2025-12-08 15:36Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the excavator industry in China and its performance in both domestic and overseas markets, particularly looking ahead to 2026 [1][5][12]. Core Insights and Arguments - Domestic Excavator Sales: By the end of 2023, domestic excavator sales exceeded expectations with an actual growth rate of nearly 20%. This surge is attributed to year-end rush work, improved funding availability, and inventory pressure from certain manufacturers [1][2][3]. - Overseas Market Performance: The overseas market also showed strong demand, with actual growth close to 20%, surpassing initial forecasts of around 10%. This was driven by similar factors as the domestic market [2][3]. - Future Sales Projections: For 2026, domestic excavator sales are expected to continue growing, with small excavators projected to increase by 15%-20% and medium to large excavators expected to achieve over 10% growth, supported by central government special bonds for water conservancy projects [5][12]. - International Market Dynamics: The overseas market is anticipated to benefit from the U.S. interest rate cut cycle, which is expected to enhance economic activity. Regions like Africa, South America, and the Middle East are expected to see increased demand for mining equipment due to rich mineral resources and a favorable exchange rate for the dollar [6][8]. Additional Important Insights - Market Share of Chinese Brands: In 2024, major Chinese engineering machinery companies are projected to hold a market share of approximately 17% in key categories like excavators and loaders. The new excavator market share is estimated to be between 25%-30%, although revenue share is lower due to lower pricing compared to Western brands [3][9]. - Impact of Used Equipment: The used equipment market significantly influences the new machine market, especially in Africa where used machines account for 70% of actual demand. This dynamic suggests that the real market share for new machines in Africa may only be around 10% [10][11]. - Competitive Landscape: The competition among Chinese brands can be assessed by tracking the gross margin changes of second-tier brands like LiuGong, which have seen margins rise from 27%-28% to 33%-34% by Q3 2025. This indicates a competitive environment that could impact market share [11]. - Valuation of Companies: The engineering machinery sector is currently undervalued, with companies like SANY Heavy Industry trading at around 16 times earnings, while others like LiuGong and XCMG are around 12 times. This presents a significant investment opportunity given the expected market rebound [12][14]. Recommendations - Investment Recommendations: The preferred investment order includes SANY Heavy Industry and XCMG due to their high elasticity in an upward cycle. LiuGong and Zoomlion are also recommended, with specific attributes appealing to different investor strategies [14].