Xugong Machinery (000425): Sales exceeded expectations in early 2019 and preliminary reforms of state-owned enterprises were carried out

Investment Highlights The company expects to achieve net profit attributable to mothers in 2018 of 19.


5 ‰, an increase of 91 in ten years.

2% -110.


In 2018, the average value of the company’s product segments achieved high-speed growth. The company benefited from internal infrastructure construction and investment, seized opportunities, and increased internal sales revenue. The company’s international development pace accelerated, and the company’s export scale and growth rate always maintained the industry’s leading position.

Benefiting from downstream infrastructure overweight and environmental protection-driven replacement demand, sales of construction machinery increased at the beginning of 2019.

1) The sales of construction machinery in early 2019 continued the high growth of 2018.

In 2018, sales of domestic excavators, truck cranes, bulldozers, and loaders increased by +45% / + 58% / + 33% / + 28%, respectively. XCMG’s crane sales growth in 2018 increased by about 40%.+ 30%, orders are expected to increase by 40-50% in March, sales continue to exceed expectations, we expect to gradually increase at about 20%.

2) The growth rate of downstream infrastructure investment rebounded, and the leading construction machinery continued to benefit in 2019: The Central Economic Work Conference proposed “countercyclic adjustment”, and stable growth remains the focus of short-term work.

From the fundamentals, we expect the construction machinery industry to resume its continuity.

3) Environmental protection policy drives demand for replacement: The sales of new truck cranes will be switched to National VI in July this year, and the national market for National Stock II has no annual review.

China started to sell Country III in 2008, which was the main model of the previous round of peaks, and currently has huge demand for updates.

The company steadily ranked first in the field of cranes, and the aerial work platform grew rapidly.

1) The company is a global crane leader and its market share has further increased.

XCMG’s truck crane share in 2018 was 45.

8%, the domestic market concentration has increased, and the top three (XCMG, Sany and Zhonglian) have a market share of 91.


XCMG cranes have high quality and high reliability, and have the highest residual value rate in the secondary market.

2) The business of aerial work platforms has grown rapidly.

The company’s aerial work platforms account for about 50% of the firefighting machinery, and the revenue of 2018H1 firefighting machinery has increased by 70%.

At present, it is mainly restricted by production capacity constraints. In 2018, 500 million yuan will be raised to expand the new plant by the scheduled increase project. It is expected to double the production capacity in the second half of this year.

3) Most of the company’s construction machinery hydraulic parts can be self-sufficient.

The company has excellent industrial chain safety and research and development of construction machinery parts.

At present, the hydraulic cylinders, pump valves and other parts of the company’s various products are self-sufficient except for large tonnage which needs to be imported.

The reform of state-owned enterprises has been gradually promoted: internal asset reorganization has added vitality to mid- and long-term development. Xingong Group Construction Machinery Co., Ltd., the controlling shareholder of the company, has 杭州桑拿网 been classified as the first batch of pilot enterprises with mixed ownership reform in Jiangsu Province.

We believe that the joining of XCMG Group in the mixed reform is conducive to the internal corporate reorganization and asset reorganization of XCMG Group, optimizing the internal capital structure, and adding vitality and creativity to XCMG’s long-term development.

The company currently estimates that it still has a high safety margin.

Benefiting from the continuous recovery of the construction machinery industry and the increase of industry concentration in the post-industrial period, the company, as a leader in the internal construction machinery industry, is expected to continue to benefit.

We expect the company’s 2018-2020 EPS to be 0.

26, 0.

41, 0.

47 yuan, PE is 17x, 11x, 10x, PB is 1 respectively.


41, 1.


Maintain “Buy” rating.

Risk reminders: lower-than-expected investment in infrastructure, macroeconomic risks, ongoing risks of deteriorating industry rebound, risks of changes in the company’s internal competitive relationships, and growth in sales of major products exceeding expected risks.