Concrete machinery needs contraction and development

If the sales volume of concrete machinery only falls periodically, once the investment returns this year, sales will pick up - however, we believe that pump sales will continue to decline in the next two years. The zero growth of pump sales in 2012 means that the stock has increased by 30%, and the supply growth is significantly higher than the demand growth rate. Our research and measurement of the return on investment in inventory equipment has fallen to zero.

If the stock of pump trucks continues to exceed the growth rate of demand this year, incremental equipment will impact the return on investment of stock equipment, and the recovery risk of the instalments of equipment sold by manufacturers in the past few years will increase, and the balance sheet will be damaged. If the stock growth this year is equal to the growth in demand, the sales volume will be about -23% year-on-year, and the income statement will be damaged. The space for urbanization growth is still large, but the peak growth in pumping demand has been determined by the concrete pumping demand determined by the cement output and the ready-mixed concrete ratio. The core variable predicted is the ready-mixed concrete ratio. The rate of ready-mixed concrete in China is significantly lower than in developed countries because of the lower level of urbanization.

In the past few years, the rate of upgrading of ready-mixed concrete was higher than that of urbanization, but the ratio of ready-mixed concrete/urbanization rate is now close to that of developed countries. This shows that the permeability of ready-mixed concrete in cities and towns is approaching saturation. Therefore, the rate of increase in the rate of ready-mixed concrete in China will slow down until it approaches the rate of increase in urbanization rate.

In 2013, the sales volume of the industry will have an unexpected decline of 20~30%. We believe that manufacturers are willing to give up their sales growth target next year and repair the balance sheet. The reasons are as follows: 1. The zero return of the new machine will weaken the stimulating effect of credit sales; 2. The new machine Zero return means that continued leveraged sales will affect the repayment of old machines; 3. The capital market temporarily does not provide low-cost funds to support manufacturers' leverage.

If manufacturers tighten their payment conditions to repair the balance sheet, we expect 2013 sales to decline by -23%, of which sales volume in the first half of 2013 may decline by -35%.

In the medium and long term, shrinkage is conducive to healthy development, and the competitive pattern will be stable and visible in the future. High growth of concrete machinery will no longer occur. Possible new growth drivers come from product innovation and post-market development, while exports will not be the mainstay of incremental revenue for several years. New entrants are unlikely to make breakthroughs in the field of concrete machinery. Sany and China United will still be the largest and best companies in the world in this field.