Soochow: Continue to recommend engineering machinery that exceeds domestic demand expectations, strongly recommend oilfield service equipment with high growth in short-term performance certainty.

Soochow released a research report stating that a total of 19,858 excavators were sold in September, an increase of 25% year-on-year. Of these, 9,249 were sold domestically, a year-on-year increase of 22%, and 10,609 were exported, a year-on-year increase of 29%, exceeding market expectations both domestically and internationally. In terms of the domestic market, the strong performance of excavators from June to September has proven the clear upward trend of the cycle. Even though the fundamentals of real estate and infrastructure are weak, factors such as machine substitution and funding support for water conservancy continue to drive the continuous improvement of small excavators. Looking at the structure of excavators in developed countries like Europe, the proportion of small excavators in China will continue to increase, providing a solid foundation for the domestic excavator market. From an export perspective, large excavators continue to show high growth year-on-year, with Soochow attributing this mainly to strong demand from Indonesian and African mines. Soochow recommends investing in related targets such as Sany Heavy Industry, a leading full-category company, ZOOMLION, Guangxi Liugong Machinery, Shantui Construction Machinery, and Jiangsu Hengli Hydraulic. Regarding oilfield equipment, on October 10th, international oil prices fell by about 2%, with Brent crude oil prices reported at $64 per barrel. The main reasons for the drop in oil prices are President Trump's announcement of additional tariffs on China, concerns about deteriorating international trade relations, OPEC+ continuing to increase production since the second half of 2025, and a ceasefire agreement between Israel and Hamas in effect, potentially leading to an increase in oil supply in the Middle East. However, the impact of the drop in oil prices on the demand for oilfield equipment is limited in the medium term. LNG, as a transitional tool for new energy transformation and power generation, will continue to sustain demand, with Middle Eastern countries experiencing continued growth in capital expenditure on LNG energy, driving equipment demand. Soochow states that the barriers to entry in the Middle East oilfield equipment market are high, with domestic equipment leaders gradually going abroad as China increases its foreign investment and obtains certifications. However, their market share is still below 5%. The impact of tariffs and falling oil prices is relatively limited in the short to medium term, and Soochow recommends focusing on strong companies with high barriers to entry such as Yantai Jereh Oilfield Services Group and Neway Valve. Soochow's main points include: In terms of engineering machinery, domestic and foreign excavator sales in September exceeded expectations. Soochow emphasizes the profit flexibility brought about by structural improvements. For oilfield equipment, the impact of US tariffs and falling oil prices on overseas markets is limited, with increased oil and gas production in the Middle East and the improvement of domestic market share being long-term trends. In the robotic and automation industry, the release of the G2 Siasun Robot & Automation is seen as a significant development, with upcoming catalysts such as the listing of Tesla and Yushu companies expected to drive growth. Regarding semiconductor equipment, stricter US controls on semiconductor exports to China are seen as an opportunity for increased localization of production and technology advancement. In the lithium battery equipment industry, export controls are seen as a positive development for leading equipment manufacturers with strong compliance capabilities. This report provides insights and recommendations for investments in various sectors such as engineering machinery, oilfield equipment, semiconductor equipment, and lithium battery equipment.