Investment Rating - The report maintains a strong buy recommendation for leading companies in the engineering machinery sector, including SANY Heavy Industry, XCMG, Zoomlion, LiuGong, and Shantui [10]. Core Insights - The engineering machinery sector is experiencing a significant recovery driven by both domestic and international demand, with a notable increase in performance elasticity [8]. - The sector's revenue for the first half of 2025 reached 187.92 billion yuan, reflecting a year-on-year growth of 8.02%, while net profit increased by 22.94% to 18.661 billion yuan [19][22]. - The report highlights a shift from an "export-only" growth model to a "dual-core" model, with both domestic and international sales contributing to revenue growth [19]. Summary by Sections 1. Operating Conditions: Accelerated Revenue Growth and Strong Profit Elasticity - The engineering machinery sector has shown significant excess returns, with the sector's stock price increasing by 27.56% from the beginning of 2025 to September 9, compared to a 16.16% increase in the CSI 300 index [8][14]. - Domestic excavator sales from January to August 2025 increased by 21.55% year-on-year, driven by structural infrastructure projects [2]. - The average expense ratio for the sector decreased by 0.3 percentage points, primarily due to increased foreign exchange gains [8]. 2. Engineering Machinery: Steady Recovery and Upward Trend - Domestic excavator sales are expected to continue growing, with major projects like the Yaxia Hydropower Station accelerating demand [2][3]. - The overseas market saw excavator exports increase by 12.79% year-on-year, reversing a two-year decline, with total engineering machinery exports reaching 33.486 billion USD, up 10.8% [3][8]. - The report emphasizes the strong performance of leading manufacturers in both domestic and international markets, with SANY Heavy Industry and LiuGong showing particularly strong revenue growth [19][24]. 3. Investment Recommendations - The report suggests focusing on leading manufacturers of complete machines, component manufacturers, and high-altitude work platform/forklift manufacturers due to the expected recovery in demand [9][10]. - Specific companies recommended for investment include SANY Heavy Industry, XCMG, Zoomlion, LiuGong, and Shantui for complete machines, and Hengli Hydraulic and Aidi Precision for components [9][10].

Investment Rating - The investment rating for SANY Heavy Industry is "Buy-A" with a target price of 23 CNY for the next six months, corresponding to a dynamic PE of 23X for 2025 [3][6]. Core Views - The company reported a total revenue of 21.177 billion CNY in Q1 2025, representing a year-on-year increase of 18.77%. The net profit attributable to shareholders was 2.471 billion CNY, up 56.4% year-on-year, indicating strong growth in performance [1]. - The demand for excavators has significantly increased, with sales reaching 61,400 units in Q1 2025, a year-on-year increase of 22.83%. Domestic sales rose by 38.25%, while exports grew by 5.49%. The demand for earth-moving machinery is improving, and the company is expected to enter a new upward cycle [1][2]. - The company has successfully implemented cost control measures, resulting in a gross margin of 26.84% and a net margin of 11.89% in Q1 2025, marking significant improvements in profitability [2]. Financial Performance Summary - Revenue projections for SANY Heavy Industry from 2025 to 2027 are 90.28 billion CNY, 106 billion CNY, and 125.35 billion CNY, with growth rates of 15.2%, 17.4%, and 18.3% respectively. Net profits are expected to be 8.51 billion CNY, 11.11 billion CNY, and 13.82 billion CNY, with growth rates of 42.3%, 30.7%, and 24.4% respectively [3][5]. - The company has shown a consistent increase in revenue over three consecutive quarters, with growth exceeding 10% [1]. - The net profit margin is projected to improve from 6.1% in 2023 to 11.0% in 2027, reflecting enhanced profitability [9][10].