Summary of SANY Heavy Industry Conference Call Company Overview - **Company**: SANY Heavy Industry Co., Ltd. (三一重工) - **Industry**: Heavy Machinery - **Market Position**: Leading manufacturer in China's excavator market Key Points from the Conference Call Domestic Market Outlook - **Excavator Sales**: Anticipated slight growth in excavator sales in the second half of 2025, driven by long-term trends favoring labor substitution [1] - **Non-Excavator Business**: Revenue from non-excavator segments turned positive in the first half of 2025, with expectations for continued growth [1] - **Concrete Machinery**: The industry has seen growth in the first half of 2025, with future growth driven by increased electrification and recovery in the real estate sector [2] - **Loader and Road Machinery**: Strong growth in loaders, with a 40% electrification rate noted in the first half of 2025; road machinery is expected to grow due to automation trends [2] International Market Insights - **US Market**: Limited impact from tariffs in the first half of 2025 due to preemptive inventory management; strong demand expected as local manufacturing cannot meet needs [3] - **European Market**: Strong recovery in demand, with plans to enhance market presence [3] - **African Market**: Fastest growth region in the first half of 2025, driven by infrastructure and mining demand [3] - **South American Market**: Demand has decreased, but SANY's market share continues to grow [3] Financial Performance and Projections - **Profitability**: The peak net profit margin in the current cycle is expected to exceed 15%, benefiting from higher profitability in overseas markets [1] - **Dividend Policy**: Aiming for a stable dividend payout ratio, targeting a 50% payout in the first half of 2025 [1] - **Revenue Growth**: Projected revenue for 2025 is Rmb 89 billion, with a net profit of Rmb 8.59 billion [7] Valuation and Investment Rating - **Target Price**: Set at Rmb 21.70 with a "Buy" rating based on PE valuation method [4] - **Current Stock Price**: Rmb 21.30 as of August 22, 2025 [5] - **Market Capitalization**: Approximately Rmb 181 billion (US$ 25.2 billion) [5] Risks and Considerations - **Downside Risks**: Include lower-than-expected recovery in the construction machinery sector, real estate investment, and competition in product development [11] Additional Insights - **Market Trends**: The company is focusing on electrification and automation as key growth drivers in various machinery segments [2][3] - **Long-term Growth Drivers**: Labor substitution and infrastructure development are highlighted as significant factors for sustained growth in the industry [1][2] This summary encapsulates the essential insights from the conference call, providing a comprehensive overview of SANY Heavy Industry's current market position, financial outlook, and strategic direction.

Core Viewpoint - Sany Heavy Industry reported strong financial performance for the first half of 2025, with revenue of 44.534 billion yuan, a year-on-year increase of 14.96%, and a net profit growth of 46.00%, driven by robust domestic and international sales [2][6]. Financial Performance - The company's excavator sales revenue reached 17.497 billion yuan, up 15.00% year-on-year, maintaining the top position in the domestic market [3]. - Concrete machinery sales revenue was 7.441 billion yuan, down 6.49%, but still ranked first globally [3]. - Crane machinery sales revenue increased by 17.89% to 7.804 billion yuan, while pile machinery sales revenue grew by 15.05% to 1.341 billion yuan [3]. - Road machinery sales revenue surged by 36.83% to 2.159 billion yuan [3]. - Overseas sales revenue accounted for 60.26% of total revenue, amounting to 26.302 billion yuan, with a year-on-year growth of 11.72% [3][4]. Profitability - The net profit attributable to shareholders was 5.216 billion yuan, reflecting a 46.00% increase, with a net profit margin rising to 11.65%, up 2.50 percentage points year-on-year [4][5]. - The company reported a significant reduction in financial expenses, down 428.57% to -0.857 billion yuan, attributed to foreign exchange gains [5]. Cash Flow and Dividends - The net cash flow from operating activities was 10.134 billion yuan, a year-on-year increase of 20.11% [5]. - The company proposed a cash dividend of 3.1 yuan per 10 shares, totaling 2.614 billion yuan, which represents 50.11% of the net profit [5]. Industry Outlook - The engineering machinery industry is experiencing a recovery, with domestic excavator sales increasing by 16.8% in the first half of 2025 [6]. - The demand for machinery in global mining and energy infrastructure is driving overseas sales growth [6]. - Analysts predict a continued upward trend in the industry, supported by equipment replacement policies and improving funding conditions [7].

Core Viewpoint - The company aims to achieve a revenue of 60 billion yuan by 2030, with international revenue accounting for over 60% and a net profit margin of no less than 8% [1] Strategic Planning - The company's 14th Five-Year Plan targets a compound annual growth rate (CAGR) of 12% for revenue and 24% for net profit from 2024 to 2030, based on 2024 figures [1] - Three core growth engines identified are: 1. Core business in earthmoving machinery 2. Growth businesses in mining machinery, industrial vehicles, and prestressed technology 3. Emerging businesses in agricultural machinery, new technologies, and industrial finance [1] Global Expansion Initiatives - The company approved an investment of 500 million yuan to establish a manufacturing plant in Indonesia, enhancing local manufacturing capabilities and global supply chain [2] - A proposal to set up a wholly-owned subsidiary in Brazil with a registered capital of 150 million reais (approximately 19.4 million yuan) was also approved, aimed at establishing a financing leasing company [3] - The company plans to invest 77.15 million yuan in the second phase of its Wuxi road machinery factory project, funded by its own resources [4] Industry Insights - The engineering machinery industry is showing signs of recovery, with expectations of improved performance and demand [6] - The industry is transitioning to "National IV" emission standards starting December 1, indicating regulatory changes that may impact operations [6] - Domestic sales have been declining for 13 consecutive months, while exports surged over 70%, highlighting a shift in market dynamics [6]

Core Viewpoint - The 17th China (Beijing) International Engineering Machinery, Building Materials Machinery, and Mining Machinery Exhibition (BICES 2025) will take place from September 23-26, 2025, at the China International Exhibition Center, showcasing advancements in the engineering machinery sector [1]. Group 1: Exhibition Details - Eddie Precision will feature a dual exhibition area, combining indoor and outdoor spaces to provide a comprehensive display of high-quality technological achievements [6]. - The indoor pavilion (E3213) will highlight key hydraulic components suitable for various machinery, including excavators and agricultural machines, showcasing Eddie Precision's intelligent manufacturing and strong R&D capabilities [7]. - The outdoor area (N201) will present products such as hydraulic breakers and tunnel hammers, along with a real-world simulation of machinery operations, allowing visitors to experience the equipment's performance firsthand [9]. Group 2: Industry Insights - The engineering machinery industry may be on the path to recovery, with signs of improved performance and a shift to "National IV" standards starting December 1 [12]. - Excavator sales data indicates a significant increase in exports, with domestic sales declining for 13 consecutive months, raising questions about the industry's future [12]. - The industry is experiencing a warming trend, with improved operating rates reported in February, suggesting a potential rebound in demand [15].

Core Viewpoint - LiuGong's performance in the first half of 2025 shows continued growth, with total revenue reaching 18.181 billion yuan, a year-on-year increase of 13.21%, and net profit attributable to shareholders of 1.23 billion yuan, up 25.05% [1] Revenue Breakdown - Domestic business achieved revenue of 9.658 billion yuan, growing by 15.69% year-on-year [2] - Overseas business revenue reached 8.523 billion yuan, with a year-on-year growth of 10.52%, accounting for 46.88% of total revenue, indicating that overseas operations have become a "ballast stone" for LiuGong's performance [2] Market Performance - LiuGong's core business segment, earth-moving machinery, has consistently outperformed industry growth rates, with domestic sales growth exceeding industry levels and overseas sales growth surpassing the industry average by 19 percentage points [2] - In a challenging global construction machinery market, LiuGong's overseas business achieved counter-cyclical growth, with market share in earth-moving machinery increasing by 1 percentage point [2] Product Strategy - LiuGong's dual strategy of "product portfolio + comprehensive solutions" has strengthened its competitive advantage, launching over 60 innovative products globally [2] - The company has seen steady growth in loader market share and significant increases in excavator sales, with large excavator monthly shipments reaching historical highs [2] Regional Growth - LiuGong's revenue structure is balanced across various marketing regions, with strong growth in emerging markets such as South Asia, the Middle East, Central Asia, Indonesia, and Africa, some exceeding 80% growth [3] - The dealer network has expanded to over 400, with more than 1,300 service points, significantly enhancing channel coverage in key countries and regions [3] New Growth Areas - LiuGong is advancing its mining machinery business with electric, intelligent, and large-scale equipment solutions, achieving a 42% year-on-year increase in overseas sales [4] - The high-altitude machinery segment has seen significant improvements in sales, revenue, and net profit, with net profit growth exceeding 100% [4] - The industrial vehicle segment also reported double-digit growth in sales, revenue, and net profit, with breakthroughs in new energy and intelligent technology [4] Innovation and Standards - LiuGong's pre-stressed business maintained stable growth, with overseas performance particularly strong, and contract amounts increasing by 34.5% year-on-year [4] - The company has received 27 patent authorizations, including 12 inventions, and has led the revision of the international standard ISO 14655, marking a significant milestone in international regulatory influence [4]

Core Viewpoint - The hydraulic equipment industry is experiencing a recovery, driven by macroeconomic adjustments and policy effects, with significant growth in both domestic and export sales of excavators [2][4]. Financial Performance - In the first half of 2025, the company reported revenue of 5.171 billion yuan, a year-on-year increase of 7.00%, and a net profit attributable to shareholders of 1.429 billion yuan, up 10.97% year-on-year [1]. - The company's net profit after deducting non-recurring gains and losses was 1.45 billion yuan, reflecting a year-on-year growth of 16.90% [1]. - The basic earnings per share reached 1.07 yuan, an increase of 11.46% year-on-year [1]. - Revenue projections for 2022 to 2024 are 8.197 billion yuan, 8.985 billion yuan, and 9.390 billion yuan, with year-on-year growth rates of -11.95%, 9.61%, and 4.51% respectively [1]. - Net profit for the same period is projected at 2.343 billion yuan, 2.499 billion yuan, and 2.509 billion yuan, with year-on-year growth rates of -13.03%, 6.66%, and 0.40% respectively [1]. - The company's asset-liability ratios for the same years are 21.75%, 19.29%, and 19.40% [1]. Industry Trends - The excavator sales in China reached 120,000 units in the first half of 2025, marking a year-on-year increase of 16.8%, with domestic sales at 65,600 units, up 22.9% [2]. - The company sold 308,300 hydraulic cylinders for excavators, achieving over 15% year-on-year growth [2]. - The company has expanded its product offerings in non-excavator hydraulic pumps and valves, with sales growth exceeding 30% [2]. - The gross margin for the first half of 2025 was 41.85%, an increase of 0.21 percentage points year-on-year, while the net margin was 27.70%, up 1.01 percentage points year-on-year, both reaching the highest levels in three years [2]. - The company has developed over 50 new products in its linear actuator project, with all new products successfully entering the market [2][3]. Future Outlook - With the established turning point in the excavator industry cycle and the increasing share of non-excavator business, the company is expected to achieve a new round of growth [4].

Core Viewpoint - The U.S. Department of Commerce has added 407 product categories to its list of steel and aluminum products subject to tariffs, imposing a 50% tariff on these items, which include wind turbine components, heavy machinery, and furniture [1][2]. Group 1: Tariff Implementation - The newly added products will face a 50% tariff, affecting a wide range of items including cranes, bulldozers, and compressors [1]. - The announcement has created confusion among trade professionals due to unclear guidelines on how to handle goods already en route to the U.S. and whether metal tariffs will be applied in addition to country-specific tariffs [1][2]. Group 2: Industry Impact - The rapid implementation of these tariffs has surprised many in the logistics industry, particularly as it includes over 400 consumer goods containing steel and aluminum [2]. - The changes took effect on August 18, with little prior notification given to customs brokers and importers, leading to potential disruptions in supply chains [1].

Core Viewpoint - The excavator serves as a standard for infrastructure construction and reflects changes in fixed asset investment, with the latest data from the "CCTV Finance Excavator Index" indicating stable progress in infrastructure projects across China, particularly in the western regions showing strong growth momentum [1][3]. Group 1: National Construction Rates - In July, the national construction rate for engineering machinery was 44.43%, with a month-on-month increase of 4.44% in total workload, indicating a gradual recovery in infrastructure projects [3]. - The top ten provinces by construction rate included Zhejiang (66.25%), Hainan, Anhui, Qinghai, Jiangxi, Beijing, Liaoning, Fujian, Hebei, and Gansu, with 20 provinces exceeding a 50% construction rate, showcasing balanced development across the country [2][3]. Group 2: Regional Performance - In July, 12 provinces experienced a month-on-month increase in workload, with the top five provinces being Guizhou, Qinghai, and Guangxi from the western region [6]. - The northeastern region had the highest comprehensive construction rate at 49.81%, with port and road equipment rates leading in their categories [12]. - The central region's comprehensive construction rate was 49.28%, with excavator and pile driver rates ranking first nationally [14]. - The western region's comprehensive construction rate was 49.10%, with lifting equipment leading at 78.11% [16]. Group 3: Equipment Performance - In July, the road equipment construction rate was 32.15%, with a month-on-month increase of 2.6% and a year-on-year increase of 20.09%, indicating strong activity in major road and bridge projects [8]. - Among 13 categories of equipment, five categories saw a month-on-month workload increase exceeding 10%, including rollers (18.35%), rotary drilling rigs (14.37%), and crawler cranes (13.16%) [10]. - The eastern region led in concrete equipment construction rates at 46.6%, with specific equipment like trailer pumps and concrete mixers also ranking first nationally [18]. Group 4: Significant Projects - In Tibet, the construction workload increased by 33.4% year-on-year in July, with continuous growth in various equipment categories since March 2025 [20].

Investment Rating - The report maintains a "Buy" rating for SANY Heavy Industry [6] Core Views - SANY Heavy Industry's profitability continues to improve, with H1 2025 total revenue reaching RMB 44.78 billion, a year-on-year increase of 14.64%, and net profit attributable to shareholders of RMB 5.216 billion, up 46.00% year-on-year [1][2] - The company is expected to benefit from the recovery of the domestic construction machinery industry and the ongoing global expansion strategy, leading to sustained high growth in performance [1][3] Financial Performance Summary - In H1 2025, the net profit margin was 11.65%, an increase of 2.50 percentage points year-on-year, and the gross profit margin was 27.44%, up 0.74 percentage points year-on-year [2] - Q2 2025 saw total revenue of RMB 23.603 billion, a year-on-year increase of 11.18% and a quarter-on-quarter increase of 11.46% [1][2] - The company achieved a significant increase in net profit in Q2 2025, reaching RMB 2.745 billion, which is a 37.76% increase year-on-year [1][2] Sales and Market Expansion Summary - SANY's international sales revenue reached RMB 26.302 billion in H1 2025, representing a year-on-year growth of 11.72%, with overseas sales accounting for 60.26% of total revenue [3] - The Asia-Pacific region saw a revenue increase of 16.3%, while Africa experienced a remarkable growth of 40.48% [3] - The company launched over 80 new products in overseas markets, expanding its product coverage [3] Profit Forecast and Valuation - The report maintains previous profit forecasts, estimating net profits for 2025-2027 at RMB 8.944 billion, RMB 11.978 billion, and RMB 15.600 billion, respectively [4] - The target price is set at RMB 26.50, based on a 25x PE ratio for 2025, reflecting the company's leadership in the industry and potential benefits from the domestic construction machinery cycle [4][6]

Core Viewpoint - Sany Heavy Industry reported a significant increase in net profit and revenue for the first half of 2025, driven by growth in both domestic and international sales [1][3]. Financial Performance - In H1 2025, Sany Heavy Industry achieved revenue of 44.534 billion yuan, a year-on-year increase of 14.96%, and a net profit of 5.216 billion yuan, up 46% year-on-year [1]. - The company's net profit margin improved to 11.65%, an increase of 2.5 percentage points compared to the previous year [3]. Business Segmentation By Industry - The engineering machinery sector generated revenue of 43.65 billion yuan, with a gross margin of 27.57%, reflecting a revenue increase of 15.39% and a cost increase of 14.12% year-on-year [2]. By Product - Excavators contributed 17.497 billion yuan in revenue, with a gross margin of 32.74%, showing a 15% increase in revenue year-on-year [2]. - Concrete machinery revenue was 7.441 billion yuan, but saw a decline of 6.49% year-on-year [2]. - Cranes generated 7.804 billion yuan, with a revenue increase of 17.89% [2]. By Region - Domestic sales reached 17.349 billion yuan, a 21.42% increase year-on-year, while international sales were 26.302 billion yuan, up 11.72% [2][3]. - The overseas market accounted for 60.26% of total revenue, with Africa showing the highest growth at 40.48% [3]. Market Dynamics - The engineering machinery industry is experiencing a recovery, with a reported 16.8% increase in excavator sales in H1 2025 [4]. - Major infrastructure projects, such as the Yarlung Tsangpo River hydropower project with an investment of approximately 1.2 trillion yuan, are expected to boost domestic demand [4]. Dividend Policy - Sany Heavy Industry plans to distribute a dividend of 0.31 yuan per share, totaling 2.614 billion yuan, which represents 50.11% of the net profit attributable to shareholders [4].