经济转型中的机遇与挑战 Opportunities and Challenges in Economic Transformation
Machinery industry: High-end equipment benefit the most from industrial upgradingOffshore engineering:Has a bright long-term prospect because: 1.The trend of deep water oil &gas exploration and production. 2.The trend of industry transfer : China is expected to be the next offshore equipment building center. 3. Offshore engineering industry possesses a high-added value and high barrier to entry. Industrial robot and automotive equipment: Industrial robot and automotive equipment (including auto-testing, auto-assembling, auto-welding, auto-cleaning and auto-lifting system) will benefit from the rise of labor cost. Currently, automobile accounts for 40% of the downstream, further applications will begradually extended to rail transportation, power, chemical and medical industry. Foreign brands account for 70% of the market, which implies a huge room for import substitution.Mid/High-end machine tool: China faces overcapacity in low-end machine tools but relies heavily on imports for higher-end machine tools. Foreign brands account for 30% of the mid-end market, and 98% of the high-end market. The machine tool industry is set to move to the higher end of the market as downstream manufacturers move up the value chain.Industrial automation: China’s level of industrial automation is relatively low compare with developed countries (output value of automated instruments/GDP=1.1%, lower than US in the 1990s). Foreign brands account for 70% of the market (while 90% of high-end market ), which implies a huge room for import substitution.Agricultural machinery: Agricultural machinery will enjoy a steady growth because: 1.Rise of agricultural mechanization rate (currently 50%). 2.Shrink of labor and rising cost of agricultural products. 3.Central government’s subsidy is expected to sustain.Coal mining machinery: Coal Machinerywill enjoy a steady growth because: 1. New capacity of coal mining. 2.Renewal and upgrade of mining equipment. 3. Rise of mechanization rate and fully mechanized mining rate. (currently 65% and 44%, respectively)Construction machinery: After a rapid growth over the past decade, construction machinery industry is facing a stable domestic demand and actively exploring the overseas market. Intense competition starts among leading companies across various sub-sectors. New capacity and M&As will be the theme of next 5 years, the strong gets stronger.
How long will this winter last??Construction machinery––We think 1Q2012 is very tough for the whole sector, and positivegrowth could be seen in late 2Q or early 3Q in 2012.We expect construction machinery products to achieve stable growth in 2012, with higher growth for forklift and crawler crane.Historically, construction machinery stocks started to perform at the lowest point of earning growth.We expect construction machinery stocks to rebound earlier and stronger than other cyclical sectors. We still expect long term sustainable growth for the whole construction machinery sector.Maintain BUY rating on Sany and Zoomlion. Our target price for Zoomlion-H is HK$15.1, implying 10x 2012PE. ––––?Coal mining machinery–We expect coal FAI to increase by 25% in 2011 and 20% in 2012, which will bring stable demand for coal mining machineries.Reconstruction of small coal mines will be the next growth driver for the demand of whole sector.Buy on dips for Zhengzhou Coal Mining Machinery, defensively hold H-share Sany Heavy Equipment. Our target price for H-share Sany Heavy Equipment is HK$9.2, implying 20x 2012PE.––?Rolling stock–After HSR accident, most of construction projects were suspended. Considering the latest financial support from central government, we maintained our full year investment forecast for 2011 (Rmb 550bn).Scenario analysis showed the potential budget of railway investment is around Rmb1.7-2.9trn for 2011-2015, and the annual demand of MUs will be around Rmb25bn for each of the company under our current base case, which is similar as the target of this year. –经济转型中的机遇与挑战 Opportunities and Challenges in Economic Transformation
Agricultural Machinery：embracing the spring of policiesA snapshot of China’s agricultural machinery market:?Benefitting from central government’s favorable policies, total sales of agricultural machinery industry has grown at a CAGR of 25% during the past 5 years. Under governments’general supports for agriculture, the policy environment for agricultural machinery industry turns increasingly warm after 2006, with central government’s subsidy scale grown from RMB700mn in FY07 to 15.5bn in FY10. According to the current subsidy plan, benefitted farmers only need to pay around 70% of the selling prices. Driven by the subsidy package, total scale of agricultural machinery market jumped to RMB284bn in 2010.????In terms of product mix, tractor represents 14% of total (i.e. RMB40bn), followed by mechanized farming equipments & gardening equipments (22%), and spare parts (15%). Investment highlights:???Subsidy plan: a long-term growth story instead of a one-off push;Agricultural mechanization rate remains low, implying substantial upsides; Four driving force for purchasing demand: 1) growing productionvolume of agricultural products; 2) shrinking labor and rising labor cost for agricultural production; 3) booming development of cooperative organizations, which combines scattered purchasing power; 4) an uptrend of farmers’income.Sub-sector 1: tractor -The big guys become only stronger;Sub-sector 2: corn harvester –Key focus for the policies, with promising growth prospect;Investable stock 1: First Tractor (0038.HK) BUY –Embark on a new era;Investable stock 2: Xinyan(300159.CH) Non-rating –Attractive sector, an emerging giant;????
Offshore Engineering: growth of high certainty in long termA snapshot of offshore engineering equipment sector:???We expect average annual size of global offshore engineering equipment market may exceed $100 billion. Most of global offshore engineering equipment market share was still controlledby Singapore and South Korea. First tie offshore engineering equipment builders in China include CSIC (DSIC & BSIC), CIMC-Raffles, COSOC Shipyard, CSSC-Wagaoqiao.However, seldom of them achieved real profitability on offshore engineering equipment business.Besides, China is still in lake of producing ability of key component on offshore engineering platform.??Investment highlights:???????We remain optimistic about the offshore engineering equipment sector in long term because:1. Global oil and gas development activities are transferring tothe deep ocean.2. Global offshore engineering equipment building industry will definitely transfer to China, like shipbuilding.3. A large part of active-duty offshore engineering platforms will retire in next 5-10 years;4. Offshore engineering equipment building is still a high-barrier industry;Investable stock 1: CIMC (000039.SZ/200039.SZ) ACCUMULATE–short-term difficulty in container business, but a promising potential in offshore engineering and energy & chemical equipment;Investable stock 2: ZPMC (600320.SH/900947) ACCUMULATE –Focus catalysts in next 6 month;经济转型中的机遇与挑战 Opportunities and Challenges in Economic Transformation
High-end Industrial Equipment: focus Coal chemical and Natural gasA snapshot of China’s high-end industrial equipment sector:?“High-end industrial equipment”, as we defined here, mainly consisted of heavy machinery and other -end equipment used in industrial production procedure. In past 10 years, fast growth of this sector was mainly driven by demands from metallurgical and chemical industry. However, traditional products see a relatively limited growth potential, partly because of deceleration of urbanization and industrialization in China. High-end industrial equipment sector has to find new growth points.???Investment highlights:???????Traditional heavy machinery producers (CFHI and China-Erzhong, e.g.) still need a long way to completely recover.We are looking for growth opportunities from energy structure inChina.In short-to-mid term, we are optimistic about coal chemical and natural gas equipment. In mid-to-long term, we still believe nuclear power equipment have investment value.Investable stock 1: Xi’an ShaanguPower (601369.SH) ACCUMULATE –Probably better-than-expected profit perfor-mancein next 1-2 years;Investable stock 2: Hangzhou Hangyang(002430.SZ) ACCUMULATE –Great growth potential in gas business;Investable stock 3: CFHI (601106.SH) Not-rating –Low P/B, superior technical strength in sector;
Refrigeration Equipment: accelerating by cold chain logisticsA snapshot of China’s refrigeration equipmentsector:?Refrigeration equipmentindustry includes sub-sector: 1. Household refrigerators and air conditioning, 2. Automobile air conditioning, 3. Large central air conditioning, 4. Commercial refrigeration equipment, 5. Industrial and special refrigeration equipment. We mainly focus on the last 3 sub-sector. Refrigeration equipment’s key componets include: 1. Compressor, 2. Evaporator, 3. Condenser, 4. Various valves. Of which we believe compressor is of the most importance.Growth of China’s refrigeration equipment market in last 10 years is mainly drivenby urbanization.China’s refrigeration equipmentsector has 2 characteristics: 1. Relatively low concentration, 2. Foreign companies still hold a large share in domestic market.???Investment highlights:?????We believe China’s refrigeration equipment market may accelerate in next 5 year, driven by:1. Development of cold chain logistics industry, which can benefit from higher standard of living of Chinese; 2. The trend of energy saving.Investable stock 1: HanbellPreciseMachinery (002158.SZ) Not-rating –Leader in refrigerating compressor;Investable stock 2: YantaiMoon (000811.SZ) Non-rating –Growth of high certainty in 2012;经济转型中的机遇与挑战 Opportunities and Challenges in Economic Transformation
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高端装备制造行业研究报告：中金公司-高端装备制造行业：下一个风云十年？-111123
