Review and Prospect of Construction Machinery Semi-annual Report 2012

The focus of the market valuation is shifted downwards, and the construction machinery sector has a low valuation advantage. Currently, the rolling average price-earnings ratio of the Shanghai and Shenzhen stocks is around 18 times, and the construction machinery industry with 15.92 times has relatively low valuation advantages. Among them, the rolling price-earnings ratio of listed companies is tracking down the stock price by 9.34 times. The stock price has responded to the declining performance this year. Worries.

Revenue and profits both declined, and asset status indicators such as inventory and accounts receivable turnover trends continued to decline. In the first and second quarters of 2012, the income of mainstream listed companies in the construction machinery industry was -17% and -16%, respectively, and their net profits were 30 and -26%, respectively, except that Zoomlion was mainly driven by profit growth in the concrete business business. The company experienced a general decline. Due to the increase in leverage overdraft sales in the previous period, accounts receivable had a rapid growth in 2010-2011, and the average operating cash flow of the domestic construction machinery industry has been negative since 2011, causing tight cash flow in the industry. The accounts receivable/operating income of the industry exceeded the historically high level of financial crisis in 2005 and the financial crisis at the end of 2008. Inventories are not the focus of the crisis. The situation is better than in 2005. Accounts receivable and cash pressure are high. The actual cash of the company is tight and the debts are increasing. Each unit of income needs more cash support.

During the “Twelfth Five-Year Plan” period, the growth rate of the construction machinery industry may decline to an overall level of 10-15%. The construction machinery industry will continue to face a downward trend in the third quarter. The fourth quarter waiting for the policy, if the infrastructure projects in various regions are opened one after another, it is hopeful that the equipment sales will be boosted. . The investment in fixed assets of various downstream industries of construction machinery has been negatively increasing since the end of the decade, and real estate has been affected by regulation. The area of ​​newly-started land and land acquisition area in July have both declined in the same way, but we expect the earthmoving machinery to continue to decline in the third quarter. The quarter is expected to pick up, and maintain the judgment of the annual total decline. Concrete machinery experienced three-way factors such as increased mix-and-construction ratio in long-term, short-duty vehicles to replace long-haul vehicles, and three-and-four-tier cities. Demand for growth in the second half of the year was lack of new momentum. Therefore, it is expected that the growth rate will also slow down. It can maintain a slight increase.

Cash is king and asset management is safer. The different cash management, fixed asset management and risk control brought about by the different judgments of the China United and the three countries on the economic situation led to the performance of Zoomlion is still good, and the Trinity crisis appeared. Thirteen-year dynamic price-earnings ratio of 10.1 times for Trinity, the valuation is slightly expensive; and only 6.72 times for China United, and companies are relatively light assets, high per capita output value, with advantages in the transition process.

risk warning. The pace of economic recovery at home and abroad may not be as expected; there are uncertainties in the intensity and progress of investment in major projects; and the volatility of raw materials will increase.