Core Viewpoint - XCMG Group has signed a strategic cooperation agreement with Australia's Fortescue River Group for green mining equipment solutions, marking the largest order for China's green mining machinery exports, with plans to deliver 150-200 units of 240-ton pure electric mining trucks between 2028 and 2030 [1] Group 1: Strategic Cooperation and Market Position - The order represents a significant expansion of XCMG's mining machinery portfolio, with ongoing collaborations with major international clients such as BHP, Rio Tinto, Vale, and FMG [1][3] - XCMG has ranked among the top five global manufacturers of open-pit mining equipment for six consecutive years, aiming for a position in the top three [1] Group 2: Incentive Plans - The company plans to implement one of the largest incentive programs in the machinery industry, granting equity incentives to no more than 4,700 employees, totaling 470 million shares, approximately 4% of the company's total equity [1] - The stock option incentive plan includes the grant of 155 million stock options, about 1.3% of the total equity, with 139 million options to be granted initially [2] - The restricted stock incentive plan involves granting 315 million restricted shares, approximately 2.7% of the total equity, with 284 million shares to be granted initially [2] Group 3: Financial Performance - For the first half of 2025, the company achieved revenue of 54.8 billion yuan, a year-on-year increase of 8%, and a net profit attributable to shareholders of 4.36 billion yuan, up 17% [2] - Operating cash flow for the same period reached 3.73 billion yuan, reflecting a significant year-on-year increase of 108% [2] - The company has made progress in adjusting its "four structures," with international revenue growing by 17% to 25.5 billion yuan, accounting for 46.6% of total revenue [2] Group 4: Industry Outlook and Profit Forecast - The engineering machinery industry is showing signs of recovery, with excavator domestic sales increasing by 22% and exports by 13% from January to August [3] - The company is expected to benefit from large infrastructure projects such as the Yaxi Hydropower Station and the Xinjiang-Tibet Railway [3] - Revenue projections for 2025-2027 are 104 billion, 126.9 billion, and 152.7 billion yuan, with corresponding net profits of 7.3 billion, 9.5 billion, and 11.5 billion yuan, indicating compound annual growth rates of 24% [4]

Investment Rating - The investment rating for the company is "Buy" [7] Core Insights - The company signed the largest order for green mining equipment exports from China, aiming to provide 150-200 units of 240-ton pure electric mining trucks to Fortescue Group between 2028 and 2030 [1] - The company is implementing one of the largest incentive plans in the machinery industry, granting equity incentives to up to 4,700 employees, which reflects strong confidence in its development [2] - The company reported steady performance in the first half of 2025, with revenue of 54.8 billion yuan, a year-on-year increase of 8%, and a net profit of 4.36 billion yuan, up 17% year-on-year [3] - The engineering machinery industry is showing signs of recovery, with domestic excavator sales increasing by 22% year-on-year from January to August 2025, supported by large infrastructure projects [4] - The company is expected to achieve revenues of 104 billion, 126.9 billion, and 152.7 billion yuan from 2025 to 2027, with net profits of 7.3 billion, 9.5 billion, and 11.5 billion yuan respectively, indicating a compound annual growth rate of 24% [4] Summary by Sections Company Overview - The company is enhancing its mining machinery portfolio through deepening cooperation with major global clients such as BHP, Rio Tinto, and Vale [1][3] - The company has been ranked among the top five global manufacturers of open-pit mining equipment for six consecutive years, aiming for a top-three position [1] Financial Performance - In the first half of 2025, the company achieved a net operating cash flow of 3.73 billion yuan, a significant increase of 108% year-on-year [3] - The company’s gross margin for the first half of 2025 was 22%, an increase of 0.7 percentage points year-on-year, with a weighted average ROE of 7.2% [4] Future Projections - The company forecasts a revenue growth of 13%, 22%, and 20% for the years 2025, 2026, and 2027 respectively, with net profit growth of 22%, 29%, and 22% for the same years [4][6] - The projected P/E ratios for 2025, 2026, and 2027 are 17, 13, and 11 respectively, indicating a favorable valuation outlook [4][6]

Market Overview - On April 21, the Shanghai Composite Index rose by 0.45%, the CSI 300 increased by 0.33%, the STAR 50 climbed by 1.07%, the CSI 1000 grew by 2.07%, and the ChiNext Index went up by 1.59% [4] - The best-performing sectors on April 21 were non-ferrous metals (+3.79%), computers (+2.72%), beauty and personal care (+2.11%), machinery equipment (+2.03%), and media (+2.03%). The worst-performing sectors were banking (-1.23%), food and beverage (-0.59%), real estate (-0.46%), coal (-0.32%), and transportation (-0.16%) [4][3] - The total trading volume for the A-share market on April 21 was 1,073.6 billion yuan, with a net inflow of 2.309 billion Hong Kong dollars from southbound funds [4][3] Company Analysis: SANY Heavy Industry - The report highlights that SANY Heavy Industry (600031) released its 2024 annual report, which exceeded expectations [5] - The company's net profit attributable to shareholders increased by 32% year-on-year, indicating improved profitability [5] - Investment opportunities are identified in the construction machinery industry, which is on an upward trend, with SANY's excavator revenue being a significant contributor to its performance [5] - Catalysts for growth include stabilization in domestic real estate and infrastructure investments, better-than-expected domestic excavator sales, accelerated international business, enhanced operational vitality, and rapid penetration of electric products [5]

Investment Rating - The investment rating for the company is "Buy" [6] Core Views - The company has announced a share buyback plan of RMB 1.8-3.6 billion, reflecting confidence in its development and recognition of its own value [2] - The construction machinery industry is showing signs of recovery, with leading companies expected to benefit [3][4] - The company is positioned to become a global leader in the engineering machinery sector, currently ranked fourth globally and first in China [4] - The company's asset quality has improved, and its profitability is notable, with a projected return on equity (ROE) of 9% for Q3 2024 [5] - Revenue and net profit forecasts for 2024-2026 indicate growth, with a compound annual growth rate (CAGR) of 22% for net profit from 2023 to 2026 [6] Summary by Sections Share Buyback and Confidence - The company plans to repurchase shares at a price not exceeding RMB 13 per share, totaling between RMB 1.8 billion and RMB 3.6 billion, which will account for approximately 1.17%-2.34% of its total share capital [2] Industry Recovery - Domestic excavator sales in March reached 19,517 units, a year-on-year increase of 29%, while total sales for the first quarter were 36,562 units, up 38% year-on-year [3] - The average working hours for major construction machinery products in March increased by 7% year-on-year, indicating a recovery in the domestic market [4] Company Positioning and Product Range - The company maintains a comprehensive product range and is expected to gradually enter the global top three in the engineering machinery sector [4] - The company leads in various categories, including cranes and concrete machinery, and ranks sixth globally in excavators [4] Financial Performance and Projections - The company’s financing lease obligations decreased by 18% year-on-year, and its net profit margin has shown consistent improvement [5] - Revenue projections for 2024-2026 are RMB 909 billion, RMB 1,047 billion, and RMB 1,279 billion, with net profits expected to be RMB 62 billion, RMB 78 billion, and RMB 97 billion respectively [6]