Xiangcai Securities: Excavator and loader sales maintained growth in the first quarter, with limited impact of tariffs on overseas revenue for major manufacturers.

Securities released a research report stating that excavator and loader sales maintained growth in the first quarter, and the penetration rate of electric loaders accelerated. In the first quarter of this year, driven by factors such as accelerated stock renewal, growth in new demand such as high-standard farmland, and stable recovery in traditional demand such as infrastructure investment, domestic excavator and loader sales grew rapidly, and export growth gradually rebounded and turned positive. The demand for construction machinery is expected to continue to recover. Meanwhile, major machinery manufacturers have a relatively low exposure in the North American market and have already made early arrangements for globalization manufacturing. Therefore, the impact of Sino-US tariffs on the overseas income of major machinery manufacturers is limited. In the future, with the continuous increase in domestic demand, CKH HOLDINGS's overseas market share is gradually rising, and the performance of construction machinery companies is expected to maintain growth. Key points from Xiangcai Securities: Excavator and loader sales maintained growth in the first quarter, with an accelerated increase in the penetration rate of electric loaders According to statistics from the China Construction Machinery Industry Association, sales of various excavators in March 2025 reached 29,590 units, an 18.5% year-on-year increase. Of these, domestic sales were 19,517 units, an increase of 28.5% year-on-year, while exports were 10,073 units, a 2.87% year-on-year increase. From January to March 2025, a total of 61,372 excavators were sold, a 22.8% year-on-year increase, with domestic sales of 36,562 units, a 38.3% year-on-year increase, and exports of 24,810 units, a 5.49% year-on-year increase. In addition, sales of loaders in March 2025 reached 13,917 units, a 12.9% year-on-year increase. Of these, domestic sales were 8,168 units, a 23.2% year-on-year increase, and exports were 5,749 units, a 0.95% year-on-year increase. From January to March 2025, a total of 30,567 loaders were sold, a 14.8% year-on-year increase, with domestic sales of 16,379 units, a 24.7% year-on-year increase, and exports of 14,188 units, a 5.21% year-on-year increase. In March 2025, the sales of electric loaders reached 2,802 units, accounting for 20.1% of total sales. In terms of utilization rate, in March 2025, the average monthly working hours of the main construction machinery products were 90.1 hours, a 6.53% year-on-year increase. The average monthly utilization rate of main construction machinery products in March 2025 was 60.80%, a 3.38 percentage point decrease year-on-year. With stock renewal overlapping new and emerging demand, domestic excavator sales are expected to maintain growth Regionally, the main reason for the rapid growth in excavator sales in China in the first quarter of this year comes from the explosion of domestic excavator sales. In the first quarter, domestic excavator sales increased by about 37,000 units year-on-year, a 38.3% year-on-year increase, which was nearly 15.5 percentage points higher than the overall sales growth. The driving factors include: First, the demand for excavator stock renewal. The previous low point of domestic excavator sales was in 2015, and the excavator renewal cycle is generally 8 to 10 years, corresponding to the low point of excavator sales in 2023 in this cycle. At the same time, in 2024, Beijing, Shanghai, Shandong, and other regions successively issued subsidies for the renewal of non-road mobile machinery, and the accelerated export of used machines also promoted the accelerated digestion of stock excavators, thus speeding up the domestic excavator renewal rate and driving sales to continue to rise. Second, the emergence of new demand in high-standard farmland, water conservancy construction, and other fields. In 2021, the State Council issued the "National High-Standard Farmland Construction Plan (2021-2030)," and in 2024, the central government's No.1 document proposed to "prioritize the construction of high-standard farmland in the black soil areas of Northeast China, plain areas, and areas with irrigation conditions, raise the central and provincial investment subsidies to grain-producing counties, and cancel local requirements for matching funds for grain-producing counties." In March of this year, the implementation plan for "gradually turning permanent basic farmland into high-standard farmland" was issued. In addition, in October 2023, China issued a trillion yuan special national debt for disaster prevention and reduction, driving a 41.7% year-on-year increase in fixed asset investment in water management in 2024. Therefore, in terms of new demand, the demand for excavators in areas such as high-standard farmland and water conservancy construction is growing rapidly, leading to a rapid increase in small excavator sales. Third, traditional demand gradually stabilizing and rebounding. The 2025 government work report proposed issuing 1.3 trillion yuan in ultra-long-term special national debt in 2025, an increase of 300 billion yuan year-on-year; accelerating the implementation of key projects to promote the smooth conclusion of major projects in China's 14th Five-Year Plan; planning to allocate 4.4 trillion yuan in local government special bonds, an increase of 500 billion yuan year-on-year, with a key focus on investment and construction, land acquisition and purchasing of existing housing, and digesting local government debt. Therefore, the speed of issuance of China's special bonds has accelerated this year, with local governments issuing new special bonds in the first two months accounting for around 13.6%, which is 3.2 percentage points higher than the same period last year. This has driven a 9.9% year-on-year growth in China's infrastructure investment in the first two months of this year, an increase of approximately 0.8 percentage points compared to 2024. Under globalization layout, the impact of Sino-US tariffs on the overseas income of major machinery manufacturers is limited On the one hand, Chinese construction machinery manufacturers have a relatively low exposure in the North American market. According to Engineering Machinery magazine, Sany Heavy Industry's market exposure in North America is about 3%, Jiangsu Hengli Hydraulic's market exposure is about 5%, and ZOOMLION, XCMG, Guangxi Liugong Machinery, and other companies all have market exposures below 2% in North America. In addition, these companies also have some capacity in the North American region. Sany's future production value in the United States will exceed 1 billion yuan after the factory is put into operation, which can basically meet the demand in North America. Jiangsu Hengli Hydraulic's production value in North America exceeds 300 million yuan, and the Mexican factory scheduled to start production in 2025 is expected to have a production value of nearly 2 billion yuan. ZOOMLION's high-end machinery factory in Mexico has an annual production value of over 1 billion yuan, and it has been in full production since the third quarter of 2024. On the other hand, Chinese major machinery manufacturers have already established a strong presence in global manufacturing. According to Sany Heavy Industry's 2024 semi-annual report, Sany Heavy Industry's Indonesian factory completed the expansion of its second phase in the first half of 2024, while its second-phase factories in India and South Africa are under orderly construction and are expected to cover Southeast Asia and the Middle East after production.In the annual report of 2024, ZOOMLION has completed the strategic layout of its global research and development manufacturing network. It has established 11 overseas production bases in 8 countries including Italy, Germany, India, Mexico, Belarus, Brazil, Turkey, and the United States, forming a production system covering 8 categories and 32 series.According to XCMG Construction Machinery's semi-annual report for 2024, XCMG's overseas production capacity layout in regions such as Brazil, Germany, Mexico, India, and Uzbekistan is gradually improving to further expand the overseas market, control costs from the supply chain end, and prepare for global trade barriers. In the 2024 annual report of Guangxi Liugong Machinery, it was also mentioned that Guangxi Liugong Machinery has entered a deep stage of internationalization. It has set up four overseas manufacturing bases in India, Brazil, Argentina, and Indonesia, developed local supply chains, and achieved localized production. Regarding targets, It is recommended to focus on core targets in the construction machinery sector such as Jiangsu Hengli Hydraulic (601100.SH), Sany Heavy Industry (600031.SH), XCMG Construction Machinery (000425.SZ), Zhejiang Dingli Machinery (603338.SH), Anhui Heli Co., Ltd. (600761.SH). Risk warning, Potential risks include domestic policies not meeting expectations in terms of implementation, escalating trade tensions, declining overseas demand, and rising raw material costs.