China Great Wall: Excavator sales in February exceeded expectations, multidimensional resonance is optimistic about the upward cycle.

China Great Wall released a research report stating that in February 2025, domestic sales of excavators increased by 99.4% year-on-year, while exports increased by 12.7% year-on-year, and the Construction Machinery Index (CMI) increased by 13.53% year-on-year and 5.44% month-on-month, indicating a continued recovery in the industry. Against this background, with the coordinated efforts of fiscal and monetary policies, continued emphasis on "equipment renewal" policies, stabilization of the real estate market, gradual release of infrastructure demand, continuous expansion in overseas emerging markets, and the growth logic of intelligence and electrification, the bank believes that under multiple resonances, the industry cycle is experiencing sustained recovery, and leading companies are expected to benefit significantly from their technological advantages and global layout. Recommended stocks to watch include Guangxi Liugong Machinery (000528.SZ), Sany Heavy Industry (600031.SH), XCMG Construction Machinery (000425.SZ), Hangcha Group (603298.SH), and Anhui Heli Co., Ltd. (600761.SH). Key points from China Great Wall: Excavator sales in February exceeded expectations, indicating a sustained recovery in the cycle. According to data from the China Construction Machinery Industry Association, excavator sales in the month reached 19,270 units, a year-on-year increase of 52.8%, with domestic sales reaching 11,640 units, a significant year-on-year increase of 99.4%, and exports reaching 7,630 units, a year-on-year increase of 12.7%. Concurrently, loader sales reached 8,730 units, a year-on-year increase of 34.4%. In February 2025, the China Construction Machinery Market Index (CMI) was 106.68, a year-on-year increase of 13.53% and month-on-month increase of 5.44%. The year-on-year growth rate of the CMI index in February increased by 10.26 percentage points, and the month-on-month growth rate increased by 8.77 percentage points, indicating that after February, especially after February 10, most domestic markets gradually improved after the Spring Festival holiday, bringing a rapid increase in overall equipment start-up rates and working hours, signaling a gradual entry into a phase of rebound exceeding expectations. Positive outlook for the industry cycle as multiple factors resonate, driving market recovery. With factors such as policy release, downstream recovery, and seasonality resonating, market demand is gradually warming up. In terms of policies, fiscal and monetary policy coordination has been strong recently, with a series of countercyclical adjustment policies being introduced since September 2024. The central bank has released long-term liquidity with reserve requirement reduction and interest rate cuts, while the Ministry of Finance has supported infrastructure and real estate industry stabilization through special bonds and tax instruments. The upgrading of environmental standards has prompted users to replace excavators that meet the new standards, accelerating the phasing out of old equipment. On the demand side, the Central Economic Work Conference pointed out the need to "continue to push for stabilization in the real estate market", with expectations of a continued easing tone in real estate policies. The government work report for 2025 shows plans to issue special long-term bonds totaling 1.3 trillion yuan, an increase of 300 billion yuan from the previous year; plans to allocate local government special bonds totaling 4.4 trillion yuan, an increase of 500 billion yuan from the previous year, indicating that infrastructure demand is expected to gradually increase. In terms of overseas markets, the bank believes that domestic construction machinery companies are accelerating their pace of going global and actively expanding overseas markets. Particularly with the advancement of the Belt and Road Initiative, exports to regions such as Southeast Asia are expected to continue increasing. Combined with the high cost performance and efficient supply chain of domestic manufacturers, their comprehensive competitiveness and global influence are increasing year by year, narrowing the gap with overseas leaders in terms of technology and quality. Risk factors: Risks of policies falling short of expectations, risks of geopolitical tensions leading to trade frictions, risks of infrastructure investment falling short of expectations, risks of the real estate market recovery falling short of expectations, and risks of RMB exchange rate fluctuations.