Shanxi: Marginal improvement in new orders for machinery and equipment in the first half of the year, and industry recovery expected to continue in Q4.

Shanxi releases a research report stating that looking ahead to Q4, under the favorable policies and downstream transformation trends, going global, upgrading to high-end products, and expanding into new areas have become new drivers of development. The demand for machine tools is expected to continue to increase, combined with the marginal improvement in new orders in the first half of the year, the entire industry is expected to see a positive recovery. The machine tool industry benefits from equipment upgrades and independent controllability, with going global and upgrading to high-end products becoming key directions for enterprise breakthroughs. The scarcity of supply is determined by the demand for high-end products and independent controllability; exploring overseas markets is expected to increase profitability and expand the development space for enterprises. Revenue is showing positive growth, with overall business conditions showing signs of recovery. In Q3, quarterly revenue increased by 5% year-on-year. For 24Q1-Q3, the combined operating income of sampled machine tool companies was 20.36 billion yuan, a year-on-year increase of 3.1%, with a combined operating income of 6.66 billion yuan in Q3, a year-on-year increase of 4.9%. Among the 17 companies, 11 achieved year-on-year revenue growth, with the top five companies in terms of growth being Kede Numerical Control (30.3%), Guangdong Create Century Intelligent Equipment Group Corporation (17.6%), Zhe Jiang Headman Machinery Co., Ltd. (16.9%), JDM JingDa Machine (Ningbo) Co., Ltd. (14.8%), and Weihai Huadong Automation (13.5%). Profit margins are under pressure mainly due to intensified market competition, price declines for some products, and rising labor costs. For 24Q1-Q3, the combined net profit attributable to shareholders of sampled machine tool companies was 1.22 billion yuan, a year-on-year decrease of 22.1%, with a combined net profit of 360 million yuan in Q3, a year-on-year decrease of 10.4%. The average gross profit margin for the sampled companies in 24Q1-Q3 was 24.1%, a year-on-year decrease of 0.9%, and the average net profit margin was 6.0%, a year-on-year decrease of 2.1%, with the average gross profit margin for Q3 being 24.4%, a year-on-year decrease of 1.0%, and the average net profit margin being 5.4%, a year-on-year decrease of 0.8%. Six listed companies saw an increase in contractual liabilities year-on-year. The growth rate of new orders for metal processing machine tools in 24H1 changed from negative to positive, and the performance of the machine tool sector is expected to recover. As of the end of Q3, the combined scale of contractual liabilities for sampled machine tool companies was 4.95 billion yuan, a year-on-year decrease of 2.3%. Among the 17 companies, 6 saw an increase in contractual liabilities year-on-year, with the companies with the highest growth being Weihai Huadong Automation (44.9%), Wuhan Huazhong Numerical Control (41.9%), Guangdong Create Century Intelligent Equipment Group Corporation (31.1%), and Neway CNC Equipment (Suzhou) Co., Ltd (17.1%). The government encourages a new round of large-scale equipment upgrades, which is expected to drive the release of demand for updating downstream customers. In July 24, several measures were introduced to support "new industries", with 150 billion yuan of super-long-term special national bond funds allocated to increase the scale, expand the scope, reduce the threshold, and support equipment upgrades in key areas. Key stock recommendations include: Kede Numerical Control (688305.SH), Wuhan Huazhong Numerical Control (300161.SZ), Neway CNC Equipment (Suzhou) Co., Ltd (688697.SH). It is recommended to pay attention to Qinchuan Machine Tool & Tool Group Share (000837.SZ), Ningbo Haitian Precision Machinery (601882.SH), Yuhuan CNC Machine Tool (002903.SZ), JDM JingDa Machine (Ningbo) Co., Ltd (603088.SH), Guangdong Topstar Technology (300607.SZ), Guangdong Create Century Intelligent Equipment Group Corporation (300083.SZ), and Zhe Jiang Headman Machinery Co., Ltd. (688577.SH). Risk warning: Economic growth may be lower than expected; increased industry competition risk; technology research and development risk; fluctuation in raw material and component costs; risk of core technology leakage and loss of personnel, etc.