The Impact of Rate Cuts Again on Construction Machinery

The central bank announced another interest rate cut. We believe this will drive demand along the chain, including the improvement of real estate sales from first-tier cities to second-tier and third-tier cities. From sales improvement to investment improvement, it will help the mechanical products industry demand in the second quarter to improve.

The impact of another interest rate cut by the central bank on construction machinery

In 2015, investment in construction machinery revolved around three main lines: First, One Belt and One Road; Second, Reform of State-owned Enterprises; Third, Domestic Replacement.

1. The “Belt and Road” initiative is a national will and national strategy. It is estimated that this year will obtain large-scale overseas infrastructure orders from the national level. Leading enterprises of construction machinery will have strong overseas expansion capabilities and will benefit significantly.

2. Recently, XCMG proposed the backbone employee stock ownership plan, and Anhui HeLi planned to achieve management and technical backbone shareholding at the group level before the Spring Festival, officially kicking off the reform of state-owned enterprises in the construction machinery industry.

3. The core parts and components of the construction machinery industry, including the engine and key hydraulic components, are in the process of localization, with large domestic and alternative space.

We continue to give the “buy” rating to the machinery industry. Based on the interest rate cut proposal, we will focus on investment opportunities in the construction machinery sector. The recommended combinations are: Sany, Zoomlion, Liugong, Hengli, XCMG, Heli, and Xiagong.