Sany Heavy Industry started taking investor orders to raise as much as HK$12.4 billion ($1.6 billion) in a Hong Kong listing, joining a flood of Chinese companies seeking to capitalize on the Asian financial hub’s hot market https://t.co/Xith0wsEqO ...

Asia Pacific Equity Research October 2025 This material is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. Asia and China Capital Goods – 3Q25 Karen Li, CFA AC Head of HK Equity Research, Head of Asia Infra, Industrials and Transport +852 2800 8589 karen.yy.li@jpmorgan.com J ...

Financial Results Announcement - Caterpillar Inc. will release its third-quarter 2025 financial results on October 29 at 5:30 a.m. CDT [1] - The full text of the financial release will be available on the company's investor relations website and will be submitted to the U.S. Securities and Exchange Commission [1] Teleconference and Webcast Details - A teleconference and webcast for the quarterly results will begin at 7:30 a.m. CDT on the same day [2] - Supporting materials for the webcast will be available prior to the event [2] Access Information - The conference call can be accessed via telephone with specific dial-in numbers provided for both domestic and international participants [3] - A replay of the webcast will be available shortly after the live event, but no telephone replay will be offered [4] Company Overview - Caterpillar Inc. reported sales and revenues of $64.8 billion in 2024, making it a leading manufacturer in construction and mining equipment, as well as engines and turbines [5] - The company operates through three primary segments: Construction Industries, Resource Industries, and Energy & Transportation, along with a Financial Products segment [5]

Core Viewpoint - Zhonglian Heavy Industry (000157)(01157) saw a stock increase of over 5%, currently at 7.62 HKD with a trading volume of 106 million HKD, indicating positive market sentiment towards the company and the industry as a whole [1] Industry Summary - According to the China Construction Machinery Industry Association, excavator sales are projected to reach 19,858 units by September 2025, representing a year-on-year growth of 25.4%. Domestic sales are expected to be 9,249 units, up 21.5%, while exports are forecasted at 10,609 units, reflecting a 29% increase [1] - Huatai Securities noted an upward trend in both domestic and international demand for excavators in September, suggesting a sustained recovery in the industry [1] - China Merchants Securities highlighted that the resonance of domestic and international demand is expected to enhance the performance elasticity of leading companies, with long-term growth driven by internationalization and lithium battery technology, thereby strengthening global competitiveness [1] - Zheshang Securities previously reported that Zhonglian Heavy Industry is considered an undervalued player in the humanoid robot sector, with accelerated industrialization of humanoid robots in factory operations [1] Company Summary - At the 2025 Internet Yuelu Conference held from September 14 to 16 in Changsha, Zhonglian Heavy Industry showcased its cloud-based intelligent models and toolchains, presenting five humanoid robots designed for various applications including reception, walking performances, logistics sorting, assembly, and daily life scenarios [1] - All key components of Zhonglian Heavy Industry's humanoid robots are independently developed, including planetary joint modules, cycloidal joint modules, linear joint modules, and key controllers, achieving complete control over core technologies [1]

Summary of China Industrials Update Industry Overview - **China Industrials** is currently experiencing an upcycle driven by industrial upgrade and replacement cycles [6][6][6] - Key long-term drivers identified include: - AI technology diffusion into intelligent manufacturing and equipment - Advanced equipment localization - Global expansion [6][6][6] - The robotics sector is entering a new booming era, with significant growth anticipated [6][6][6] Subsector Insights - **Automation, Robotics, and AIDC Equipment**: - Rated as Overweight (OW) with key stocks including Inovance, Geekplus, Han's Laser, Shuanghuan, Hongfa, and Neway Valve [6][6][6] - **Construction Machinery**: - Rated as Overweight (OW) with key stocks including Sany, Hengli Hydraulic, and Zoomlion [6][6][6] - **Lithium Battery Equipment**: - Rated as Overweight (OW) with key stocks including Wuxi Lead and Hangke [6][6][6] - **Heavy Duty Trucks and Railway Equipment**: - Rated as Equal Weight (EW) with key stocks including Weichai, Sinotruck, and CRRC [6][6][6] - **Solar Equipment and Infrastructure E&C**: - Rated as Underweight (UW) with key stocks including SC New Energy and CSCEC [6][6][6] Market Performance - The automation market showed a mild recovery with a 1% year-on-year increase in sales for 1H25, indicating a less intense competitive environment compared to the previous year [28][28][28] - Anticipated recovery in 2026-27 driven by: - Replacement demand from equipment sold during the 2020-21 capex upcycle - New capex demand from AI applications - Continued benefits from overseas capacity expansion [28][28][28] Financial Metrics - **Return on Equity (ROE)**: Mixed trends observed across subsectors, with growth in ROE for lithium battery equipment, automation, and construction machinery, while solar equipment and E&C show eroding ROE [20][20][20] - **Sector P/E Multiples**: Most subsector valuations are above the five-year median, particularly in automation, solar equipment, and lithium battery equipment [13][13][13] Robotics Market Insights - The Chinese robotics market is expected to double by 2028, with significant growth in drones, mobile robots, and collaborative robots (cobots) [62][62][62] - Localization in robotics is increasing, with domestic players gaining market share [76][76][76] - The market for robot components is projected to reach a total addressable market (TAM) of US$40 billion by 2024, with a 23% CAGR anticipated from 2025 to 2028 [86][86][86] Conclusion - The China Industrials sector is poised for growth, driven by technological advancements and increasing localization. Key subsectors such as automation and robotics are expected to lead this growth, with significant investment opportunities identified in specific companies. The overall market dynamics suggest a favorable environment for both established players and new entrants in the industrial landscape [6][6][6][62][62][62]

Company Action - Sany Heavy is assessing investor interest for its Hong Kong listing [1]

Core Insights - Caterpillar (CAT) has returned an impressive $57 billion to investors over the past ten years through dividends and buybacks, ranking as the 47th largest return to shareholders in history [2][3] - The company's capital returns reflect management's confidence in its financial strength and ability to generate sustainable cash flows [3] - A comparison of capital returns as a percentage of market cap indicates an inverse relationship with growth potential for reinvestment opportunities, with companies like Meta and Microsoft allocating less to shareholders while growing faster [5] Financial Performance - Caterpillar's revenue growth has been negative at -4.9% over the last twelve months, with an average growth of 5.8% over the past three years [11] - The company has a free cash flow margin of nearly 12.3% and an operating margin of 18.2% for the last twelve months [11] - The stock trades at a P/E ratio of 24.9, indicating a higher valuation compared to the S&P [11] Historical Performance and Risks - Caterpillar has experienced significant declines in the past, including a 52% drop during the Dot-Com crash and a 73% decline during the Global Financial Crisis [8] - The stock also faced reductions of about 33% to 39% during corrections in 2018 and the COVID pandemic, and a drop of roughly 32% due to recent inflation shocks [8] - Despite solid fundamentals, the company has shown vulnerability to substantial losses during market shifts [8]

Group 1 - The three major indices opened lower, with the Shanghai Composite Index at 3915.48 points, down 0.47%, the Shenzhen Component Index at 13633.19 points, down 0.67%, and the ChiNext Index at 3230.46 points, down 0.96% [1] - Zhongyuan Securities anticipates that the Federal Reserve has initiated a rate-cutting cycle, leading to a more accommodative global liquidity environment, which may enhance domestic monetary policy flexibility and boost market risk appetite [1] - The crowded midstream manufacturing sector may increase short-term market volatility risks, suggesting a balanced allocation strategy between growth and value styles [1] Group 2 - CICC indicates that the market has shown strong structural characteristics, with hotspots concentrated in growth sectors [2] - The strong demand for overseas AI computing power and China's clear energy transition goals are expected to drive structural opportunities in the stock market, with manufacturing upgrades being a long-term trend [2] - Recommended sectors for October include AI computing and robotics, innovative pharmaceuticals, consumer electronics, batteries, non-ferrous metals, engineering machinery, power grid equipment, and the livestock and feed industries [2]

China’s Sany Heavy plans to begin gauging investor interest as early as next week for a Hong Kong listing that could raise about $1.5 billion https://t.co/1RdXQNpM7m ...

Market Overview - Corporate America is about to disclose quarterly results, with high expectations as the S&P 500 Index is trading at 23 times expected earnings, comparable to dot-com levels, making stocks vulnerable to disappointments [1][17] - The ongoing government shutdown is creating uncertainty, leading to a potential 5% to 10% pullback in the S&P 500 this month due to seasonal risks and shutdown-related concerns [2][17] Investor Sentiment - The shutdown is negatively impacting investor sentiment, causing some to hold cash or take profits before year-end [2][17] - There is a notable trend of investors trimming positions in highly valued stocks like Nvidia Corp. to reallocate to lower-valued stocks such as Deere & Co. and Caterpillar Inc. [3][17] Historical Context - Historically, the S&P 500 has shown little change during the last 20 government shutdowns, with an average drop of 0.5% when excluding the 10% gain during the 2018 shutdown [8][17] Economic Data and Market Conditions - The delay in key economic reports, including non-farm payrolls and oil and gas storage statistics, is leaving traders without critical data, leading to a reliance on alternative sources [9][17] - The current market conditions are described as "foggy," with tensions surrounding the Federal Reserve's policy path, although the market still anticipates at least one more interest rate cut this year [10][17] Volatility and Hedging - Market volatility is expected to increase if the shutdown continues, particularly if it delays the upcoming consumer price index report [11][18] - There is a significant demand for hedging among investors, with a rise in the three-month put skew indicating increased costs for protection against stock declines [15][16][18]