Good "trio" to pull construction machinery out of the bottom

The fine-tuning of macroeconomic policies, the easing of capital shortages by the Ministry of Railways, and the gradual advancement of the construction of affordable housing have made it possible for the construction machinery industry that directly benefited from infrastructure investment to reach the bottom in the fourth quarter of this year and usher in a recovery. However, the construction machinery industry is hard to reproduce the rapid growth of the past decade. As the growth rate slows down, overcapacity will bring vicious competition to the entire industry.

Sales will gradually improve. Premier Wen Jiabao presided over the forum on economic forms in Tianjin, Inner Mongolia, Jiangsu, and Shandong (provinces and cities) recently and emphasized that we must grasp the direction, intensity, and rhythm of macro-control, and pay more attention to the pertinence and flexibility of policies. Forward-looking, timely and appropriate pre-adjustment and fine-tuning; maintain a reasonable increase in total money and credit; ensure that the state focuses on the funding needs of projects under construction and continued projects; focus on supporting the real economy, especially SMEs in line with industrial policies to support the people’s livelihood project, especially Safe housing project.

Under the background of the fine-tuning of macroeconomic policies, the railway department, which was originally plagued by financial constraints, will receive financing support of more than 200 billion yuan to ensure the repayment of funds and the promotion of key projects. This is conducive to the release of construction machinery needs, enhance the buyer's liquidity, which is conducive to sales of construction machinery.

At present, the issuance of bonds by the Ministry of Railways is under intense tension. Following the issuance of two bonds with a total value of 40 billion yuan in October, the Ministry of Railways issued another 30 billion yuan in bonds on November 8. It is expected that 100 billion yuan will be issued this year. The financial strain on railways, which has been plagued by funds, will be greatly eased with the support of the government.

At the same time, it is reported that the four major state-owned commercial banks may relax restrictions on the Ministry of Railways project loans. According to the CBRC's regulations on the level of credit concentration, the credit concentration index of a single group customer should not exceed 15%. So far, among the four major state-owned banks in industry, construction, agriculture, and agriculture, the credit concentration of the Ministry of Railways is mostly on the red line of 15% of the capital balance of commercial banks. The Ministry of Railways is expected to continue to receive financial support from the bank.

The ease of capital shortage will help the Ministry of Railways to implement the strategy of “maintaining construction” and indirectly favor construction machinery and other industries. According to domestic construction machinery manufacturers, the Ministry of Railways shut down some of its projects in the third quarter, resulting in a significant decline in sales of construction machinery. In October, the Ministry of Railways funds began to ease, and the sales of engineering machinery industry continued to pick up. Xiagong Engineering Co., Ltd. said that since the beginning of October, sales have gradually improved, especially in the Southwest (Yungui) and North China, the company's sales have improved significantly.

The rapid growth of difficult-to-reproduce data shows that the three-quarter total revenue of the listed construction machinery companies and the growth rate of their parent company's net profit in the third quarter were further slower than the second quarter respectively. The overall asset turnover rate dropped sharply to 0.27 from 0.24 in the same period of last year; among them, the inventory turnover rate fell to the lowest level since the second quarter of 2009, the receivables turnover rate was the lowest in history, and the turnover of accounts payable increased. .

Industry analysts believe that the marginal improvement in the liquidity of capital is conducive to alleviating the financial constraints of projects under construction and downstream customers. The prosperity of the construction machinery industry is expected to bottom out in the fourth quarter. However, the growth of the industry is hard to reproduce the splendid growth of the past ten years.

The Construction Machinery Industry Association predicted at the beginning of this year that during the “12th Five-Year Plan” period, the annual growth rate of the domestic construction machinery industry will remain at 17%, and by 2015 the industry sales scale will reach 900 billion yuan. However, this growth goal is being challenged.

The main engine for the construction machinery industry's growth - railway construction investment has already shrunk significantly, and real estate investment is also rapidly falling. Demand decline in these two major industries will inevitably affect the growth of the construction machinery industry.

It is understood that during the "12th Five-Year Plan" period, the annual investment scale of China Railways may be reduced to RMB 500 billion (US$78 billion) or so. In 2010, the railway investment in fixed assets reached 842.625 billion yuan. According to the plan of the Ministry of Railways, the railway will complete an investment of 600 billion yuan in infrastructure this year, but the railway investment in the first three quarters has only completed 395.4 billion yuan.