With the introduction of policies supporting the real estate sector and large-scale equipment updates since 2024, the demand for the replacement of existing engineering machinery is expected to accelerate.
Since the second half of 2021, the engineering machinery industry, which had enjoyed five consecutive years of growth, has entered a downward cycle that has lasted for three years. “In the first half of this year, some product lines in the engineering machinery sector faced weak demand and insufficient orders, leading to intense market competition, declining product prices, and difficulties in accounts receivable,” said Su Zimeng. He added that the insufficient momentum of global economic growth, along with the increasing complexity, severity, and uncertainty of the external environment, presents numerous difficulties and challenges for enterprises and the overall recovery of the industry.
The downturn period is a critical time for contemplating the future direction of industry development and provides an opportunity for companies to distinguish themselves amid fierce competition.
Data shows that in the first half of the year, the sales volume of twelve major product categories included in the statistics of the China Engineering Machinery Industry Association exhibited signs of stabilizing at a low point, with a total domestic and foreign sales volume of 968,900 units, a year-on-year increase of 4.58%. Among these, domestic sales totaled 597,100 units, up by 0.31%, while exports reached 371,700 units, reflecting a year-on-year increase of 12.3%.
In terms of profitability, key enterprises tracked by the association reported stable revenue, with a cumulative year-on-year growth of 0.14%. Total profits continued to show recovery, with a year-on-year increase of 3.87%. Accounts receivable grew by 1.61%, and inventory decreased by 6.14%, indicating that overall operational risks in the industry are manageable.
Several listed companies in the sector have recently released their mid-year performance reports. XCMG (000425.SZ) disclosed its semi-annual report on August 28, showing stable revenue with operating income of 49.632 billion yuan, maintaining its leading position in the domestic industry. Revenue from high-end products increased by over 10%, while revenue from new energy products soared by 26.76%.
Sany Heavy Industry (600031.SH) released its 2024 semi-annual report on August 29, reporting an operating income of 38.738 billion yuan, a year-on-year decrease of 1.95%, while net profit attributable to shareholders rose to 3.573 billion yuan, an increase of 4.80%.
On August 29, Liugong (000528.SZ) announced its 2024 semi-annual report, revealing an operating income of 16.06 billion yuan, up by 6.81% year-on-year, with a net profit attributable to shareholders of 984 million yuan, reflecting a substantial increase of 60.20%.
Shantui (000680.SZ) released its semi-annual report on the evening of August 22, showing a total operating revenue of 6.508 billion yuan in the first half of 2024, a year-on-year increase of 33.81%, with a net profit attributable to shareholders of 418 million yuan, up by 38.49%.
According to the reports from these companies, the reasons for the performance improvement include increased revenue from overseas business as well as development after structural adjustments and deepening reforms. Shantui stated that the company proactively responded to changes in market conditions, accelerating adjustments in market, business, and product structures, which further enhanced its market share in the domestic market and led to high growth in export business. Liugong noted that its performance improvement was mainly due to its high brand recognition and market share, which provided a significant competitive advantage. The merger with Guangxi Liugong Group Machinery Co., Ltd. enabled overall listing, creating a solid foundation for releasing the vitality of mixed ownership reform and enhancing the company's endogenous growth momentum.
“We estimate that excavator sales in 2024 are likely to remain flat or slightly decrease year-on-year, indicating that the engineering machinery industry is showing signs of bottoming out, and leading domestic manufacturers are expected to fully benefit from the industry's recovery,” said analyst Yao Jian from Guohai Securities. He believes that the introduction of policies supporting the real estate sector and large-scale equipment updates will likely accelerate the demand for the replacement of existing engineering machinery.
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