Overall profitability of construction machinery industry is expected to rebound

Although construction machinery companies increase revenue through more credit sales, it is still difficult to hide the overall downward trend of the market since the mid-year inflection point in 2011. The total operating revenue and total profit of the 10 sample companies selected by China Bonds declined by 9.96% and 30.57% respectively year-on-year in 2012. This was the first negative growth in recent years and was in line with market expectations. In the first quarter of 2013, the total operating income and total profit of the sample companies in the industry fell by 25.55% and 53.55%, respectively, and the decline has increased.

Affected by the declining business climate and the expected high impact of the market recovery at the end of last year, the inventory of sample companies at the end of 2012 was RMB 41.90 billion, an increase of 5.42% year-on-year. At the end of the first quarter of 2013, total inventory increased further to a record high of RMB 45.015 billion. Although the proportion of net assets in inventory was slightly lower by 45% due to the increase in net assets in 2012, it immediately rebounded to 48% at the end of 1Q13. As a whole, inventory pressure remains high.

The falling profits of the sample companies continued to exceed the decline in revenue, reflecting the weakening of the industry's profitability. In 2012 and 2013, although the industry's operating gross profit margin was relatively stable at 19.61% and 21.04% respectively, the average EBIT margin of the sample companies decreased significantly, and the major players in the industry were unable to realize the scale advantage. The cost and other expenses are more difficult to control, and sample companies have higher sales and management expenses.

On the whole, with the weak recovery of the construction machinery industry in 2013, the revenue and profit scale of major companies are expected to increase year-on-year, but due to the recovery pressure of concrete machinery, Sany Heavy Industry and Zhonglian Heavy Industries Due to the large proportion of sample companies, it is expected that the total income and profit scale of the sample companies will remain basically stable in 2013. In the next few quarters, the overall profitability of the industry will show a certain degree of stabilization and recovery as the company tightens sales policies.