Construction Machinery Industry Review Report: Forklift Sales in May Increased by 10% Year-on-Year, Continuing the Growth Trend-RUNTX Machinery Group

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Construction Machinery Industry Review Report: Forklift Sales in May Increased by 10% Year-on-Year, Continuing the Growth Trend

The following content is extracted from the original text of the research report attachment "Report on the Construction Machinery Industry: Forklift Sales in May +10% Year-on-Year, Continuing the Growth Trend" by Dongwu Securities

Oct 11,2024

(The following content is extracted from the original text of the research report attachment "Report on the Construction Machinery Industry: Forklift Sales in May +10% Year-on-Year, Continuing the Growth Trend" by Dongwu Securities)

Investment Highlights

Forklift sales in May increased by 10%/11% year-on-year respectively, and the industry continued to be prosperous

In May 2024, the total sales of the forklift industry were 110,446 units, a year-on-year increase of 10%, of which domestic sales were 72,428 units, a year-on-year increase of 10%, and export sales were 38,018 units, a year-on-year increase of 11%. The industry sales continued to grow. The prosperity of the downstream manufacturing industry has declined. The PMI in May was 49.5, a month-on-month decrease of 0.9pct; the logistics industry prosperity index was 51.8%, a month-on-month decrease of 0.6pct, and remained in the prosperity range; the warehousing index was 48.4%, a month-on-month decrease of 0.6pct. Looking forward to 2024, the industry is expected to maintain steady growth: (1) With the tightening of domestic environmental protection policies and the promotion of large-scale old-for-new policies, the domestic sales structure is expected to be optimized and the scale will continue to grow. In March 2024, the State Council issued the "Action Plan for Promoting Large-Scale Equipment Renewal and Consumer Goods Replacement", which promoted the equipment renewal and transformation of key industries, and proposed to implement energy-saving and carbon-reduction transformation in different industries and fields. As the policy is implemented, the industry will also benefit. (2) The overseas market sentiment has not declined, and the logic of increasing market share is sustainable. In 2021, due to the impact of the epidemic and supply chain blockage, the global forklift order volume reached a historical peak. Subsequently, the epidemic disturbance was eliminated, and the year-on-year growth rate of new orders in Europe and the United States declined in 2022-2023. Against this background, the new orders of domestic forklift leaders are still on the rise, and the growth rate of overseas revenue remains high. The overseas revenue growth rates of Hangcha Group in 2022/2023 are 70%/30% respectively, and the overseas revenue growth rates of Anhui Heli in 2022/2023 are 57%/32% respectively. We believe that the advantages of domestic forklifts such as short delivery time and leading lithium electrification are still sustainable, which will drive the continuous increase in market share.

In 2024Q1, the revenue growth rate of the forklift sector is weaker than the sales volume. Pay attention to the subsequent recovery and optimization structure of counterbalanced forklifts. We selected Hangcha Group, Anhui Heli, and Noli Shares as the core targets of the forklift sector. In 2024Q1, the forklift sector achieved a total operating income of 10.2 billion yuan, a year-on-year increase of 5%, while the sales volume of the forklift industry in the same period was 320,000 units, a year-on-year increase of 11%. The revenue growth rate of the sector was lower than the industry growth rate. The main reason was that the sales volume was greatly affected by the three types of small vehicles, and the demand for counterbalanced forklifts that affected the industry scale, the revenue and profitability of the main engine factory had just started to recover. Counterbalanced forklifts have a wider range of applications, sales have a strong correlation with the overall economic activity, and the scale of stock equipment renewal is larger. In March and April, the domestic manufacturing PMI returned to above the prosperity line. With the advancement of stock renewal policies, the sales volume of large vehicles is expected to increase, and the sector is expected to benefit. The growth of the forklift industry is stronger than the cyclical nature, and we continue to be optimistic about the domestic leaders with strong growth certainty. Forklifts have different logic from traditional engineering machinery, and the growth is greater than the cyclical nature. Industry demand comes from (1) the growth of investment in manufacturing and logistics industries, which increases the demand for handling tools, and (2) the increase in labor costs. Factories, warehouses, etc. have higher requirements for work efficiency, and machines are replacing people. The industry's sales volume will grow at a compound annual growth rate of 15% from 2017 to 2023. Lithium electrification and globalization are the two major trends in domestic forklifts. Due to the high value and profit margin of electric forklifts and exported forklifts, the industry scale is expected to continue to grow: (1) Lithium electrification: The lithium electrification of high-value balance vehicles will drive the increase in industry scale. In 2023, the electrification rate of my country's industry counterbalanced forklifts will be about 31%, lower than the 48% level in Europe and the United States (calculated based on order volume). (2) Globalization: In 2023, the overseas forklift market size will be about 120 billion yuan, and the overseas share of the two leading domestic companies, Hangcha Group and Anhui Heli, is only 5% each, leaving ample room for improvement. (3) Aftermarket: The revenue of overseas forklift leaders' aftermarket and rental business accounts for an average of about 40% in the long term, and domestic forklift manufacturers mainly sell equipment. As the number of forklifts in my country increases, aftermarket services are expected to become a new growth point for performance.

Risk warning: worsening industry competition, geopolitical conflicts, and fluctuations in raw material prices

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