Core Viewpoint - The sales of new energy heavy trucks in China have experienced a significant decline in February 2026, marking the first year-on-year decrease since February 2023, ending a streak of 36 consecutive months of growth [1][2][16]. Sales Performance - In February 2026, the domestic new energy heavy truck market sold 7,435 units, representing a 9% year-on-year decrease and a 54% month-on-month decline [1][2]. - The overall heavy truck market saw a total sales of 28,400 units in February, with a 41% decline both month-on-month and year-on-year [2]. Market Share - In February 2026, new energy heavy trucks accounted for 26.16% of the total heavy truck market, down approximately 7 percentage points from the previous month but up nearly 10 percentage points from the same month last year [4]. - For January-February 2026, the market share of new energy heavy trucks reached 30.58%, slightly higher than the 2025 annual share of 28.89% [4]. Regional Distribution - By February 2026, there were 285 cities in China with registered new energy heavy trucks, with 65 cities having over 100 registrations [7]. Leading Companies - In February 2026, 12 companies sold over 100 units of new energy heavy trucks, with two companies exceeding 1,000 units: XCMG with 1,230 units and SANY with 1,078 units [9]. - The top 12 manufacturers showed mixed results in February, with some companies like Yutong and United Heavy Truck achieving over 100% growth, while others experienced significant declines [11]. Cumulative Sales Data - Cumulatively, from January to February 2026, new energy heavy truck sales reached 23,500 units, a 54% increase year-on-year, although the growth rate has significantly narrowed compared to January [12]. - The leading companies in cumulative sales for January-February 2026 included XCMG (4,413 units), China National Heavy Duty Truck (3,365 units), and SANY (3,296 units) [14]. Market Dynamics - The decline in sales in February 2026 is attributed to the long Spring Festival holiday and the reduction in the new energy vehicle purchase tax, which led to a preemptive buying surge in late 2025 [1][2][16].

Group 1 - South Korean retail investors have significantly increased their net purchases of Chinese assets, particularly in sectors such as power equipment, engineering machinery, and chemicals, which are classified as HALO assets by Goldman Sachs [1] - The top net bought A-shares by South Korean investors include companies like SANY Heavy Industry, China Power Construction, and Guangxun Technology, while the leading Hong Kong stocks include China Energy Construction and Baidu [1] - The current trend indicates that as risk appetite rises among investors, there is a shift towards HALO assets, suggesting that AI technology stocks are perceived to be overvalued [1] Group 2 - The performance of US tech stocks has been mediocre this year, while the South Korean stock market has shown strong growth but recently experienced volatility [1] - Global capital is increasingly seeking certainty in investments, especially following geopolitical events in the Middle East, indicating that HALO assets are unlikely to be replaced by AI and some sectors are entering a price increase cycle [1]

Core Viewpoint - SANY Group showcased its commitment to the North American market by participating in the Las Vegas International Construction Equipment Exhibition with a significant presence, featuring 32 advanced machines and 17 diverse attachments, emphasizing its strategic focus on high-end markets and innovative technology [1][3][4]. Group 1: Exhibition Highlights - SANY Group's exhibition area covered 4,686 square meters, marking a substantial increase from the previous event, positioning it as one of the largest exhibitors [3]. - The showcased products included a full range of machinery such as excavators, pile drivers, loaders, road machinery, cranes, and port machinery, attracting numerous industry professionals and partners [3][4]. - All exhibited equipment was tailored to meet the specific needs of North American customers, including 10 newly developed models designed for the local market [4]. Group 2: Product Features and Innovations - The micro-excavator features a zero-tail swing design, enhancing maneuverability in tight spaces, while the medium excavator offers strong digging performance and precise control [4]. - The cranes are equipped with an intelligent front window system, improving operational safety and comfort, and the new generation of loaders integrates advanced smart functions to significantly boost efficiency and economic performance [4][5]. - SANY's AI service assistant made its debut, providing intelligent diagnostics and interactive fault identification, streamlining equipment maintenance processes [5]. Group 3: Strategic Focus and Market Insights - The North American market is viewed as a high-end benchmark for the global construction machinery industry, and SANY's strategy emphasizes local adaptation and customized solutions to meet stringent industry standards [4][6]. - SANY aims to increase its R&D investment and channel development in North America, enhancing its service system to better align with local demands and improve brand penetration in the high-end market [5][6]. - The company has established a comprehensive competitive advantage through its focus on electrification, intelligence, and internationalization, successfully breaking the long-standing dominance of foreign brands in the high-end construction machinery market [6].

Group 1 - Korean investors have shown significant interest in A-shares, with top net purchases including SANY Heavy Industry, Power Construction Corporation of China, and Accelink Technologies, among others [1][3] - In the Hong Kong market, notable net purchases include China Energy Construction, MiniMax, and Harbin Electric, indicating a strong preference for energy and technology sectors [1] - The trend reflects a shift towards HALO assets, which are characterized by stability and growth potential, particularly in the context of rising global uncertainties [1] Group 2 - Over the past month, three ETFs have made it to the top 20 net purchases by Korean investors, with the Silverhua CSI Innovation Drug Industry ETF leading at a net purchase of $148.05 million [2] - The strong performance of the Korean stock market has encouraged local investors to allocate funds into Chinese assets, particularly in the innovative drug and artificial intelligence sectors [2][3]

Investment Rating - The report maintains an "Outperform" rating for the machinery equipment industry [1]. Core Insights - The machinery equipment industry is experiencing sustained growth, with February exports exceeding expectations. The main drivers are the "replacement cycle and external demand" [1][6]. - Domestic sales of excavators slightly decreased in January-February 2026, while exports continued to grow significantly. The overall upward trend for the year remains unchanged despite short-term fluctuations due to the Spring Festival [6]. Summary by Sections Market Review - In February 2026, the Shenwan Machinery Index rose approximately 7.35%, outperforming the Shanghai Composite Index by 6.26 percentage points and the CSI 300 by 7.26 percentage points [13]. - The performance of different segments includes: - Complete machine manufacturing for earthmoving/concrete/lifting machinery: -1.7% - Complete machine manufacturing for others: 2.5% - Components: 20.7% [13]. Industry Tracking - Excavator sales in January-February 2026 totaled 35,934 units, a year-on-year increase of 13.10%. Domestic sales were 15,478 units, down 9.19%, while exports reached 20,456 units, up 38.8% [18]. - Loader sales for the same period were 21,299 units, a year-on-year increase of 27.9%. Domestic sales were 9,156 units, up 11.5%, and exports were 12,143 units, up 43.9% [18]. Macro Dynamics - In February 2026, the manufacturing PMI fell to 49.0%, indicating a seasonal decline. However, high-tech manufacturing PMI remains in the expansion zone at 51.5% [48]. - The government has clarified its fiscal strategy, planning to issue 4.4 trillion yuan in special bonds and 800 billion yuan in ultra-long-term special bonds to support large-scale equipment updates [48]. Key Targets - Recommended leading manufacturers include: - Zoomlion Heavy Industry (000157) - Sany Heavy Industry (600031) - XCMG (000425) - LiuGong (000528) [6]. - Core component manufacturers to focus on: - Hengli Hydraulic (601100) - Aidi Precision (603638) - Fushite (301446) [6].

Investment Rating - The industry investment rating is "Overweight" indicating that the industry index is expected to outperform the CSI 300 index by 10% or more over the next six months [7]. Core Insights - The report highlights a positive trend in excavator exports, with a year-on-year increase of 37.2% in February 2026, despite a domestic sales decline of 42% due to the Chinese New Year holiday affecting workdays [6]. - The domestic demand for excavators is anticipated to recover gradually, supported by major projects in sectors such as mining and water conservancy, which are expected to release demand dividends [6]. - The loader segment also shows growth, with domestic sales increasing by 11.5% in January-February 2026, driven by the commencement of significant domestic projects [6]. - The report emphasizes the importance of companies like Zoomlion, which raised RMB 60 billion through convertible bonds to support global expansion and innovation in technology [6]. - The report suggests focusing on leading companies with strong brand recognition and efficient cost structures, such as Sany Heavy Industry, Zoomlion, LiuGong, Shantui, and Hengli Hydraulic, as they are well-positioned for growth in both domestic and international markets [6]. Summary by Sections Excavator Market - In February 2026, a total of 17,226 excavators were sold, a decrease of 10.6% year-on-year, with domestic sales at 6,755 units, down 42% [6]. - Year-to-date (January-February) domestic sales were 15,478 units, down 9.19%, while exports reached 20,456 units, up 38.8% [6]. Loader Market - In February 2026, 9,540 loaders were sold, marking a year-on-year increase of 9.28%, with domestic sales at 3,863 units, down 14.3%, and exports at 5,677 units, up 34.4% [6]. - Year-to-date (January-February) domestic sales were 9,156 units, up 11.5%, and exports were 12,143 units, up 43.9% [6]. Company Developments - Zoomlion's issuance of convertible bonds aims to enhance its global competitiveness and support innovation in new technologies, with 50% of the funds allocated for global development and the other 50% for high-quality development strategies [6].

Investment Rating - The industry investment rating is "Buy" [2] Core Viewpoints - The report highlights a strong post-holiday resumption of work in March, indicating a positive outlook for the engineering machinery industry [4] - Excavator sales in February 2026 were 17,226 units, down 10.6% year-on-year, with domestic sales at 6,755 units, down 42%, while exports increased by 37.2% [4] - The report anticipates that March excavator sales could be 1.5 to 1.8 times the combined sales of January and February, projecting a year-on-year growth of approximately 20% [4] - The export market remains robust, with a 5% month-on-month increase in excavator exports in February, driven by strong overseas demand [4] - Investment suggestions include focusing on hydraulic component manufacturers and major engineering machinery manufacturers, with specific recommendations for companies like Hengli Hydraulic, Sany Heavy Industry, XCMG, and Zoomlion [4] Summary by Sections Sales Performance - In January and February 2026, a total of 35,934 excavators were sold, reflecting a year-on-year increase of 13.1% [4] - Domestic sales for the same period were 15,478 units, down 9.19%, while exports reached 20,456 units, up 38.8% [4] Market Conditions - The report notes that the decline in domestic sales is primarily due to the impact of the Chinese New Year, with a significant drop in local government bond issuance in February [4] - The construction activity is improving, with a recovery rate of 23.5% for construction sites as of March 4, 2026, and a labor utilization rate of 29.7% [4] Future Outlook - The report expresses optimism for March, citing improved labor and funding conditions, particularly in high-speed rail, water conservancy, and housing projects [4] - The report emphasizes that the industry is approaching a phase of internal and external resonance, with a favorable outlook for both domestic and export markets [4]

Investment Rating - The report assigns an "Accumulate" rating for the industry, indicating a positive outlook for investment opportunities [4]. Core Insights - The industry is experiencing a cyclical recovery domestically, with structural improvements in export demand. The gradual implementation of counter-cyclical fiscal policies is expected to sustain the industry's positive momentum [2]. - Domestic sales of excavators are projected to rebound as the industry cycle turns upward, with leading companies enhancing their overseas presence and entering a harvest phase. The operational leverage within the industry is anticipated to gradually release [4]. Summary by Sections Industry Fundamentals - In February 2026, a total of 17,226 excavators were sold, representing a year-on-year decline of 10.6%. Domestic sales accounted for 6,755 units (including 19 electric excavators), down 42% year-on-year, while exports reached 10,471 units (including 16 electric excavators), marking a year-on-year increase of 37.2% [4]. - For January to February 2026, a total of 35,934 excavators were sold, reflecting a year-on-year growth of 13.1%. Domestic sales were 15,478 units (including 43 electric excavators), down 9.19%, while exports totaled 20,456 units (including 27 electric excavators), up 38.8% [4]. - The share of domestic sales in total sales for February 2026 was 39%, while exports accounted for 61%. For January to February 2026, domestic sales represented 43% and exports 57% of total sales [4]. Operating Hours and Rates - The average working hours for major construction machinery products in February 2026 was 55 hours, showing a year-on-year increase of 18.6% but a month-on-month decrease of 24.1%. Specific working hours included excavators at 48.2 hours and loaders at 69.9 hours [4]. - The operating rate for major construction machinery products in February 2026 was 35.9%, down 8.63 percentage points year-on-year and 12.2 percentage points month-on-month. Excavators had an operating rate of 36.5% [4]. Company Recommendations - Recommended stocks include SANY Heavy Industry, Zoomlion Heavy Industry, XCMG, Liugong, and Hengli Hydraulic, all expected to benefit from the industry's recovery and growth [4].

Investment Rating - The industry investment rating is "Overweight" indicating a positive outlook for the engineering machinery sector [2][4]. Core Insights - The engineering machinery industry shows an upward trend in sales, with a total of 17,226 excavators sold in February 2026, a year-on-year decrease of 10.6%. However, the cumulative sales for January-February 2026 reached 35,934 units, reflecting a year-on-year increase of 13.1% [2][4]. - Exports have significantly exceeded market expectations, with excavator exports in February 2026 increasing by 37.2% year-on-year, and cumulative exports for January-February 2026 growing by 38.8%. Exports accounted for 60.8% of total sales in February, marking a historical high [2][4]. - Domestic sales saw a decline of 42% in February 2026, attributed to the timing of the Spring Festival, rather than a weakening demand. The actual demand remains resilient when adjusted for working days [4]. - The report anticipates a synchronization of domestic and international sales, with a potential surge in domestic demand as the traditional construction season begins in March 2026 [4]. - The report highlights key investment opportunities in the engineering machinery sector, focusing on major manufacturers such as SANY Heavy Industry, XCMG, Zoomlion, LiuGong, and Shantui, as well as component suppliers like Hengli Hydraulic, Aidi Precision, Fushite, and Weiman Sealing [4]. Summary by Sections Sales Performance - In February 2026, a total of 17,226 excavators were sold, down 10.6% year-on-year. Domestic sales were 6,755 units, down 42%, while exports reached 10,471 units, up 37.2% [2][4]. - Cumulative sales for January-February 2026 were 35,934 units, with domestic sales at 15,478 units (down 9.19%) and exports at 20,456 units (up 38.8%) [2][4]. Market Dynamics - The engineering machinery industry is experiencing a recovery trend, with strong export growth and resilient domestic demand expected to drive future performance [4]. - The report notes that the current domestic industry cycle resembles the upward phase of the 2017-2018 renewal cycle, suggesting a robust recovery ahead [4]. Investment Opportunities - The report identifies key companies for investment consideration, including SANY Heavy Industry, XCMG, Zoomlion, LiuGong, and Shantui for main machinery, and Hengli Hydraulic, Aidi Precision, Fushite, and Weiman Sealing for components [4].

Investment Rating - The industry is rated positively, expecting an overall return exceeding 5% above the CSI 300 index in the next six months [7] Core Views - In February, domestic excavator sales declined due to the Spring Festival effect, while export sales exceeded expectations, with a year-on-year growth of 37.2% [3][5] - The report anticipates a rebound in domestic demand, supported by government policies aimed at enhancing infrastructure investment and promoting consumption [4] - The export market is expected to continue performing well, driven by strong overseas demand and the increasing market share of domestic brands [5] Summary by Sections Sales Performance - In February 2026, a total of 17,226 excavators were sold, representing a year-on-year decrease of 10.6%. Domestic sales were 6,755 units, down 42%, while exports reached 10,471 units, up 37.2% [3] - Cumulatively, from January to February, 35,934 excavators were sold, marking a year-on-year increase of 13.1%, with domestic sales at 15,478 units (down 9.19%) and exports at 20,456 units (up 38.8%) [3] Government Policy Impact - The report highlights the government's commitment to a more proactive fiscal policy, including the issuance of long-term special bonds totaling 1.3 trillion yuan to support major projects and enhance domestic market strength [4] - The government plans to allocate 755 billion yuan for central budget investments and 800 billion yuan in special bond funds for infrastructure projects, which is expected to positively influence industry demand [4] Investment Recommendations - The report recommends focusing on the engineering machinery sector, particularly companies like Sany Heavy Industry and Hengli Hydraulic, as domestic demand enters a new upward cycle and export conditions remain favorable [5]