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The construction machinery sector has fallen to a long-term bottom

time：2023-01-28 18:22:55 source：clevelanddrifters.com author：Market analysis

The construction machinery sector has fallen to a long-term bottom

Time flies like electricity. In the blink of an eye, the share price of Sany Heavy Industry in A-shares has fallen to the price of 11 years ago, and the current price is more than 15 yuan. Sany Heavy Industry, Zoomlion Heavy Industry, Xugong Machinery and other companies in the machinery sector have been my long-term attention. I remember that when the stock of Sany Heavy Industry rose continuously last year, the official Sany Heavy Industry once shouted the slogan "The market value should reach 1 trillion". As a result, not only did it fail to reach the goal of the market value of 1 trillion, but the stock price fell continuously. Now the company's The market value is only over 100 billion! If it continues to fall like this, it is doubtful whether the company's market value of 100 billion can be maintained. I am actually very optimistic about Sany Heavy Industry. Sany Heavy Industry is definitely a construction machinery company with global status and one of the leaders in the global machinery industry. Sany Heavy Industry's interim report showed that the company's performance dropped by 76%, which obviously exceeded my expectations. Some fans and friends work at Sany Heavy Industry Company. They told me last year that the company’s workload suddenly decreased a lot. Some fans who work at Sany even suspect that the company is going to close down. Although I was alert to the decline of Sany Heavy Industry's performance at the time, I did not expect it to decline so severely. Sany Heavy Industry's interim results once again show that it is an iron law that companies in cyclical industries will experience declines in performance when the economy is sluggish. No matter how bullish this cyclical industry leader is, it is impossible to resist the general trend of the industry entering a trough. Even Conch Cement, which has integrated its industrial chain in this industry, has seen its performance plummet by more than 30-40% when the economic situation is not good! The market in the past few years has given me a deeper understanding of the cyclical industry - do not believe that the leading companies in the cyclical industry have the ability to cross the industry cycle. In contrast, we may see the consumer industry perform much better when the economic environment is not good. Many leading companies in the A-share consumer industry saw their performance drop by only 10-20 percentage points in this year's semi-annual report. Some leading companies in the consumer industry not only did not experience a decline in performance, but instead increased by 10-30 percentage points against the trend. Of course, not all cyclical sector stocks do poorly when the global economy struggles. Due to global inflation, commodities, especially oil, coal, and natural gas, have been relatively strong in the past two years. But this is a special case, and commodities only perform best when there is global inflation. At other times, oil, coal, natural gas, etc. still maintain the nature of cyclical industries that fluctuate strongly with the economic cycle. With the continuous decline of the construction machinery sector represented by Sany Heavy Industry, I am more and more optimistic about this sector. Taking Sany Heavy Industry as an example, although the company's performance has dropped significantly, the company's overseas revenue has greatly increased, which is undoubtedly a progress in the company's development. This has laid a good foundation for the company to gain a foothold in overseas markets and expand its influence in the future. Some other domestic machinery industry giants have also increased their income in overseas markets this year, which shows that the status of my country's construction machinery industry in the global market is accelerating. The domestic market competition of my country's construction machinery industry has been saturated, and the occupation of foreign markets is very important, which is related to the development of my country's construction machinery industry. In addition, the important reason why I am more optimistic about the construction machinery industry is that the construction machinery industry has entered an era of change - new energy, electrification, and intelligence are historical opportunities for the construction machinery industry. As long as my country's construction machinery industry seizes this major opportunity for change and vigorously develops digital, electrified, and new energy machinery, it will surely achieve a major breakthrough in performance. This breakthrough is similar to the development of new energy passenger vehicles. In the future, all construction machinery will be intelligent, digital, and new energy. Think about it, what kind of change this is for the construction machinery industry, the old construction machinery will inevitably be eliminated, and the new intelligent construction machinery will inevitably be replaced, which is bound to improve the performance of the construction machinery industry. Data shows that the sales volume of the excavator industry in July this year increased by 3.4% year-on-year, and the sales volume of the excavator industry ended a 14-month decline, which is an optimistic value. This shows that the fundamentals of my country's machinery industry may pick up in the second half of this year. At present, many institutions have polished the construction machinery sector. The open interest of construction machinery sector institutions is at a historically low level. This suggests that the sector may have bottomed out. The semi-annual report of the social security fund, which is known for its long-term investment, shows that it has a substantial increase in Sany Heavy Industries. This shows that the social security fund is optimistic about the machinery industry. The above picture shows that Sany Heavy Industry's performance continued to decline during the industry trough period from 2012 to 2016, and even suffered losses. The corresponding share price is also sluggish, but the share price has not fallen to the level before 2005. The rally in the company's stock price in 2015 was due to the bull market at the time. When the bull market in 2015 ended, the company began to fall sharply again due to poor performance. Where will Sany Heavy Industry fall in this round of decline? We can see that Sany Heavy Industry's performance has declined since 2012, and its stock price has also begun to fall. In 2016, the stock price has already fallen to the position where the current bull market started. If a simple simulation is carried out according to this algorithm, then the current stock price of Sany Heavy Industry of more than 15 yuan has just entered the bottom zone, and the stock price may fall by another 30-50%. In other words, the current share price of Sany Heavy Industry is definitely relatively undervalued, but there is a possibility of being trapped by 30-50% after buying. The stocks of other construction machinery sectors such as Zoomlion and Xugong Machinery are also basically at a relatively undervalued position, and it can be judged with a high probability that the construction machinery sector is at a long-term bottom. Investing in this sector has room to rise by 100% in the next few years, but investors who buy now may have to bear the risk of floating losses as high as 50%. I think the best way to invest is to invest in construction machinery index funds. From now on, if you invest monthly, you will have a high probability of getting rich investment returns in a few years. Disclaimer: Any opinions expressed in this article are solely those of the author and do not constitute investment advice. Enter the market accordingly, at your own risk.

(Responsible editor：Individual stock analysis)

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