20231130-招银国际-2024_Outlook__Slowdown_of_overseas_demand_along_with_lack_of_growth_in_China__be_selective_34页_3mb

CMB Research: Chinese Machinery Sector 2024 Outlook

Date: November 30, 2023

Overall Recommendations

• OUTPERFORM: Maintain for heavy-duty trucks (HDTs) due to expected growth.
• Downgrades:
  • Zoomlion and SANY Heavy revised to HOLD;
  • Zoomlion-H and Zoomlion-A target prices reduced.
  • SANY Heavy target price lowered.

Segment-Specific Outlook

Heavy-Duty Trucks (HDTs)

• Expected 15% YoY growth in 2024E driven by replacement demand and solid export growth (18% YoY), with natural gas HDTs accounting for 25-30% of sales.
• Market share gain for Weichai Power, benefiting from high penetration in gas engines.

Aerial Work Platforms (AWPs)

• Strong in US and Middle East due to mega projects and replacement demand, but Chinese market slowed due to reduced capex by leasing companies.
• Forecast ~5% YoY decline in China sales; US expects steady growth.

Excavators

• Expected 5% YoY decline in 2024E, with China market stabilizing slightly (+1% YoY) but offset by weak exports due to high base and base effect.

Tower Cranes and Concrete Machinery

• Subject to property construction decline; sales expected single-digit reduction, exacerbated by weak China property investment.

Company-Specific Analysis

Weichai Power (2338 HK / 000338 CH)

• Upped to BUY; SOTP-based target price revised up to HK$19.4 / RMB17.8.
• Key drivers: HDT engine market share, gas engine leadership, and diversification into large-bore engines and hydrogen fuel cells.
• Earnings forecast revised up by 2%/13%/11% for 2023E/24E/25E.

Zoomlion (1157 HK / 000157 CH)

• Downgraded to HOLD from Buy; target prices lowered.
• Vulnerable to property spending decline; earnings forecast revised down significantly.

SANY Heavy (600031 CH)

• Maintained HOLD; target price reduced to RMB12.3.
• Domestic sales weak; overseas growth slowing due to high base and supply chain easing.

Opportunities and Risks

• Belt-and-Road Initiative: Offers ongoing opportunities through Chinese ODI abroad; projects like NEOM and UAE infrastructure demand.
• Middle East: High growth potential from Saudi Vision 2030 and UAE Vision 2021, focusing on energy and infrastructure.
• Risks: Competitive landscape deterioration, supply chain bottlenecks easing, potential anti-dumping investigations in Europe affecting AWPs.

This summary captures key recommendations, segment outlooks, and company updates from the CMB research report.