Demand for construction machinery will be gradually released in the northeast and northwest of the country.

Investment tips:

Taking the excavator as an example, we believe that the high growth of construction machinery in January-February 2011 will still mainly come from the eastern region, accounting for nearly half of the country's sales, and the demand will continue to increase. At the same time, the northeast and northwest regions have experienced rapid growth, with sales growth rates of 147% and 101%, respectively, far exceeding the growth rate of local fixed asset investment. This shows that the demand for mechanization in the construction of the western region has gradually increased and is expected to become a new driving force for the growth of construction machinery throughout the year.

Since we recommended construction machinery at the beginning of the year, the construction machinery sector averaged 10.3%. Industry leading companies Sany, China United and Liugong rose 29.6%, 11.5% and 13.0%, respectively, significantly outperforming the broader market's gain of 6.3%; H shares The Associated Press Group rose 12.2%, substantially outperforming the Hang Seng China Enterprise Index's 1.6% gain. Looking ahead, we believe that the construction machinery sector still has upward momentum under the promotion of the “Fourth Quarterly” report. We still recommend the allocation of leading and export flexibility. The company includes Sany Heavy Industry, Zoomlion, Liugong, and Anhui Heli. ;

reason:

We analyzed the regional distribution of investment in fixed assets and sales of various mechanical products in 2010 and concluded that:

1) As a whole, the high growth of construction machinery products in 2010 still mainly comes from the demand in the east, while the high growth in the western region is still not significant, and the share is still low, which has not yet exerted the pulling effect;

2) In particular, the tendency of truck cranes is contrary to other products. The growth rate in the northeast, north and northwest regions is relatively high, but due to the relatively low proportion in the western region, the overall growth has limited effect, which leads to the 2010 auto cranes in various products. Relatively low sales growth;

3) From the matching of fixed assets investment, the proportion of investment in fixed assets in the eastern region was higher than that of the corresponding construction machinery. The proportion of product sales in the western region was higher than that of FAI, indicating that the mechanical inventory in the eastern region was higher and the new construction started. Few, marginal demand for construction machinery is not large; while the western region is currently in relatively new start, the demand for new construction machinery purchases is strong;

From the regional distribution of excavator sales in January-February 2011:

In terms of growth rate, coastal areas such as East China and South China are similar to the national average, while the northeast and northwest regions have a relatively high growth rate of 147% and 101%, respectively, far exceeding the local FAI growth rate, indicating that the demand for mechanized construction in the west has gradually increased. Become a new driving force for the growth of construction machinery throughout the year;

Valuation and recommendations:

At the current stock price, the A shares of the construction machinery sector correspond to the PE valuations of 2010 and 2011 of 22.3 and 17.0, respectively, which are at the low end of the reasonable valuation range. Looking ahead, we believe that the construction machinery sector is still driven by There is a rising momentum, we still focus on the allocation of leading + export flexibility, the company includes Sany Heavy Industry, Zoomlion, Liugong and Anhui Heli, etc.;

risk:

The domestic macroeconomic control exceeded the market expectations, the cost pressure brought by rising raw material prices, and the spread of the situation in the Middle East affected the export recovery.