Construction Machinery: Moment improvement, valuation still low

The recovery in sales volume was relatively weak. In March, the construction machinery sector oscillated downward. The construction machinery sector fell by 7.1% in March. The Shanghai Composite Index fell by 3.9% during the same period, and the Shanghai-Shenzhen 300 Index lost 3.1%, which was weaker than the broader market. We believe that the correction of the construction machinery industry this month was mainly due to the weak recovery in sales volume after experiencing a wave of valuation repairs.

The month-on-month sales improvement was mainly due to seasonal factors. The reasons for the significant increase in the sales volume of construction machinery in February were: 1) mainly due to seasonal factors; 2) some infrastructure construction started one after another, and new construction projects for farmland water conservancy increased.

Domestic demand for construction machinery was weak in January-February, and the export market exceeded expectations. Looking at the current situation, there is no significant improvement in infrastructure construction. The downstream wait-and-see mood is still strong. Some downstream customers use short-term leases or purchase two mobile phones to supplement equipment. The demand for new aircraft is weak. From January to February, sales of excavators, loaders, truck cranes, bulldozers, and road rollers decreased by -33.1%, -18.2%, -10.8%, -26.2%, and -42.3%, respectively. Export market performance exceeded market expectations. From January to February, exports of excavators and loaders increased by 82% and 36.6% respectively.