发帖
雷达卡
July 9, 2010
China Capital Goods
Growth to Slow; Stay with
High-Quality Industry
Leaders
Investment conclusion:
The China capital goodsindustry (including both construction and machinery
sectors) enjoyed a record half year in 1H10 on strong
downstream capex, government spending and
abundant liquidity. We expect 2H10 construction
machinery sales growth to slow sharply, but remain
healthy at 15% YoY. Real challenges lie in 2011,
especially 1H, when infrastructure construction is
expected to slow to 11% and machinery sector to dip to
just 3% YoY (the lowest since 1998). However, amid the
downcycle in next 12 months, we still highlight good
investment value in those leading industry players that
are consolidating, penetrating new product categories,
and actively exploring overseas markets. Construction
machinery industry’s current valuation already is pricing
in downcycle risk; FY1 P/E is at a 36% discount to the
prior decade average, on our estimates.
Construction: Stick with Railway plays.
Railwayinfrastructure investment rose 17.5% YoY in the first 5
months, while new contracts were up a substantial 65%
in 1H10e. We remain more bullish than the market on
railway investment; Rmb700/805/886bn in 2010/11/12e,
a 13.8% CAGR. CRGL remains our top pick, given it has
both the best new contracts growth in 1H10 (up 45%
YoY) and visibility (contract backlog at 2.1 years
revenue), and it seems well on track to lift gross margin
(6.7% in 1H10e versus 6.1% in 2009).
Machinery: Stay with industry leaders with broader
product lines, market share gains.
Machinery deliveryreached record levels in 1H10e – up 75% from a low
base in 1H09 and up 44% from the pre-crisis peak in
1H08. While we expect growth to slow, we still forecast a
15%-plus YoY increase. We expect major mining and
property exposed machinery (wheel loaders and
concrete machinery) to dip into negative growth in 2011.
Lonking and Haitian are our top picks.
Key Risk: Tighter government policy.
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