales.
3) the competitiveness of imported competitive products has declined and domestic substitution has accelerated: in recent years, the import amount of China’s machinery and transportation equipment has been increasing. Under the recent depreciation of RMB, the cost of imported machinery and equipment has further increased, and domestic brands are expected to accelerate domestic substitution with further price advantages.
Elastic calculation of gross profit margin of export-oriented companies: assuming that the depreciation rate of RMB is 5%, we calculate the elasticity of income and gross profit margin of companies with high absolute amount of overseas income in the machinery and equipment industry, and draw the following conclusions: 1) companies with high absolute amount of overseas income are expected to increase their income by more than 1 billion yuan, and the head companies are expected to benefit from this round of RMB depreciation cycle; 2) Companies with a high proportion of overseas revenue will show a higher flexibility in the change of gross profit margin. Among the top 30 companies with a high proportion of overseas revenue, 8 companies are expected to increase the gross profit margin of 3PCT or more when the RMB depreciates by 5%, and the profitability of companies with a high proportion of export revenue is more obvious.
With the rising import cost, CNC cutting tools are expected to accelerate domestic substitution: in recent years, the import amount of many types of mechanical equipment has steadily increased. Under the background of the recent depreciation of RMB, the cost of imported mechanical equipment by downstream companies has increased. We believe that CNC cutting tools industry is expected to accelerate domestic substitution. The reasons are as follows: 1) the growth of China’s export volume of cutting tools far exceeds the growth of import volume: China’s export volume of cutting tools was 22.516 billion yuan in 2021, A year-on-year increase of 25.45%, while China’s tool import in the same period was only 10.632 billion yuan, a year-on-year increase of 5.69%. The domestic substitution trend in China’s tool market has become more and more obvious. 2) The proportion of CNC of metal cutting machine tools has increased: the proportion of CNC of metal cutting machine tools in China has increased from 13.23% in 2005 to 44.85% in 2021. The proportion of CNC of domestic machine tools has shown an upward trend for a long time. We believe that under the catalysis of the recent devaluation of RMB, the import cost of CNC tools has increased again, and the comprehensive advantages of domestic brands have been further highlighted to promote the domestic substitution of CNC tools.
Investment suggestions: we recommend paying attention to three directions: 1) companies with a high proportion of overseas income: companies with a high proportion of overseas income can produce greater gross profit margin flexibility in the case of RMB devaluation. We recommend Junhe Pumps Holding Co.Ltd(603617) , Hangzhou Great Star Industrial Co.Ltd(002444) ; 2) Subdivision direction of relative advantage improvement due to the increase of import cost: under the background of RMB devaluation, the cost performance of domestic CNC tool products is prominent, and domestic substitution is expected to accelerate. It is recommended to pay attention to Oke Precision Cutting Tools Co.Ltd(688308) , Zhuzhou Huarui Precision Cutting Tools.Co.Ltd(688059) . 3) Chinese companies with comparative advantages and increased proportion of overseas income: recommend Sany Heavy Industry Co.Ltd(600031) .
Risk tip: there is a risk that the RMB exchange rate will fluctuate sharply due to macroeconomic changes, and the domestic substitution of CNC tools is less than expected.
