Investment Rating - The report maintains a "Buy" rating for the engineering machinery industry [1] Core Viewpoints - The engineering machinery industry is experiencing steady revenue growth, with profit growth outpacing revenue growth in 2024 and Q1 2025 [3][4] - The industry is benefiting from cost reduction, efficiency improvements, and product structure optimization, leading to a recovery in profitability [5] - The demand for engineering machinery is expected to continue its recovery due to strong government support and infrastructure investment [7] - The trend towards electrification in the engineering machinery sector is accelerating, with significant growth in electric loader sales [9] Summary by Sections Revenue and Profit Performance - In 2024, the overall revenue of listed companies in the engineering machinery industry reached 355.12 billion yuan, a year-on-year increase of 3.5% [3] - For Q1 2025, the revenue was 96.13 billion yuan, reflecting a year-on-year growth of 10.4% [3] - The net profit attributable to shareholders in 2024 was 29.77 billion yuan, up 16.9% year-on-year, with Q1 2025 showing a 30.2% increase to 9.72 billion yuan [4] Profitability Metrics - The overall gross margin for the industry in 2024 was 25.5%, a slight increase from the previous year, while the net margin improved to 8.7% [5] - In Q1 2025, the gross margin slightly decreased to 25.1%, but the net margin rose to 10.3% [5] Sales Trends - From January to April 2025, excavator sales reached 83,514 units, a year-on-year increase of 21.4%, with domestic sales growing by 31.9% [6] - The report highlights a significant increase in electric loader sales, with a year-on-year growth of 254.8% in Q1 2025 [9] Government Support and Market Outlook - The government plans to issue 1.3 trillion yuan in long-term special bonds to support infrastructure projects, which is expected to boost demand for engineering machinery [7] - The report anticipates continued growth in the international market for engineering machinery, particularly in Southeast Asia, Africa, and the Middle East [8] Investment Recommendations - The report recommends investing in leading companies such as Sany Heavy Industry, Zoomlion, XCMG, LiuGong, and Shantui, as well as component manufacturers like Hengli Hydraulic [10]

Core Viewpoint - The domestic engineering machinery market is experiencing a significant recovery, with strong sales and operating hours in early 2025, indicating positive trends in the industry [2][4]. Group 1: Sales and Operating Data - In January-February 2025, excavator sales (including exports) reached 31,782 units, a year-on-year increase of 27.2%, with domestic sales at 17,045 units, up 51.4% [2]. - The operating hours for Komatsu in January 2025 were 66.2 hours, significantly higher than the previous two years during the same period [2]. Group 2: Growth Drivers - The ongoing replacement cycle in the engineering machinery sector is expected to drive sales, with a projected compound growth rate of around 30% for replacement demand in the coming years [3]. - The export of used machinery to developing countries is also contributing to the reduction of domestic machinery inventory, further boosting new machine sales [3]. Group 3: Policy Support - The 2025 government work report indicates a plan to issue over 1.3 trillion yuan in special bonds, an increase of 300 billion yuan from the previous year, aimed at infrastructure investment and supporting the construction of major projects [4]. - The report emphasizes the continuation of urban infrastructure investment, particularly in areas such as underground engineering and municipal construction, which will sustain demand for engineering machinery [4]. Group 4: Export Trends - In January-February 2025, excavator exports totaled 14,737 units, a year-on-year increase of 7.4%, while loader exports reached 8,439 units, up 8.3% [5]. - The engineering machinery sector is expected to maintain growth in exports, driven by opportunities in Southeast Asia, Africa, and the Middle East, as well as increased penetration in high-end markets in Europe and the U.S. [5]. Group 5: Electrification Trends - Sales of electric loaders surged to 2,413 units in January-February 2025, marking a 261.2% year-on-year increase, with an electrification rate of 14.5%, up 12 percentage points from the previous year [6]. - The government report highlights the push for green transformation and energy-saving initiatives, indicating that electrification will be a key focus for the engineering machinery industry moving forward [6].