Construction Machinery: Maintain high growth of more than 20% in the short term

Investment Highlights

The history of Caterpillar's development shows that construction machinery can surpass the depression and prosperity cycle. Since 1933, Caterpillar has been distributing dividends for 305 consecutive quarters; Caterpillar's stock has outperformed the Dow in the past half century; since 2000, Caterpillar has maintained an annual sales growth of more than 10%. Therefore, we should not worry too much about the cyclicality and profitability of construction machinery.

The empirical valuation center of the international construction machinery giant is 15 times PE and 1 times PS, which corresponds to a growth rate of about 10% and a net interest rate of about 6%. We believe that China's construction machinery can refer to this valuation level, but it needs to consider Differences in growth and profitability levels.

We believe that the growth rate of China's construction machinery industry will continue to maintain a high growth rate of more than 20% in the short term (3 years). In the long term (10 years), the growth rate will decline to 10-20%. This is a high probability event, and the industry leader is because Increased concentration and enjoy higher than industry growth; For far higher levels of profitability than international counterparts, we believe that before 2015, because of low labor cost factors will remain high, but then will decline.

Therefore, we conclude that we firmly grasp the valuation center of 15 times PE and 2 times PS, select products with strong comprehensiveness, have breakthroughs in core parts and spare parts, and improve the distribution of dealers, and the short-term stock price fluctuation is the operation. Great opportunity.

Risk Warning: If interest rates are raised in the second half of the year, property tax introduction will bring greater impact.