Construction machinery giant performance declines collectively

According to the third quarter report of 2012, the construction machinery industry is collectively "turning the car on." According to statistics, the revenue growth rates of the six major companies such as Sany Heavy Industry, Zoomlion, Liugong, XCMG, Shantui, and Xiagon decreased by an average of 4.9% in the third quarter, and their profit growth rate declined even faster. In the third quarter, only two companies across the industry achieved revenue growth. In the first three quarters, only one company across the industry achieved double revenue and profit growth. At the same time, the absolute value of inventories, accounts receivable increased sharply, cash flow tensions and other situations appeared one after another.

6 company receivables increased by 54%

When Shenyin Wanguo analyzed the six representative companies including Sany Heavy Industry, it was found that the decline in profitability, rising costs, and rising receivables were common features of the construction machinery industry.

Jinan’s Yu Xiaoqiang (a pseudonym) is seeking to lease his two 46-meter Sany Heavy Industry trucks this month. He said that the current market conditions can still be maintained, but the situation will improve next year and he will expand his fleet of pump trucks.

Although the economy is currently in a sluggish state, there are many people who share similar views with Yu Xiaoqiang in the industry that is closely related to economic prosperity.

Sany Heavy Industry President Xiang Wenbo said in an interview with the media that it is expected that the construction equipment industry in China will fully recover by the third quarter of next year. He believes that China's infrastructure, including roads, airports, and sewage treatment systems are in urgent need of improvement. In the next 20 to 30 years, more investment will be a foregone conclusion.

The third quarterly report of 2012 revealed the current industry's difficulties. The three quarterly report of Sany Heavy Industry showed that the industry’s leading company’s sales revenue for the first three quarters was 40.7 billion yuan, a decrease of 1.5%, and net profit was 5.874 billion yuan, a decrease of 23.4%. At the same time, the company’s accounts receivable at the end of the third quarter increased by 83.11% to reach 20.7 billion yuan, which is equivalent to half of the operating income in the first three quarters. Inventories and interest payments also increased accordingly, of which inventory amounted to 9.93 billion yuan.

The general situation of the entire industry is similar. The proportion of financial expenses to revenue of three companies including Sany Heavy Industry, Zoomlion, Liugong, Xugong Machinery, Shantui, and Xiagong increased in the first three quarters. The absolute amount of inventory increased by 1.2%, and accounts receivable increased by 54%. .

Small manufacturers from three to five years or closed

Changes in the degree of macroeconomic conditions, especially in the area of ​​fixed asset investment, are the main reasons for the declining economy in this industry.

Liu Gong, president of Liugong, described the dilemma of the excavator industry at a forum on October 23. He said that the company's inventory levels remain high, agents' funds are difficult to return, and the pressure for survival is high. Overcapacity and increased vicious competition in the industry are restricting the development of the industry.

Zeng Guangan said that large companies like Sany Heavy Industry and Zoomlion have the strength to overcome all problems, but many small-scale manufacturers will be forced to close within the next three to five years.

For many years, investment in fixed assets began to cool. In the summer of 2009, fixed-asset investment increased by 33% year-on-year, and by the first three quarters of this year, this proportion dropped to 20.5%.

At present, the situation in the entire industry is much the same. In some indicators, such as the excavator industry, sales have been negative for 15 consecutive months. Problems such as overcapacity, market saturation, and excessively loose sales policies have exposed customers' credit risks.

Monthly drop in pump rental by nearly 20%

The price of a million-dollar pump truck usually ranges from one year to two years. In the case of low rents, users who purchase pump trucks will have “severed supply”.

Yu Xiaoqiang has pump trucks in Erdos and Changchun, and there are more than a dozen of them. He is still active on the construction site.

It is reported that Sany Heavy Industry can provide 20% to 30% down-payment mortgage loan guarantees for pump users. Other pump truck users said that there could actually be a lower down payment ratio. Foreign companies Caterpillar, Japan Komatsu, etc. also occupy a certain share in the Chinese construction machinery market (such as excavators, loaders, etc.), but this share is shrinking with prudent customer credit policies.

According to Xiaoqiang, a 46-meter pump truck can now reach a rent of 100,000 yuan per month in some mountainous areas, and rents on flat land are even lower. Yu Xiaoqiang said that in the golden age of 2009, the pump rental of 46 meters or even shorter could reach 120,000 yuan, and the rental return has now fallen by nearly 20%.

Not all pump truck owners can do business smoothly, and pump trucks are becoming more and more frequent. A pump truck operator consulted the rent seeker on the Internet. He owned a 47-meter Zoomlion pump truck produced in 2008 and has been idle for nearly a year.

Loose credit policies to avoid repayment of self-destructive machines are supporting the scale of construction machinery products to maintain sales. Some analysts believe that such sales strategies are at risk.

There is also a backlog of new pump trucks on the market. Caterpillar said in the second quarter that sales in China in the second quarter were much lower than in the same period in 2011 due to the increasing number of defaults on customer loans.

Zeng Guangan had previously revealed that some excavator users were unbearably burdened with repayment, and even appeared to evade repayment and destroyed the machine.

The data disclosed by Sany Group shows that in the sales of concrete machinery in 2010, only 15.34% of customers paid in full, 21.62% of customers paid in installments, and 63.04% of customers chose mortgage or financial leasing.

The sales structure of construction machinery reflected in the three quarterly reports is a substantial increase in accounts receivable. On the one hand, the increase in customer receivables on installments, and on the other hand, the bank’s credit crunch also made it impossible for the mortgage payments and financial leasing to make timely payments. If demand does not increase, the excess situation may still persist.

Concrete pump products began to flourish in various types of construction sites in 2004, but from the perspective of the performance of listed companies, the real sales peak began in 2009 and peaked in 2010-2011. This means that if the demand does not increase, the equipment in the market can still operate for a long time.

Betting on a sufficient number of sites Many investors believe that demand in the field of mechanical engineering will continue to grow, mostly due to expectations of urbanization in China.

Institutions such as China National Gold Corporation (CICC) and other institutions have previously anticipated that in the long run, construction machinery is far from meeting the demand bottleneck. Urbanization is the biggest driving force for China’s economic development. Before 2020, China's construction activities will remain at a peak active stage, and the continuous increase in the mechanization rate of construction will boost domestic demand for construction machinery.

UBS Securities analysts Fu Weiqi and Tang Yibo predict that the industry recovery needs to continue to wait, and the growth guarantee policy can only support the steady growth of sales volume in the construction machinery industry.

Shenyin Wanguo believes that the investment logic of the construction machinery industry should shift from infrastructure to real estate. If the property policy is expected to be stable, the number of new construction projects is expected to go from negative to positive, which will drive the recovery of construction machinery stock prices.

However, Yu Xiaoqiang is still very optimistic. He said that if the new year market improves, new equipment will be added. He said: “Original construction methods will be eliminated sooner or later, and concrete mixing will disappear in situ. As long as there is a construction site, whether it is pouring or piling, pump trucks will be used.”

A research report of Industrial Securities stated that the current domestic bulk cement rate is just over 50%, while developed countries have reached 80%. This means that the use of bulk cement and ready-mixed concrete will increase.

The premise is that there are enough sites. Yu Xiaoqiang has no doubt about this.