GF SEC: Domestic sales of excavators increased by 23.5% year-on-year in March. The electrification of engineering products has further developed iteration.

GF Securities released a research report, stating that in March 2026, domestic excavator sales increased by 23.5% year-on-year. The structural end reflected that the insufficient growth of large excavators led downstream customers to be more cautious about capital expenditures, making the leasing market and the second-hand market more active. Large construction projects in the Southwest region are still the core driver of growth; in some provinces in East China, there is a phenomenon of domestic excavator sales turning into exports. In the overseas market, high export growth still reflects high market demand. At the enterprise end, the penetration rate of electric loaders and concrete mixer trucks exceeded market expectations, indicating the basic maturity of the three-electric technology of construction machinery, which can further iterate towards intelligence and unmanned development. The main viewpoints of GF Securities are as follows: Domestic: Resumption of construction, major infrastructure projects, local government debt Sales: In March 2026, domestic excavator sales increased by 23.5% year-on-year, reflecting three issues at the structural end. The slow growth of large excavators indicates that downstream customers are more cautious about capital expenditures, making the leasing market and the second-hand market more active. Large construction projects in the Southwest region are still the core driver of growth; in some provinces in East China, there is a phenomenon of domestic excavator sales turning into exports. Construction: There are increasing signs of recovery in construction starting in March, including regional construction rates, CMI index, and Pangyuan index, all showing signs of improvement. Domestic sales are expected to achieve higher quality growth compared to last year. Projects: The 14th Five-Year Plan pointed out 21 modern infrastructure projects, and in January-February 2026, China's infrastructure fixed asset investment rebounded into positive growth range. The projects have ample reserves. Funds: Since 2025, the issuance of local government debt has shown a high consistency with domestic excavator sales, indicating that the improvement of funds is one of the driving factors for the recovery of downstream construction. Overseas: Global resonance, recovery in Europe and America, mining in Africa In February 2026, China's engineering machinery export amount increased by 56% year-on-year. The high export growth is driven by strong overseas demand. Combining three independent data sources to analyze off-highway equipment: Global earthmoving machinery sales increased by 2% year-on-year in 2025, indicating the start of an upward cycle globally. It is expected that by 2030, earthmoving machinery sales in North America and India will reach historic highs. Enterprise: Growth in mining machinery, electrification, cash flow Mining machinery: According to Bloomberg and Caterpillar forecasts, global mining capital expenditure is expected to increase by about 50% by 2030 compared to 2024. With the drive of capital expenditure, mature product lines like excavators for Asia, Africa and Latin America are accelerating. For emerging product lines, companies are winning large orders for large mining machinery, breaking through overseas leading technologies accumulated over the years, and catching up with Caterpillar and Komatsu. Electrification: According to the data from the Engineering Machinery Association, the penetration rates of electric loaders and concrete mixer trucks reached about 40% and 80% respectively in 2025, exceeding market expectations. The breakthrough of these products basically means that the basic maturity of the three-electric technology of construction machinery, and can further iterate towards intelligent and unmanned development. Enterprise reports: Taking Sany Heavy Industry as an example, the net operating cash flow reached 20 billion yuan in 2025, an increase of 49% compared to the peak in the previous cycle in 2020. The driving factors behind this are the strategy of going overseas, capital expenditures, and the decline in depreciation and amortization. A sufficient cash flow opens up imagination in terms of risk management, capital operation, and shareholder returns in the future. Investment advice Each cycle of construction machinery is accompanied by new changes and logics. The industry's domestic and international cycles are on the rise, and incremental logics such as mining machinery, electrification, and cash flow will further reshape the valuation space of enterprises. Recommended companies include Jiangsu Hengli Hydraulic (601100.SH), Sany Heavy Industry (600031.SH), XCMG Construction Machinery (000425.SZ), ZOOMLION (000157.SZ), Zhejiang Dingli Machinery (603338.SH), and it is suggested to pay attention to Yantai Eddie Precision Machinery (603638.SH), Shantui Construction Machinery (000680.SZ), etc. Risk warnings Risk of trade friction; Exchange rate risk; Policy risk.