International competitiveness enhanced popular with the market, the company continued to revitalize the equipment manufacturing industry to improve the company's international competitiveness, to enhance international competitiveness of enterprises will be rewarded by the government in fiscal and tax policies, industry planning, etc.Support in industrial planning and other aspects.
Low 2006 strong enterprises enhance the international competitiveness will be the first to show the international market to expand and the growth of export revenue, but the growth simply rely on the growth of low-cost low-quality products different, because the product technology level, the development of such enterprises will enter a virtuous circle
The growth rate of macro economy may slow down next year but not much. The possibility of exchange rate appreciation still exists, but it will not cause obvious harm to related industries.In order to support advantageous enterprises to expand international market, the magnitude of RMB appreciation will not affect the overall planning and industrial policy of the country.
We maintain a "neutral" investment grade in the machinery manufacturing industry.The key recommendations are: G resultant, mountain push shares and large cold shares.
In 2005, equipment manufacturing was in good condition
Several characteristics of industry operation
Since 2002, China's equipment manufacturing industry has experienced three consecutive years of ultra-fast growth, with annual industrial output increasing by more than 25%, the highest year even reaching 31.9%.But since April 2004, when the state strengthened its macroeconomic control, the economic operation of equipment manufacturing has cooled, but in 2005 there was no deep pullback.In combination, the equipment manufacturing operation in 2005 presents the following characteristics:
First, the total output value remains relatively fast.From January to October 2005, the total output value of equipment manufacturing was 3,307.557 billion yuan, a year-on-year increase of 20.55%.According to the China equipment manufacturing federation, production and sales growth in 2005 could still exceed 20%.
Second, import growth is slow and exports are growing at a rapid rate.From January to October 2005, the total imports and exports of equipment manufacturing totaled us $180.4 billion, up 16.01 percent year on year.Among them, $957.9 billion was imported, up 2.52%.Exports rose 36.33 percent to $846.9 billion.The total import and export volume of foreign trade and exports of foreign trade are expected to exceed 200 billion us dollars and 100 billion us dollars respectively.Among them, the largest trade exports remained in Asia, with exports of $39.736 billion, up 33.03 per cent year on year.Exports to major countries and regions were: us $17.411 billion, up 33.27% year on year.Japan's $10.649 billion, up 24.90% year on year;Developed countries such as the United States, Japan and Germany have become important markets for China's mechanical products, indicating that the technical level of mechanical products in China has improved rapidly and can be accepted by these markets.
Third, net profit growth is slow.Due to raw materials, transportation, the jump in energy prices, and some of the industry overcapacity, the profitability of the equipment manufacturing industry's steep decline, industry net profit growth rate is far lower than the growth in output, is expected to 2005 full-year net profit growth of 7% or so.
2005 basic reflects the operation of the equipment manufacturing industry of the status quo, on the one hand, the status of the equipment manufacturing industry in the whole national economy rise, output growth faster than the growth of the national economy as a whole, and because of the improvement of technical level, the equipment manufacturing industry's international competitiveness enhancement, but the profitability of the equipment manufacturing industry is still not very ideal.
Companies with strong international competitiveness should have high valuations
The leading enterprises in the equipment manufacturing industry have gained a lot of development space with increasing international competitiveness, and its competitive advantage is constant and irreversible.From the Angle of internationalization and the world industrial transfer, once formed, this trend in the future for a period there will be a growing trend, which means that the stable growth of revenue and earnings from exports.Eventually, some companies will become the world's most important producers in a few years.Its products in the main market occupy the important position, with the expansion of our business and the rising power of r&d, the company's ability to control the domestic market and international market is growing, the development of the environment, into the technology upgrade to quality improvement and market expanding, research and development capabilities and pricing power increase and technology upgrades the virtuous cycle.
We believe that in 2006 China's macro economic is stable, the growth rate might slow down but there is little possibility of drop sharply, volatility in the domestic market is not big, but the leading companies in the industry continue to enhance the international competitiveness, so profits can be sustained at a rapid pace.For these companies, valuations cannot be valued at the same time as those seen in cyclical industries and the general machinery sector, giving them higher valuations.
A key focus of the manufacturing industry
We believe that in 2006, we can focus on the companies that are making a significant increase in international competitiveness and rapidly growing export revenues.Of rapid export growth increases the company's revenue and earnings, and because these companies have already solved the technical authentication, after-sales service, intellectual property rights, and many other important issues, products have been approved by foreign clients, can give full play to the advantages of cost performance, and the international market for the enterprise for a long time has provided a broad space for development.In general, the following industries deserve attention.
Rapid growth of engineering machinery exports
Construction machinery on the whole, at present is not internationally competitive advantage products in China, many high-end products, such as large tonnage of all terrain crane, full facer, shield machine still rely on imports, but the trend of rapid growth of the export of Chinese construction machinery industry has been very obvious.In 1997, exports were only $285 million, compared with $18.55 billion in 2004.Exports hit $2.33 billion in january-october 2005.The import volume of construction machinery is slower, indicating that the international competitiveness of China's engineering machinery industry is improving greatly.
Bulldozer development space is larger
Bulldozers belongs to shovel of transport machinery, as a result of bulldozer in China have a long history, after 50 s and early cooperate with the international advanced manufacturers (shandong bulldozer factory cooperation with Japan komatsu production in the early 1980 s to produce bulldozer), so the gap with international level is relatively small, various technical indicators and caterpillar, komatsu, such as the gap of the company has a smaller, but the price is only the company 40% of similar products.It is popular in western Asia, South America and Africa.Exports have been growing rapidly since 2002.
It is estimated that the scale of the international market mainly in 1.5-22000 / year (not including China), and most of the market in Asia, Africa, South America and other developing countries and regions, China's export machine 500 units in 2005, only 4% of the effective market share, market capacity and the development space is very big, bulldozers, of China's exports will also is expected to maintain rapid growth trend.
Shares in listed companies, hill pushed (000680), the main production and sale of bulldozer, exports accounted for 80% of China's total exports bulldozer in the international market have a certain visibility and influence, is expected in 2006 will still have good performance.
Engineering machinery parts have a competitive advantage
Although the integral design of the China in engineering machinery, engine, key hydraulic parts, etc, compared with developed countries there is big difference, but some parts has a considerable competitive advantage.For example, the structure of the excavator (dipper, bucket), caterpillar assembly (bulldozer, excavator, etc.), bearing, etc.These components are usually vulnerable parts and need to be replaced regularly, with huge market space both domestically and internationally.
In the listed company, shan push shares (000680), longxi shares (600592) have more engineering machinery parts business, which is worthy of attention.
Forklift has the ability to expand market share
Forklift belongs to industrial vehicles, mainly for logistics shipment. According to the China association of industry and vehicles, the global market of forklift trucks exceeds 600,000 / year.China's forklift industry after years of development and try, in the international market, especially the developed countries and regions such as North America, the European Union a foothold on the market, marketing system and after-sales service system have more perfect, has continued to expand market share.
G force (600761) is the main production and sales of forklift trucks. Export earnings will continue to grow rapidly and the company's position in the international market is becoming increasingly important.
Enhancing international competitiveness requires four levels
We believe that under the current policy guidance and market environment, in 2006 to focus on is enhanced international competitiveness of enterprises, the development of the equipment manufacturing industry is bound to in the enhancement enterprise's international competitiveness.Export growth and product upgrades or major equipment localization is increased performance in international competitiveness, and enhance the international competitiveness will make the company entered the track of benign development, product profitability and the research and development ability of the enterprise will benefit.
Relatively speaking, we are more bullish on stronger ability to export enterprises, the main reason is that after a few years ago of marketing work and product upgrading, enterprise strong competition part of products have been accepted by the international market, in the next few years will enter a period of relatively rapid sustainable development.
The localization of major technical equipment is more demanding and takes longer, and its impact on corporate profits is hard to be reflected in 1-2 years.But as part of a long-term development strategy, it is still worth watching;However, due to the government support strategy and the interactive mode of research and development production, it is difficult to determine, so there is great uncertainty.
From the past experience, the products of domestic machinery production enterprises must break through the four gateways to break into the international market:
One is authentication.Whether China's mechanical products can obtain relevant international standard certification is a major difficulty in exporting.The CE certification mark is a pass that is allowed to enter the eu market.CE certificate is to confirm that the product has passed the corresponding conformity assessment programs or manufacturer's qualified brand statement, whether in Europe, America, Japan or other country can obtain a good effect for export.Obtaining the certification of relevant countries is the key to influence our mechanical products entering the market.
Second, the quality control.The international market has a higher demand for product quality than the domestic market.In general, there is still a gap between our mechanical products and international advanced level.In engineering machinery products, for example, at present our country product reliability test in 1000 hours and statistical data of the "three guarantees" period, the average trouble-free time interval (MTBF) for 150 to 150 hours, compared with the international level is 500 to 800 hours.If the imported engine is not used, the life span of our products is only 4,000 to 5,000 hours, while the international level reaches between 8000 and 10,000 hours.
If the product quality cannot meet the international standard, it will be difficult to be accepted by foreign customers.Problems caused by the quality of the product will harm the reputation of the enterprise and the export business will be adversely affected.Chinese enterprises usually adopt the way is the key to the export products using imported parts and components, enhance the ability of independent research and development at the same time, the localization rate of increase can greatly reduce the product cost.
Third, service customs.After the sale of mechanical products, it usually requires continuous after-sales service, and the timeliness and quality of the service are also important factors that affect customers' purchasing.It now seems that it is more common to conduct after-sales service through local agents.At present, some enterprises in China have established relatively perfect after-sales service network in major countries and regional markets, which has laid a good foundation for sustainable development.
Fourth, property rights.International markets, especially developed countries, are very strict in protecting intellectual property.In America, for example, in violation of United States v. if one product of the intellectual property rights, the international commission (ITC) issued general exclusion order, and all the related companies will be left out of the U.S. market.For the long-term development of international market, many domestic enterprises are speeding up research and development of independent intellectual property products and have achieved certain results.
However, once the product can be accepted by the international market, the company's export earnings and profits will continue to grow rapidly and even accelerate in a period of time.Reason is that China's products are usually has a great advantage in terms of cost, after customers to use and approved, the price advantage into full play, and some international rivals because it could not in terms of cost compared with Chinese companies, so the output will be reduced correspondingly or high-end products as the main product, avoid direct competition with the Chinese products.
The industry's main risk impact is limited
The main risks facing the machinery industry in 2006 remain the risk of macroeconomic regulation and exchange rate, and the risk of international markets being difficult to accurately predict.But we believe that these kinds of risks have limited impact and will not affect the direction of industry and enterprise development.
The risks of macroeconomic regulation remain.By means of policy tools since 2004 and regulation effect analysis forecast, the next time, macro economy could enter a period of relatively stable, all kinds of structural contradictions still exist, but as the economic growth rate slowed growth, and adjust the time conflict began to ease.
Judging from the policies of the central government, this macro regulation is very different from the macro regulation in the past.Previous macroeconomic regulation and control is to solve abnormal high-speed economic growth brought about by a series of problems, such as fixed asset investment growth too fast, bank loan growth too fast, increases risk of bad debt losses, strain energy demand, etc., therefore, the control method is relatively simple, also is easier to achieve target.And the purpose of the macroeconomic regulation and control, is to solve the deep-seated problems plagued the development of Chinese economy, such as economic development and the contradiction between energy consumption and environmental protection, export products low price competition leads to the anti-dumping problem, various elements price is not reasonable phenomenon, therefore, the macroeconomic regulation and control will be difficult, for a long time, but more moderate, won't appear the situation of the ups and downs.
Macroeconomic regulation and control in 2004 economic performance confirmed us the above judgment, nearly 2 years, economic growth, on the whole, not affected by large, money supply, inflation, interest rates and other indicators are normal.As a result, we expect the macro economy to slip even into recession in the future.Because the target economy is growing at a faster pace, it is expected to adjust slightly downward, but it will be able to sustain faster growth over a longer period of time.
RMB exchange rate appreciation expectations
The risk of exchange rates is also under control.About the call for an appreciation of the renminbi is still rise one after another, but from the perspective of the whole environment of China's economy, exports and investment in fixed assets has traditionally been the main power drive China's economic growth, the inevitable decline in the growth rate of investment in fixed assets, therefore more important export status in our country's economy.Although the exchange rate may appreciate further, the government will control the magnitude of the appreciation, which will not hurt the overall development of the economy.
In addition, the domestic machinery products and the gap is bigger, the price of similar products abroad, for example, the same specifications of the bulldozer Chinese products only 30-40% of Europe and the United States or Japan product prices, but has little difference quality.So if the yuan appreciates a little bit, these companies will be able to cope without a decisive impact on the profitability of their exports.
International markets are volatile
The stability of international market is also a factor to be concerned about.But from past experience, the international market may be more stable than the domestic market.For enterprises, the initial stage of international market development is not stable.Because sales and after-sales service system is still in construction, enterprise is not thorough, and understanding of the international market and foreign clients also not too familiar with the performance of products, in this period, the export income volatility may be relatively large.But after a market expansion after the initial attempt and exploration, enterprise for gradually familiar with the international market, and foreign customers to have a comprehensive understanding of the product, more recognition to the enterprise brand, at this time will be able to form a stable customer base.In other words, for enterprises that have solved the problems of technical certification and after-sales service, the export has formed a certain scale, and the risk of international market instability is greatly reduced.
Key companies and investment ratings
We think the following company in 2006 with growth potential, but it should be pointed out that due to the improvement of the overall market environment, other large scale, research and development ability is stronger, the future is likely to have the international competitiveness of enterprises are also worth investors to focus on for a long time.Here are the companies we recommend.
G-force: growth will continue in the coming years
G force (600761) is the main production and sales of forklift trucks. The demand for forklift trucks is less affected by macroeconomic regulation.Domestic demand in 2005 is about 4.5 to 50000, is expected in the next few years to maintain the growth rate of 20% above, retail business and logistics demand for forklift supporting the rapid growth of the industry.
The competitive advantage of anhui forces mainly comes from the complete parts supporting system, and the sales network and after-sales service system throughout the country.Since 2002, the company has stepped up its efforts to expand the international market, and it is expected that the export volume of forklift trucks will increase by more than 50% in 2005, and it will be more than 30% after 2006, which will obviously improve the company's performance.Companies around the world, especially in the developed regions such as North America and the eu market sales and after-sales service system has been basically perfect, foreign customers for anhui forklift products have been gradually recognized.The world forklift market needs more than 600,000 vehicles a year, and the company's forklift exports have long-term growth potential.
The fluctuation of steel price has little effect on the cost of the company. Only about 15% of the production cost of forklift truck comes directly from the purchased steel.As domestic steel prices fall, companies could benefit.
The company is expected to make a profit of 0.479 yuan in 2005. In 2006, it did not consider a convertible bond spread of 0.602 yuan.The dynamic p/e ratio is 9.8 and 7.8, respectively.
Mountain push shares: competitive in similar products
Shan push shares (000680) main bulldozer production.Bulldozer is mainly used in large construction site, such as roads, railways, Bridges, large construction sites, etc., in the macroeconomic relatively stable period, China's domestic bulldozers annual demand is about 5000 to 6000 units, is expected in the next few years will keep on this level.
There are five more important bulldozer manufacturers in China, and the mountain push shares and hebei xuanmen ranked number one and two, among which the market share of the mountain push shares exceeded 40%.Because bulldozers market is relatively stable, profit margins are at a reasonable level, so there are few new firms to enter the market, hill pushed shares in leading position in the market is expected to keep for a long time.
The export revenue of the stake has grown rapidly since 2002, and the annual export revenue in 2005 is expected to exceed us $30 million (about 400), up more than 70% from 2004.In the international market, the company's products are only 30 to 40 percent of the price of similar products in Europe and the United States or Japan, and the product quality is not very different and has very strong competitiveness.Recently, the company has been focusing on the markets of South America, west Asia and the Middle East, which has achieved good results.The company's export earnings are expected to remain high, and the company is likely to become the most important manufacturer in the world.
2005 earnings per share 0.167 yuan, it is expected that the company expects 2006 earnings per share 0.20 yuan, due to the constant expansion of the firm in the domestic market and international market, the company has a long-term growth potential, the current stock price is low.
Big cold shares: market share stability
The big cold (000530) is the largest manufacturer of industrial refrigeration equipment in China and the largest supplier of refrigeration equipment in China.The company's main products are: used in scientific research, petroleum, chemical, textile, medicine, animal husbandry, fishery and catering services, agricultural products processing industries such as piston, screw refrigeration compressor, absorption lithium bromide chiller and pressure vessels, combinatorial libraries, the gas adjustment freshness storehouse and so on six big complete sets of equipment.After the acquisition of the wuhan cold machine factory, the company has already made up more than 60 percent of the main business revenue, and the profitability has been significantly enhanced.
Company's main profit growth from its joint venture, especially several important joint venture with Japan's sanyo, these companies have relatively stable market share, better earnings growth prospects;The most important joint ventures are sanyo cold chain, sanyo compressor and sanyo air conditioning.
Sanyo cold chain is the company's most promising joint venture, with a 40 per cent stake.The company mainly produces supermarkets and convenience stores display case, the market share of over 40%, due to supermarkets and convenience stores in the next few years China will continue rapid expansion, so the company's market outlook continues to look good.
Sanyo refrigeration has very good prospects, the company built in 2004, China's only production line, annual output of ten thousand units of gas heat pump in energy efficiency, environmental protection, alternative electric power and other advantages, is expected in the next few years will get rapid development, become an important source of company investment income.
The market is expected to grow by more than 20 percent in the next few years.The company has a market share of about 10% and can grow with the market.The market structure, sales model and after-sales service mode of household central air-conditioning are different from domestic air conditioners, and the profit margin is relatively stable.
Is expected to further strengthen the company's industry leading position, cooperating with Japanese sanyo will also expand and thorough, in the next few years, the company's main business and investment income will enter a period of fast growth.The company's earnings per share in 2005 and 2006 are expected to be 0.32 yuan and 0.41 yuan respectively.