Construction machinery earnings overseas recovery export demand increased

In recent years, the proportion of manufacturing added value has been rising, the proportion of manufacturing exports has gradually increased, and going to sea has become a widespread consensus in the manufacturing industry. Taking the US manufacturing PMI as an indicator of external demand, it is highly correlated with China's export growth. Second, the US manufacturing PMI is about 6 months ahead of the US inventory cycle, and the bottoming out of this round of manufacturing PMI may mean that the US destocking cycle is coming to an end, which is expected to drive China's exports to rebound in 2024.

Based on the "overseas revenue" data in the appendix of the annual report of listed companies, the proportion of overseas revenue in various industries in the past three years was found that the proportion of overseas revenue in the construction machinery industry increased from 11.2% in 2020 to 32.0% in 2022, an increase of nearly three times, which is a typical high external demand industry. With the gradual increase in the proportion of overseas revenue, changes in overseas demand will have an increasingly important impact on China's construction machinery related enterprises.

From the perspective of overseas demand, in the United States, for example, the Federal Reserve monetary policy began to shift. The current market expects the Fed to start cutting interest rates in March 2024, and the annual rate cut is expected to reach 150bp. The US real estate industry is a typical interest rate sensitive sector, with the decline of interest rates, the US real estate transactions began to pick up. At the same time, the new start lags behind the transaction for about three months, and the increase in the new start data corresponds to the increase in the demand for construction machinery.

On the other hand, there is a high degree of fit between the inventory growth rate of American machinery manufacturers and China's construction machinery exports in history. After nearly two years of inventory reduction, US machinery manufacturers inventory growth has fallen to a low position. With the downward interest rate driven by the increase in demand for related industries, China's construction machinery export growth is expected to usher in an inflection point.

From the perspective of growth space, the overseas market share of China's construction machinery enterprises still has a large room for growth. From 2015 to 2021, the global market share of China's construction machinery enterprises has increased from 8% to 20%, and the gap between global leading enterprises is shrinking. Since 2020, relevant domestic enterprises have taken the initiative to increase overseas investment, and the proportion of export revenue has continued to increase. With the recovery of important market demand for overseas construction machinery, it provides a better external market environment for China's construction machinery industry.