Investment Rating - The report maintains a positive outlook for the construction machinery sector, projecting a full-year growth of 15% for domestic excavator sales in FY25, despite short-term fluctuations in demand [2][3][6]. Core Insights - Domestic excavator sales experienced a decline in May due to a significant drop in medium excavators, but the overall upward trend in the industry is expected to continue until 2027/28 [2][3]. - Small excavators showed the fastest growth in May, while large excavators lagged behind, primarily driven by urban underground utility tunnel construction [2][3]. - The expert anticipates that wheel-loader growth may surpass excavators in 2025E, influenced by the rise of electric wheel-loader penetration [2][3]. - The report highlights that the price competition for medium excavators has intensified, while competition for small and large excavators remains milder compared to previous cycles [4][6]. Summary by Sections Domestic Demand - Domestic excavator sales are expected to fluctuate in the short term, with a rebound anticipated in June due to mid-year KPI pressures, although real demand may remain weak during the off-season [3][6]. - The expert forecasts a 5% year-on-year growth in H225E for domestic excavators, indicating a gradual recovery post-September [3][6]. Competitive Landscape - Price competition is more pronounced in the medium excavator segment due to lower brand concentration, while Tier-1 manufacturers focus on profitability [4][6]. - The report notes that as domestic brands enter the large and extra-large excavator segments, price cuts may become more significant in those areas [4][6]. External Demand - The impact of trade tensions on external demand is considered limited, with Chinese OEMs expected to continue gaining market share in overseas markets [6].

Investment Rating - The report maintains a "BUY" rating for SANY Heavy, with a target price revised to RMB22 from RMB21, indicating a potential upside of 15.4% from the current price of RMB19.06 [1][3]. Core Insights - SANY Heavy's net profit for 2024 is projected at RMB5.97 billion, reflecting a 32% year-over-year increase, which aligns closely with estimates [1]. - The company is focusing on emerging markets such as Asia Pacific, Africa, the Middle East, and South America, while remaining cautious about the US and European markets due to geopolitical concerns [1]. - The management highlighted the growth potential in large-size and mining excavators, positioning SANY as a key player in the excavator upcycle [1]. Financial Performance - Revenue for FY24 is expected to reach RMB78.38 billion, a 5.9% increase from FY23, with further growth projected to RMB88.84 billion in FY25 and RMB97.80 billion in FY26 [2]. - Adjusted net profit is forecasted to grow to RMB7.72 billion in FY25 and RMB8.88 billion in FY26, with corresponding EPS increasing to RMB0.91 and RMB1.05 respectively [2]. - The proposed dividend for FY24 indicates a 51% payout ratio, up from 41% in FY23, marking the highest payout since 2017 [1]. Regional Revenue Breakdown - In 2024, overseas revenue is expected to grow by 12% year-over-year, contributing 64% of total revenue, with Africa showing a significant 44% increase [6][8]. - The revenue breakdown for overseas markets in 2024 includes Asia Pacific (42%), Europe (25%), America (21%), and Africa (11%) [8]. Earnings Forecast Adjustments - The earnings forecasts for 2025 and 2026 have been slightly revised upwards by 5% and 7% respectively, reflecting the anticipated earnings upcycle [1][13]. - The target price adjustment to RMB22 is based on an unchanged target P/E of 24x, which is 0.5 standard deviations above the average of 20x since 2017 [1][3]. Share Performance - The market capitalization of SANY Heavy is approximately RMB161.74 billion, with an average turnover of RMB1.51 billion over the past three months [3]. - The stock has experienced a 1-month decline of 6.7% but a 3-month increase of 23.6% [5].

Summary of Zoomlion Heavy Industry Conference Call Company Overview - **Company**: Zoomlion Heavy Industry (1157 HK/000157 CH) - **Industry**: Machinery and Construction Equipment Key Points and Arguments Financial Performance and Outlook - **Profit Recovery**: Zoomlion's 4Q24 profit miss was attributed to foreign exchange losses and lack of disposal gain recognition. A 30% net profit growth is expected in 1Q25 due to positive domestic sales recovery [1][10] - **Sales Growth**: Domestic sales are projected to grow by 4% in 2025 after consecutive declines since 2021, driven by recovery in construction machinery and steady growth in agricultural and mining machines [2][10] - **Overseas Sales**: Contribution from overseas sales increased to 51% in 2024 from 6% in 2020, with a four-year CAGR of 57%. However, growth is expected to normalize to 15% in 2025 [3][10] Market Dynamics - **Sector Recovery**: The domestic recovery has expanded from excavators to concrete machines since March 2024, with key applications in farmland, water projects, and community renewal [2][10] - **Excavator Sales**: The 2025 domestic excavator sales volume is raised to 118k units (17% growth), with 70% driven by replacement demand [21][10] Profitability and Margins - **Profit Growth**: A 39% net profit growth is estimated for 2025, supported by a higher sales contribution from overseas business (32% gross margin) and reduced stock-based compensation expenses [4][10] - **Sales Contribution**: The company expects 10% sales growth in 2025, with a significant contribution from margin-accretive overseas business [4][10] Investment Recommendations - **Stock Ratings**: Maintain Buy on H-shares and Hold on A-shares, with target prices adjusted to HKD7.40 for H-shares and RMB8.90 for A-shares [5][10] - **Valuation**: H-shares trade below the historical average at 0.7x 2026e PB, indicating attractive valuation [5][10] Risks and Catalysts - **Risks**: Potential risks include weaker-than-expected residential property construction activity, price competition, and export sales moderation [46][10] - **Catalysts**: Anticipated catalysts include a potential profit beat in 1Q25 and better-than-expected machinery sales in 2Q25 [5][10] Additional Important Information - **Market Data**: As of March 31, 2025, the market cap is HKD66,258 million, with a free float of 48% for both H and A shares [7][10] - **Financial Estimates**: Revenue is projected to grow from CNY45,478 million in 2024 to CNY60,477 million by 2027, with a consistent increase in net profit [11][10] - **Sales by Segment**: Construction machinery accounts for 89% of sales, with concrete machinery and crane machinery being the largest segments [30][10] This summary encapsulates the key insights from the conference call regarding Zoomlion Heavy Industry, highlighting its financial outlook, market dynamics, profitability, investment recommendations, and associated risks.