Summary of Conference Call Records Industry Overview - The excavator market in July exceeded expectations for both domestic and international sales, with a strong upward cycle observed in both markets [1] - The domestic excavator market is experiencing structural optimization, with an increased demand for medium and large excavators, leading to enhanced profit elasticity [1][2] - The overall engineering machinery sector is characterized by a robust profit pool, presenting high investment value [2] Key Insights - **Domestic Market Dynamics**: - The demand for small excavators is supported by central government funding for water conservancy projects and high-standard farmland construction, with a significant increase in fixed asset investment in the water management sector [1][7] - Medium and large excavators are affected by the slow issuance of local government special bonds, leading to a cautious outlook for the next 3-5 years [1][8] - The relationship between excavator sales and stock prices is significant, with stock prices influenced by sales trends despite the limited impact of sales on overall profits [3] - **Sales and Inventory Trends**: - There is a notable divergence between sales and operating hours, primarily due to the increased share of small excavators and low operating rates for medium and large excavators [4] - Dealer inventory levels have been low, around 1.5 to 2 months, leading to a replenishment phenomenon in July, which supported sales [6] - **Future Demand Projections**: - The demand for small excavators is expected to remain strong as long as government policies are clear and funding is in place [7] - The medium and large excavator market may rely heavily on policy guidance and support in the coming years [8] Export Performance - Excavator exports are projected to grow by 10%-15% for the year, with strong performance noted in Africa, Indonesia, and the Middle East [1][10] - The total export value for excavators is expected to reach approximately 7-8 billion RMB, with a year-on-year growth of 60% [11] - The demand structure in key regions has improved, with medium and large excavators making up a significant portion of exports [11] Non-Excavator Segment - The non-excavator segment has shown good profit release, with improvements in export structure and a narrowing decline in certain product categories [9] - The overall trend for cranes and other lifting equipment remains positive, with a significant market share held by Chinese brands [13] Investment Recommendations - The focus for stock selection this year is on leading companies such as SANY and XCMG, which are expected to have greater profit elasticity in an upward cycle [15] - Other recommended companies include Liugong, Zoomlion, and Shantui, which are seen as having potential for growth but may not match the profit realization of the leading firms [15]

Summary of Conference Call on Engineering Machinery Industry Industry Overview - The engineering machinery industry is experiencing fluctuations in domestic market performance, particularly in excavator sales, which saw a decline in growth rate since April 2025. The expected growth rate for June is projected to be within ±5% [1][2] - Despite short-term volatility, the long-term outlook for the domestic excavator market remains positive, with strong production schedules for medium and large excavators [1][2] Company Performance Expectations - Annual net profit forecasts for key companies in the engineering machinery sector are optimistic: - SANY Heavy Industry: ¥8.5 billion - XCMG: ¥7.5 billion - Zoomlion: ¥4.8-5 billion - LiuGong: ¥1.8-1.9 billion - The second quarter is expected to show significant year-on-year growth for these companies [1][3] Market Dynamics - The domestic market has a high proportion of small excavators (70-80%), which have lower profitability. However, the export market has shown a year-on-year growth of 8-9% from January to May 2025, supporting overall performance [1][5] - Non-excavator products, such as truck cranes, have shown a notable recovery, alleviating some domestic performance pressures [1][5] Valuation and Investment Opportunities - The engineering machinery sector has seen a valuation correction, with P/E ratios for major companies at relatively low levels: - SANY: 17x - XCMG: 12x - Zoomlion: 12-13x - LiuGong: 10-13x - This presents a favorable investment opportunity [1][6] Future Market Outlook - The domestic market is not expected to experience significant declines in the coming months, with strong production data from Hengli Hydraulic and positive feedback from dealers regarding downstream demand [1][7] - If local government funding issues are resolved, the market is anticipated to gradually recover and grow in the second half of the year [1][8] Funding Sources and Government Impact - Funding for the engineering machinery industry primarily comes from two sources: small investors and central government allocations for water conservancy projects, which provide stable cash flow and support excavator demand [1][9] - The issuance of ¥1 trillion in government bonds, with 70-80% directed towards water conservancy projects, is expected to stabilize cash flow and support demand for excavators [1][10] Debt Replacement Effects - Local government debt replacement has led to a temporary decline in operating rates, but new projects are expected to increase in the second half of 2025 and into 2026, boosting excavator sales [1][11][12] Long-term Market Trends - The domestic excavator market is projected to experience an upward trend over the next few years, driven by replacement demand and the export of used equipment [1][13] - Non-excavator equipment markets are also showing signs of recovery, with significant improvements in profitability for companies like SANY [1][14] Export Market Performance - The export market for engineering machinery has remained stable, with excavator exports growing by 8% from January to May 2025, despite some fluctuations due to tariff adjustments [1][15] - Chinese brands have a significant presence in emerging markets, with potential for substantial growth in regions like Southeast Asia, Africa, and South America [1][19][20] Recommendations for Investment - Key companies recommended for investment include: - SANY Heavy Industry: Strong performance and potential for profit release - XCMG: Notable scale advantages, though facing short-term caution due to stock unlock issues - Zoomlion: Focus on tower crane and aerial work platform recovery - LiuGong: Attractive valuation with significant upside potential - Hengli Hydraulic: Strong short-term growth potential and global expansion opportunities [1][25][26]

Group 1 - The core focus of the Malaysian Crane Association is on products such as truck cranes, crawler cranes, and aerial work platforms, highlighting the rapid development and high cost-performance of Chinese engineering machinery brands [1] - The fourth Changsha International Construction Machinery Exhibition attracted over 760 international trade merchants from more than 50 countries, showcasing a strong global interest in Chinese engineering machinery [1] - Large procurement delegations from countries like Vietnam, India, and Russia are seeking various machinery, including concrete mixers, excavators, tower cranes, and mining equipment, indicating a robust demand for Chinese products [1] Group 2 - The exhibition featured six global buyer negotiation meetings aimed at building international trade bridges, with specialized sessions for regions such as India, Russia, the Middle East, Africa, South Korea, Chile, Europe, and Southeast Asia [2] - Chinese engineering machinery companies are increasing their investment in smart technology and green energy solutions, gaining global attention for their innovative products [2] - The cluster development advantage of Changsha's engineering machinery industry allows overseas customers to achieve one-stop procurement, enhancing the appeal of Chinese products in international markets [2]

Group 1 - The fourth Changsha International Construction Machinery Exhibition has officially opened, attracting over 200 procurement representatives from Malaysia [1] - Malaysian buyers express strong interest in Chinese construction equipment, particularly small excavators and intelligent weeding machines, indicating a growing confidence in the quality of Hunan's engineering equipment [1][2] - The event showcases a variety of construction machinery, with notable interest in products from established brands like Zoomlion and SANY, which have been in the Malaysian market for over a decade [2] Group 2 - The Malaysian delegation includes members from various industries, all with specific procurement needs, highlighting the diverse applications of construction machinery [1] - The exhibition has seen significant improvements in equipment intelligence and quality compared to previous years, reflecting the evolving standards in the construction machinery sector [2] - The event not only serves as a procurement platform but also as an opportunity for cultural exchange and exploration of the local area by international visitors [1]

Core Viewpoint - The company is expected to achieve long-term growth potential through continuous overseas sales, domestic sales resonance, and industry tier expansion [2]. Financial Performance - The company's revenue for Q1 2025 reached 12.117 billion, a year-on-year increase of 2.92% - The net profit attributable to shareholders was 1.410 billion, up 53.98% year-on-year - The net profit excluding non-recurring items was 874 million, reflecting a 12.40% year-on-year growth - The gross profit margin for Q1 2025 was 28.67%, an increase of 0.21 percentage points year-on-year - The net profit margin was 12.51%, up 3.84 percentage points year-on-year - The expense ratio for Q1 2025 was 17.74%, a decrease of 0.21 percentage points year-on-year - The net operating cash flow was 740 million, a significant increase of 140.96% year-on-year [2]. Global Expansion - The company's overseas revenue for Q1 2024 was 6.568 billion, a year-on-year increase of 15.17%, accounting for 54.20% of total revenue, up 5.77 percentage points year-on-year - Domestic revenue was 5.549 billion, a year-on-year decrease of 8.59% - The company has established a presence in over 170 countries with more than 430 outlets and over 7,300 overseas employees, including approximately 4,600 local foreign employees - The company has made significant achievements in international standard-setting and is actively expanding into overseas markets, particularly in countries along the "Belt and Road" initiative [3]. Industry Innovation - The company is experiencing rapid revenue growth in its second growth curve businesses, including earthmoving, mining, agricultural machinery, and high-tech equipment - The company is optimizing its industrial structure and accelerating the integration of traditional and emerging industries, with new industries contributing to new growth drivers - Traditional businesses remain strong, with the company holding the top market share in crawler cranes and second in truck cranes, as well as leading in high-value-added all-terrain cranes over 110 tons, construction cranes, and first in concrete mixing stations, and second in pump trucks [3].