Since the beginning of this year, domestic demand stocks have taken the lead
Although there has been a large correction recently, after all, the Sino-US trade war continues, the Chinese economy slows down, and Hong Kong declines. The overall environment is still more favorable for domestic demand stocks.
On the contrary, cyclical stocks are more sensitive to the economy and generally have higher risks. The exception is construction machinery stocks, which can be expected to promote more stable growth policies in China, and there are four major positive factors. The industry expansion cycle is expected to continue until 2020-2021 .
2019 is the third year of the growth cycle of China’s construction machinery industry
Our industry analysts believe that growth has not yet peaked because of four major structural factors: (1) Environmental protection and emission reduction policies promote replacement demand and new emissions The standard will be implemented in the next two years. We estimate that the replacement demand will account for more than 60% of the overall demand; (2) the increased competitiveness of Chinese manufacturers, improved product quality, marketing strategies, and the introduction of new products will help seize the domestic market from foreign counterparts Market share; (3) there is huge room for growth in overseas markets, and Chinese manufacturers are actively expanding overseas business, such as setting up factories and R & D centers in foreign countries; (4) national policy support, starting to relax local government infrastructure financing this year, estimated next year The growth rate of investment in fixed assets accelerated, coupled with a higher growth rate of real estate investment.
Zoomlion (1157) mainly produces cranes and concrete machinery, each accounting for about 40% of its revenue. The demand prospects for these two types of products are not bad. We forecast that the demand will increase by 20% and 14% in 2020. Can get more market share, the growth rate is expected to be higher than the industry.
Profit is expected to increase by 119% this year
The demand for cranes is closely related to the floor space under construction, and the latter increased by 9% year-on-year in October this year, the highest since 2014, and the contracted sales of domestic houses in September-October were better than expected, which are all favorable for crane demand. The number of Chinese crane manufacturers has decreased from approximately 300 in 2012 to 70 in 2019. The industry consolidation is obvious, and the market share of leading companies is expected to continue to rise. In terms of concrete machinery, Zoomlion has a market share of about 14%, which is the second largest in the industry. This industry is also supported by infrastructure investment and real estate construction.
It is estimated that Zoomlion’s profit will increase by 119% this year, the forecast P / E ratio is 8.4 times, the forecast dividend rate is 7%, the current price is bought, and the midline target is 7 yuan.