Summary of SANY Heavy Industry Conference Call Company Overview - **Company**: SANY Heavy Industry - **Industry**: Construction Machinery Key Points Industry and Market Outlook - **2026 Overseas Business Growth Target**: 15% increase, with Americas and Africa expected to grow by 24% and 19% respectively [2] - **Domestic Market Recovery**: Concrete machinery expected to stop declining in H2 2025, with cranes projected to grow over 10% in 2026 due to equipment updates and major projects [2] Financial Performance and Strategy - **Cash Management**: Company has a strong cash position due to good operational performance and low capital expenditures, with plans for overseas capital expenditures in Southeast Asia, Europe, and South America [3] - **Tax Increase**: Expected due to tighter tax policies and higher overseas tax burdens as profits from international operations grow [6] - **Dividend Policy**: Aiming to maintain a dividend payout ratio of over 50% [2][19] Product and Market Development - **Electric Product Penetration**: Domestic penetration of electric mixers expected to reach 80% by 2025, with electric loaders at 52.1% in early 2026 [2] - **North American Market Strategy**: Focus on product, marketing, and service enhancements, including introducing new products like skid steer loaders and electric products [4] - **Sales Data for 2025**: Excavators sales at 21.9 billion, cranes at 11.3 billion, concrete machinery at 9.7 billion, with significant growth in Africa at 66% [10] Exchange Rate and Risk Management - **Exchange Rate Strategy**: Company employs a "spread + exposure" strategy for currency management, with a focus on maintaining a certain level of USD holdings due to favorable interest rates [3][5] - **Impact of Exchange Rates**: In 2025, exchange rate fluctuations resulted in a net loss of approximately 580 million RMB, indicating the importance of effective currency management [8] Electric and New Energy Business - **Electric Product Development**: Focus on electric excavators, with a full range of products developed over six years, leading the industry in technology [7][11] - **Market Demand for Electric Products**: Increased demand for electric products due to rising fuel costs and environmental pressures, particularly in Europe and Southeast Asia [12] Competitive Advantages and Challenges - **Overseas Market Gross Margin**: Gross margin for excavators exceeds 39%, with strategies in place to maintain margins despite increasing competition [14][15] - **Long-term Competitive Advantages**: Continuous product line improvement, comprehensive solutions for mining clients, and strong after-sales service capabilities [18] Future Growth and Market Share Goals - **Market Share Targets**: Aiming for 30% market share in China, 20% in other developing countries, and 10% in developed markets by 2026 [16] - **Domestic Market Demand**: Anticipated growth in concrete machinery and cranes, with a target of over 10% sales growth for cranes in 2026 [17] Risk Management and Financial Health - **Credit Risk Management**: Company maintains a low overdue rate of 1.6%-1.7%, with a conservative approach to credit provisions [19] - **Future Dividend Plans**: Commitment to stable and continuous cash dividends, considering macroeconomic conditions and shareholder interests [19]

Report Industry Investment Rating - The report gives a rating of "oscillating operation" for the industry [3] Core Viewpoint - The steel price is currently oscillating and weakening, mainly dragged down by coking coal on the raw material side. The steel price is temporarily following the changes in the raw material side, and the subsequent focus is on the downstream demand situation [2][3] Summary by Related Catalog Industry Data - In March, China's manufacturing, non - manufacturing, and comprehensive PMI output indices all returned to the expansion range, at 50.4%, 50.1%, and 50.5% respectively, up 1.4, 0.6, and 1 percentage points from the previous month [2] - In March, the actual production of tube billet steel mills was 1.3393 million tons, a month - on - month increase of 85,000 tons and a year - on - year increase of 107,600 tons. The estimated output in April is 1.3542 million tons [2] - On March 31, the average cost of 76 independent electric arc furnace construction steel mills was 3,410 yuan/ton, a daily increase of 2 yuan/ton. The average profit was a loss of 86 yuan/ton, and the off - peak electricity profit was 21 yuan/ton [2] Industry Events - On March 30, the UK Trade Remedies Authority announced an anti - absorption review of the anti - dumping measures applicable to imported excavators from China to decide whether to maintain or adjust the current anti - dumping duty rate [2]

Core Viewpoint - The engineering machinery industry is at a pivotal moment, with opportunities for high-quality development driven by digitalization, green initiatives, and global collaboration [4][9]. Industry Status from Global and Domestic Perspectives - The global economy is experiencing a "divided but stable" trend, with significant regional disparities; emerging markets in Asia, Latin America, and the Caribbean are showing steady growth, while Africa is becoming a new highlight for global economic growth [4]. - Despite opportunities, the industry faces challenges such as high global energy costs and significant fluctuations in the RMB exchange rate, which has appreciated nearly 7% over the past year, potentially impacting domestic companies' overseas operations [4]. - China's manufacturing sector remains robust, with manufacturing value added maintaining the world's top position for 16 consecutive years, supported by national funding, trends towards smart and green technologies, and infrastructure demands [4]. Analysis of Submarket Development Trends - The mining equipment market is projected to be a trillion-dollar market by 2030, with steady growth expected in transportation, excavation, and auxiliary equipment due to rising mineral resource demand and the push for intelligent and green upgrades [5]. - The humanoid robot market is emerging as a new direction for industry transformation, with significant potential for application in various sectors, including industrial manufacturing and extreme operations [5][6]. Industry Development Pain Points and Transformation Pathways - The industry faces several pain points, including reliance on core components, challenges in overseas markets, and issues of overcapacity and homogenized competition [7]. - The core of transformation lies in innovation-driven strategies, focusing on high-value product upgrades and comprehensive lifecycle services, while green development and electrification are essential trends [7]. Global Development and Solutions - Chinese companies should learn from international firms like Komatsu and Liebherr, which emphasize profitability and localized operations [8]. - Recommendations include establishing localized ecosystems for R&D, manufacturing, and services, ensuring compliance in developed economies, and shifting from price competition to value competition [8]. Call for Industry Collaborative Development - The industry must work together to achieve high-quality development, moving away from vicious competition and fostering collaboration across the supply chain [9]. - Leading companies like Lingong Group are committed to driving innovation and sharing experiences to overcome industry bottlenecks and enhance China's global competitiveness in engineering machinery [9].

Core Insights - The company achieved a significant increase in net profit and continuous improvement in profitability, with a net profit of 1.3 billion yuan in 2025, representing a year-on-year growth of 27.7% [1] - The company plans to distribute a dividend of 0.20 HKD per share, with a payout ratio of 58% and a dividend yield of approximately 6.5% [1] Revenue Growth - The company's revenue from wheel loaders reached 4.6 billion yuan, a year-on-year increase of 16.9%, serving as the core driver of revenue growth [1] - Excavator sales performed exceptionally well, generating 1.69 billion yuan in revenue, a year-on-year increase of 60.1%, driven by equipment upgrades and infrastructure investment policies [1] - Forklift revenue declined by 7.0% to 3.46 billion yuan, but the gross margin increased to 21.3%, with future recovery expected as the company accelerates electric forklift development and overseas expansion [1] Global Expansion Strategy - The company achieved overseas revenue of 3.81 billion yuan, a year-on-year growth of 19.3%, with overseas revenue accounting for 33.9% of total revenue, an increase of 2.7 percentage points year-on-year [1] - The company is expected to benefit from increased demand for construction and mining machinery in Southeast Asia, Africa, and South America, as well as improved penetration in high-end markets in Europe and the U.S. [1] Electric Loader Market - In the first two months of 2026, China's electric loader industry saw sales of 5,132 units, a year-on-year increase of 112.7%, with an electricization rate of 24.1%, up 9.6 percentage points year-on-year [2] - The government report emphasizes the need to accelerate the elimination of outdated capacity and support the innovation and application of green low-carbon technology equipment [2] - The company has strategically positioned itself in the electric loader market and is expected to benefit significantly as the penetration rate of electric loaders continues to rise [2] Profit Forecast - The company's net profit forecasts for 2026 and 2027 have been raised by 15.2% and 16.1% to 1.58 billion yuan and 1.83 billion yuan, respectively, with a new forecast for 2028 set at 2.07 billion yuan [2] - Corresponding EPS estimates are projected at 0.37, 0.43, and 0.48 yuan for 2026, 2027, and 2028, respectively [2]

Core Viewpoint - The company has demonstrated significant growth in net profit and profitability, with a focus on expanding its global presence and capitalizing on the electric loader market trend [4][6][7]. Group 1: Financial Performance - In 2025, the company achieved operating revenue of 11.22 billion, a year-on-year increase of 9.8%, and a net profit attributable to shareholders of 1.3 billion, up 27.7% [4]. - Earnings per share were reported at 0.30, with a gross margin of 21.4%, an increase of 1.8 percentage points year-on-year, and a net profit margin of 11.6%, up 1.6 percentage points [4]. - The company proposed a dividend of 0.20 HKD per share, with a payout ratio of 58% and a dividend yield of approximately 6.5% based on the stock price as of March 27, 2026 [4]. Group 2: Product Performance - The revenue from wheel loaders reached 4.6 billion, reflecting a robust year-on-year growth of 16.9%, serving as a core driver for revenue growth [5]. - Excavator sales performed exceptionally well, generating 1.69 billion in revenue, a remarkable increase of 60.1%, driven by equipment upgrades and infrastructure investment policies [5]. - Forklift revenue declined to 3.46 billion, down 7.0%, but the gross margin improved to 21.3%, with future recovery expected as the company accelerates electric forklift development and overseas expansion [5]. Group 3: Global Expansion - The company reported overseas revenue of 3.81 billion, a year-on-year increase of 19.3%, with overseas revenue accounting for 33.9% of total revenue, up 2.7 percentage points [6]. - The company is well-positioned to benefit from increased demand for construction and mining machinery in Southeast Asia, Africa, and South America, as well as improved penetration in high-end markets in Europe and the U.S. [6]. Group 4: Electric Loader Market - In the first two months of 2026, the sales of electric loaders in China reached 5,132 units, a year-on-year increase of 112.7%, with an electricization rate of 24.1%, up 9.6 percentage points [7]. - The government has emphasized the need to accelerate the elimination of outdated capacity and support the innovation and application of green low-carbon technology equipment [7]. - The company has strategically positioned itself in the electric loader market, anticipating growth as electric loader penetration increases and the competitive landscape improves [7].

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected investment return exceeding the market benchmark by over 15% in the next 6-12 months [5]. Core Insights - The company achieved a significant increase in net profit, with a 27.7% year-on-year growth, reaching a net profit of 1.3 billion yuan in 2025. The revenue also grew by 9.8% to 11.22 billion yuan, with an EPS of 0.30 yuan [1]. - The gross margin improved to 21.4%, up by 1.8 percentage points, while the net margin rose to 11.6%, an increase of 1.6 percentage points [1]. - The company plans to distribute a dividend of 0.20 HKD per share, resulting in a dividend payout ratio of 58% and a dividend yield of approximately 6.5% [1]. Revenue Breakdown - The revenue from wheel loaders increased by 16.9% to 4.6 billion yuan, serving as a core driver for revenue growth. Excavator sales surged by 60.1% to 1.69 billion yuan, driven by equipment upgrades and infrastructure investments [2]. - Forklift revenue declined by 7.0% to 3.46 billion yuan, but the gross margin improved to 21.3%. The company aims to enhance its electric forklift penetration, which is currently below the industry average, indicating potential for future recovery [2]. Global Expansion Strategy - The company reported overseas revenue of 3.81 billion yuan, a 19.3% increase, with overseas revenue accounting for 33.9% of total revenue, up by 2.7 percentage points year-on-year [3]. - The report highlights opportunities in Southeast Asia, Africa, and South America for construction machinery exports, as well as increased penetration in high-end markets in Europe and the US [3]. Electric Loader Market - The electric loader market is experiencing rapid growth, with sales increasing by 112.7% in early 2026. The electricization rate reached 24.1%, up by 9.6 percentage points [4]. - The government is promoting the elimination of outdated capacity and supporting green technology innovations, positioning the company to benefit significantly as a leader in the electric loader sector [4]. Financial Forecasts - The company’s revenue is projected to grow to 12.76 billion yuan in 2026, with a net profit forecast of 1.58 billion yuan, reflecting a growth rate of 21.4% [6]. - The EPS is expected to increase to 0.37 yuan in 2026, with a P/E ratio projected to decline to 7.3 [6].

Investment Rating - The report maintains an "Outperform" rating for the mechanical industry [1] Core Views - The cyclical recovery in the mechanical sector continues, with high oil prices expected to catalyze opportunities in the new energy sector [1][5] - In March, the CITIC mechanical sector fell by 13.54%, underperforming the CSI 300 index by 8.59 percentage points, ranking 25th among 30 CITIC primary industries [4][10] - The report suggests a cautious approach to investing in the mechanical sector, focusing on defensive stocks and sectors with stable earnings and high dividend yields [5] Summary by Sections 1. Mechanical Sector Market Performance - As of March 26, 2026, the CITIC mechanical sector experienced a decline of 13.54%, with all sub-industries showing a downward trend, except for nuclear power and railway transportation equipment, which fell by less than 10% [4][10] - The median decline for 635 stocks in the CITIC mechanical sector was -14.17%, with 58 stocks rising and 576 falling [14] 2. Engineering Machinery - In January-February 2026, excavator sales increased by 13.1% year-on-year, indicating a sustained recovery in the industry [21][32] - The report highlights the importance of equipment renewal cycles and increasing export competitiveness for leading companies in the engineering machinery sector [39] 3. Robotics - The industrial robot sector continues to recover, with production increasing by 31.1% year-on-year in January-February 2026 [40][43] - The report emphasizes the significance of humanoid robots as a key application of artificial intelligence, with several domestic companies entering the IPO stage [48] 4. Shipbuilding - In January-February 2026, new ship orders and prices showed signs of recovery, with China maintaining a leading position in global shipbuilding metrics [49][51] - The report notes that the global shipbuilding market remains competitive, with China capturing a significant share of new orders [51]

Investment Rating - The report maintains an "Outperform" rating for the mechanical industry [1] Core Viewpoints - The cyclical recovery in the mechanical sector continues, with high oil prices expected to catalyze opportunities in the new energy sector [1][5] - In March, the CITIC mechanical sector fell by 13.54%, underperforming the CSI 300 index by 8.59 percentage points, ranking 25th among 30 CITIC primary industries [4][10] - The report suggests a defensive approach in the short term, focusing on stable recovery and high dividend yields from leading cyclical mechanical companies [5] Summary by Sections 1. Mechanical Sector Market Performance - As of March 26, 2026, the CITIC mechanical sector experienced a decline of 13.54%, with all sub-industries showing a downward trend, except for nuclear power and railway transportation equipment, which fell by less than 10% [4][10] - The report highlights that the mechanical sector's valuation is at a high level, with a price-to-earnings ratio of 39.2, placing it in the 76.5th percentile of the past decade [16][19] 2. Engineering Machinery - In January-February 2026, excavator sales increased by 13.1% year-on-year, indicating a sustained recovery in the industry [21][32] - The report emphasizes the importance of equipment renewal cycles and the increasing competitiveness of engineering machinery exports, with major companies expanding their global presence [39] 3. Robotics - The industrial robotics sector continues to recover, with production increasing by 31.1% year-on-year in January-February 2026 [40][43] - The report notes that humanoid robots are entering a phase of mass production, with significant advancements in technology and market potential [48] 4. Shipbuilding - In January-February 2026, new ship orders and prices are showing signs of recovery, with China maintaining a leading position in global shipbuilding metrics [49][51] - The report indicates that the shipbuilding industry is experiencing a resurgence, with a notable increase in new orders compared to previous years [49]

Market Overview - A-shares opened lower but rose throughout the day, with major indices collectively increasing and turning positive [1] - The A-share market saw a surge in the non-ferrous metals, pharmaceutical biology, and basic chemicals sectors, leading to a wave of stocks hitting the daily limit [1][4] A-share Performance - By the end of the morning session, the Shanghai Composite Index rose by 0.26%, the Shenzhen Component Index by 0.93%, the ChiNext Index by 0.83%, and the Sci-Tech Innovation Index by 1.08% [4] - The non-ferrous metals sector led the gains with an increase of 2.6%, with multiple stocks hitting the daily limit, including Shenzhen New Star, Haixing Co., Rongjie Co., Yunnan Zhiye, and others [4][5] Pharmaceutical Sector - The pharmaceutical biology sector also performed well, with stocks like Hotgen Biotech, Yinuo Si, Shutaishen, and Huana Pharmaceutical seeing increases of over 10% [6][7] - Notable stocks in this sector included Hotgen Biotech with a rise of 14.70% and Shutaishen with an increase of 11.50% [7] Basic Chemicals Sector - The basic chemicals sector experienced significant gains, with stocks such as Keta Biotech and Shandong Haihua hitting the daily limit [8][9] - Keta Biotech saw a remarkable increase of 19.99%, while other stocks in the sector also posted gains around 10% [9] New Listings - A new stock, Puan Medical, was listed today, with its price surging over 170% at one point during the session [11][12] - Puan Medical specializes in diabetes care and related medical devices, with a projected increase in global insulin pen needle sales from 8.81 billion units in 2022 to 9.97 billion units by 2024 [12] Hong Kong Market - The Hong Kong market experienced narrow fluctuations, with China Longgong's stock surging over 20% during the morning session [13][15] - China Longgong reported a total revenue of RMB 11.215 billion for the year 2025, reflecting a year-on-year growth of 9.81%, with significant contributions from electric loaders and export products [15][16]

Summary of the Conference Call for LiuGong Company Overview - **Company**: LiuGong - **Industry**: Construction Machinery Key Points Financial Performance and Projections - **2026 Q1 International Business Revenue**: Expected growth of 20%-25%, a 10 percentage point acceleration compared to the same period in 2025 [2][4] - **Overall Performance**: Anticipated single-digit growth for the overall performance in 2026 [2] - **Middle East Conflict Impact**: Limited impact on revenue, with pure Middle East revenue contributing only 3%-4% [2][4] - **Exchange Losses**: Estimated losses of RMB 50 million to 100 million due to currency fluctuations [4] Product and Market Insights - **Electric Loader Penetration**: Expected to reach 60% in 2026, with overseas electric loader gross margins exceeding 50% [2][4] - **Domestic Business Improvement**: Increased share of large and super-large excavators contributing to profit recovery; loader business gross margins have bottomed out [2][4] - **Mining Business Goal**: Targeting RMB 10 billion scale by 2030, transitioning from small to large mines [2][11] - **Agricultural Machinery**: Currently in a foundational stage, aiming for profit contribution by 2027 [2][12] Industry Trends - **Industry Cycle**: Currently in an L-shaped slow recovery phase, expected to rise until 2028 [2][16] - **Price Competition**: Price wars are easing, especially in the electric loader sector due to rising fuel costs [5][6] Strategic Initiatives - **H Share IPO Plans**: Delayed due to A-share valuation issues; decision expected in the second half of 2026 [2][6] - **International Business Strategy**: Aiming for international revenue to exceed 60% of total by 2030, with increased resource allocation [7][11] - **R&D and Market Investment**: No changes in R&D and market investment plans for 2026, with evaluations planned mid-year [7] Channel Strategy - **Distribution Model**: Primarily relying on dealers, with a focus on supporting them rather than increasing direct sales [7][9] - **Agent Transition**: Open to new cooperation models with agents to enhance governance and compliance [8] Competitor Landscape - **Agent Profitability**: Agents focusing on comprehensive solutions are performing better than those specializing in single products [9] - **Market Adaptation**: Encouraging agents to adopt models similar to Caterpillar, focusing on after-market services [9][10] Regional Market Insights - **Regional Performance**: North American market expected to show good growth in 2026, while the Northern Special Zone (Russia) may face challenges [16][17] - **Emerging Markets**: Africa and South Asia are identified as regions with long-term growth potential [17][18] Product Development - **Electric Loader Gross Margin**: Currently over 50% in international markets, with expectations for domestic margins to improve [14][15] - **Product Innovation**: Focus on new technology products and improving product structure to enhance margins [15] Conclusion - **Overall Outlook**: LiuGong is positioned for growth with strategic initiatives in international markets, product innovation, and a focus on improving profitability through enhanced product offerings and market strategies [2][7][11]