The construction machinery industry is a highly cyclical industry, which is mainly influenced by downstream demand changes in real estate, infrastructure, exports, as well as factors such as equipment renewal cycles and environmental emission policies. The average cycle of the construction machinery industry is roughly 8-10 years. The latest upward cycle started in 2016 and ended in the first half of 2021, followed by a three-year downward cycle.

According to a research report by Zhongyuan Securities, from a cyclical perspective, construction machinery products that entered the market in 2016 will gradually enter the equipment renewal cycle from 2024, and the construction machinery industry is expected to rebound from the bottom. On the other hand, in recent years, the export competitiveness of the main products of construction machinery has continued to improve, and the proportion of exports has been continuously increasing. It is expected to continue to expand overseas markets in the future.

According to the China Construction Machinery Industry Association, from April to June this year, major excavator manufacturers sold 18822, 17824, and 16603 excavators of various types, with year-on-year growth of 0.27%, 6.04%, and 5.31%, respectively, achieving a positive growth rate for three consecutive months.

Especially in June, CME (Construction Machinery) magazine predicted that excavator sales would be about 16000 units, a year-on-year increase of 1.5%, of which 7300 units are expected to be sold domestically, a year-on-year increase of 20%; The expected export volume is 8700 units, a decrease of 10% year-on-year. The actual data shows that 7661 units were sold domestically, a year-on-year increase of 25.6%; 8942 units were exported, a year-on-year decrease of 7.51%, both better than expected.

In this regard, Hengli Hydraulic (SH601100, share price of 42.82 yuan, market value of 57.414 billion yuan) related people analyzed the reporter of the Daily Economic News through WeChat that the domestic demand for excavators in the second quarter was much better than that in the first quarter, mainly because of the new water conservancy projects, better demand for mining and the special treasury bond. In addition, the demand base after the second quarter of 2023 is very low, so it is more likely to achieve year-on-year growth this year.