Zheshang: Excavator total sales in January increased by 1.1% year-on-year. The construction machinery industry is expected to have a strong start in the first quarter.

Zheshang released a research report stating that according to statistics from the China Construction Machinery Industry Association, in January 2025, the sales of various excavators reached 12,512 units, an increase of 1.1% compared to the same period last year. Among them, domestic sales in China were 5,405 units, a decrease of 0.3% year-on-year; while export sales were 7,107 units, an increase of 2.2% year-on-year. The decline in domestic sales may be attributed to the Chinese New Year falling in January 2025, creating a staggered effect compared to the Chinese New Year in February 2024. It is worth mentioning that the first quarter is traditionally a peak season for the industry, and many construction machinery manufacturers are expected to have a good start. With the potential gradual initiation of globalization and domestic renewal cycles, the construction machinery industry may enter a period of reversal. Key points from Zheshang: In January 2025, the sales of electric loaders increased by 194% compared to the same period last year, with a penetration rate of 14%. In January 2025, the sales of various loaders reached 7,920 units, an increase of 1.5% compared to the same period last year. Domestic sales in China were 3,706 units, a decrease of 1.0% year-on-year; while export sales were 4,214 units, an increase of 3.8% year-on-year. In January 2025, the monthly sales of electric loaders reached 1,086 units, with a penetration rate of 14%, an increase of 194% year-on-year. The first quarter is a traditional peak season, and construction machinery manufacturers are expected to have a good start. On February 3, 2025, Sany Heavy Industry kicked off the year with various departments holding opening ceremonies and launching ceremonies. In the beginning of 2025, Sany Pump Roads achieved sales of 1.12 billion and had over 450 units of equipment ready to be dispatched worldwide. On February 10, 2025, XCMG held a grand ceremony for the mass delivery of the hundred-ton level refurbished cranes, marking the "opening" of the cranes going abroad. According to the XCMG WeChat public account on February 11, 2025, XCMG XC9108 large-tonnage loaders were delivered in bulk, injecting new momentum into the transfer of bulk cargo in ports, and helping to upgrade the international port operational capacity to a new level. On February 7, 2025, ZOOMLION held "opening" ceremonies in various parks across the country. During the series of opening activities, ZOOMLION launched over 10,000 units, totaling approximately 5.7 billion RMB; the engineering cranes sector launched over 850 units, totaling over 1.8 billion RMB; over 1200 units, totaling over 1 billion RMB, of concrete machinery were sent worldwide; 38-ton excavators, the world's first 100-ton load capacity wide-body mine dump truck ZT160HEV, and over 1,300 units of earthmoving and mining machinery equipment, totaling over 900 million RMB, were sent to various parts of the world. On February 3, 2025, Guangxi Liugong Machinery launched its first batch of equipment and services for the "Global Journey," with nearly 20 units of equipment including loaders, excavators, graders, forklifts, agricultural machinery, etc., being sent to the global market. On January 30, 2025, Shantui Construction Machinery successfully delivered over 400 units of equipment to the Central Asian market, with over a hundred loaders being dispatched, heading to Shanxi, Yunnan, Xinjiang, Inner Mongolia, and other areas. According to a report by Shandong Satellite TV on February 7, at the beginning of the new year, Shantui sent over 300 full series of equipment to Africa, laying a solid foundation for the group's foreign trade business in the first quarter. The logic for the reversal of construction machinery is strengthening, with expectations for improvement in globalization and domestic demand The recovery of China's construction machinery industry consists of three stages improving export market share, enhancing domestic demand, and initiating renewal cycles. 1) Export: Globalization continues to advance, with overseas market share expected to continuously increase. 2) Domestic demand: Implementing more proactive macroeconomic policies, expectations for improving domestic demand are gradually rising. The meeting of the Political Bureau of the CPC Central Committee on December 9 emphasized implementing more proactive macroeconomic policies to stabilize the real estate and stock markets; the meeting pointed out the implementation of more pro-active fiscal policies and moderately loose monetary policies. 3) Renewal: The domestic cycle is expected to bottom out and start upward, with expectations for the renewal cycle to kick start. 2015 marked the bottom of the previous excavator cycle, with renewal cycles typically lasting 8-10 years. It is estimated that the domestic renewal cycle is likely to gradually start in 2025, with expectations for an upward cycle in the future. Investment Recommendations Continue to focus on leading companies in the industry: Sany Heavy Industry (600031.SH), XCMG Construction Machinery (000425.SZ), Shantui Construction Machinery (000680.SZ), Jiangsu Hengli Hydraulic (601100.SH), ZOOMLION (000157.SZ), Guangxi Liugong Machinery (000528.SZ), Hangcha Group (603298.SH), Anhui Heli Co., Ltd. (600761.SH); also continue to recommend Weichai Power (000338.SZ,02338), SANY INT'L (00631), Shaanxi Construction Machinery (600984.SH). Keep an eye on Zhejiang Dingli Machinery (603338.SH), Noblelift Intelligent Equipment (603611.SH). Risk Warning Infrastructure and real estate investments fall short of expectations; risks of overseas trade disputes.