Dong Yaguang: Investment Strategy for Machinery Industry in the Second Half of 2010

The China State Securities Research Institute held its 2010 mid-term strategic meeting in Lijiang, Yunnan on June 9th. The analysts at the IFI conducted a comprehensive analysis of macroeconomic development, the evolution of the A-share market, and industry investment strategies in the second half of 2010. Sohu Securities video, graphic broadcast, the following is the statement of Dong Guoguang, the analyst of Guojin Securities.

Guo Jin Securities Analyst Dong Yaguang

The Upgrading of Industrial Institutions Is the Biggest Opportunity for the Machinery Industry - Investment Strategy of Machinery Industry in the Second Half of 2010

Dong Yaguang, analyst of Guojin Securities Machinery Industry, believes that the biggest opportunity for the industry in the second half of the year is the upgrading of the industrial structure, which includes two aspects. First, the structural adjustment of the existing industry. The industry that meets government regulation in this process will benefit. Another opportunity is to accelerate urbanization and increase labor costs. The increase in urbanization rate will result in increased investment. In addition, the increase in labor costs will bring about a corresponding increase in the quality of products, which will certainly promote the upgrading of machinery manufacturing.

The following is the full text of Dong Yaguang's speech.

Dong Yaguang: Good afternoon, everyone, thank you very much for your persistence until now to hear our report. I report to you on the second half of the machinery investment, the macro environment we are concerned about, the government’s proposal to change the mode of economic development, and speed up the adjustment of the economic structure. We think this is a macro variable that deserves the most attention, and this is a big decision. In the background, we believe that the biggest challenge for the machinery industry is that the investment environment in the future may change, but the biggest opportunity he faces is related to the upgrading of industrial structure. For the major sub-sectors, we have listed heavy machinery, Construction machinery and heavy machinery have benefited from an obvious upgrade of the industrial structure. The investment in engineering machinery has been highly correlated. Currently, it is still in a period of blinding and difficult to judge. The government’s big decision-making background is worthy of our attention. Looking at some documents issued by the government one after another, the government is very serious about changing the mode of economic development and accelerating economic restructuring. Moreover, his focus is on accelerating the adjustment of the economic structure. In the process, it will inevitably have a long-term impact on the macro environment of the entire ranks of machinery. That is to say, the party’s leaders have all made clear speeches recently. We have made it very clear that we have made adjustments to the economic structure. We believe that the party and the government's adjustment ideas will focus on expanding domestic demand. Future investment needs will decline in the government's position, and the demand for future mechanical products will result. A certain degree of influence, in addition, among the expansion of domestic demand, urbanization is placed in a relatively high position, and accelerating urbanization has a number of different effects on related industries. Judging from the current economic structural adjustment measures, it is the real estate that has a relatively large impact on the economy. One of the controls is the elimination of outdated production capacity, including strategic emerging industries. These aspects will have a certain impact on the future development of the machinery industry. When we analyze the challenges we faced, we studied the development situation in Japan that year. After the end of World War II in Japan, the economy developed to a certain level in 20 years, after which he introduced one. Policies and concerns are similar to those faced by China. At that time, attention was paid to the increase in income of workers, the differences between urban and rural areas, including environmental pollution, and the improvement of the technological level of enterprises. At that time, economic restructuring measures and their effects were adopted. , may have some reference to China's current adjustment. In the process of structural adjustment, Japan introduced a series of industrial policies and formed its own superior position for steel, automobiles, household appliances, etc. In terms of foreign trade, he took an export substitution strategy rather than an export-oriented one. Higher and higher value-added products can avoid the impact of trade imbalances and will also reduce the anti-dumping pressure of exporting countries on domestic products. In the course of Japan’s economic restructuring, Japan’s manufacturing industry has not been affected by economic restructuring and has had a huge negative impact. The share of manufacturing in GDP has risen. By 1985, Japan’s manufacturing sector accounted for 30% of GDP. The high point is that the heavy chemical industry has continuously increased by 66% in 85 years in the manufacturing industry. Since the machinery industry is actually a manufacturing operation, he will inevitably provide a lot of equipment during the development of the manufacturing industry. Industry, in this restructuring of the economy, he has also been continuing to develop. Until 90 years ago, we got an inspiration from the adjustment of Japan’s economic structure. In Japan’s conditions, we still play our own dominant industry. Japan has a comparative advantage in manufacturing. The advantage is that he is not debasing in the adjustment of economic structure. He will increase the competitiveness of the manufacturing industry through policy support, increase investment in R&D, and so on. His economic adjustment model is very favorable to the machinery industry in this process. Among them, the machinery industry will also receive relatively large developments. This is a lesson for our country's economic adjustment. At present, because of the harsh government policies, Li Keqiang’s article in “Seeking Truth” is more serious about economic restructuring. In the future, there will be some changes to the domestic macro investment environment, and the dependence of the economy on investment will decline, but it will not be an extreme speed. In the process of decline, the government will reduce its reliance on investment on a stable economy basis.

The biggest opportunity is the upgrading of the industrial structure. We think that it includes two aspects, one aspect, the structural adjustment of the existing industry, and it is quite typical. Now we are vigorously developing nuclear power in the power sector. In addition, strategic emerging industries, according to media reports, in September Among the other emerging strategic industries, emerging industries are also associated with machinery manufacturing. Civil aviation, marine engineering equipment, and high-end smart equipment are among the most relevant. Industries that are compliant with government regulation in this process will benefit. Another opportunity is to speed up urbanization and increase labor costs. Increased urbanization rate will result in increased investment. In addition, the increase in labor costs will bring about corresponding improvements in the quality of products, which will certainly promote the upgrading of machinery manufacturing.

There are many sub-sectors of machinery. We use heavy machinery and engineering machinery as a model for their investment strategies under the adjustment of economic structure. For heavy machinery, they are still more in line with the direction of the government's industrial structure upgrade, which means that he can provide a large number of basic equipment. In this industry, his business barriers are relatively high. Therefore, the corresponding enterprises have a comparatively strong operating position in the industry structure. During the upgrade, the benefits will be more obvious. In the future, the large aircraft industry of migrant workers will also have a pulling effect on heavy machinery. The development level of nuclear power and domestic nuclear power is still relatively low. At present, the domestic nuclear power planning is relatively large. Nuclear power is mainly related to heavy machinery and is the equipment of nuclear islands. His market capacity may increase from about 2 billion in 2009 to 12 This year reaches 10 billion yuan, because the gross profit rate is quite high, so the impact on the profitability of manufacturing companies is relatively large. At the same time as the development of nuclear power in the country, we are also concerned about the global nuclear power market. Why do we pay attention? Because the global nuclear power market, the current demand still belongs to a relatively low level. The main reason is that some nuclear power plants appeared in the 1980s. The accident caused Europe and the United States to take a negative attitude towards the development of nuclear power. However, in the future, the safety and longevity of current nuclear power technologies will be greatly enhanced. With the global warming towards a low-carbon economy, nuclear power can be expected to re-energize. And the major development markets in the future are in Western Europe and the United States. Because our country is now taking the lead in the use of nuclear power technology in the world. With the operation of the third generation of nuclear power plants, China will have world-leading manufacturing capabilities in terms of its three-generation nuclear power operation experience, and will inevitably lead to future nuclear power in China. To lay a relatively good foundation for overseas development, in the development of nuclear power, the heavy machinery with obvious benefits is mainly China’s heavy and heavy equipment.

The construction machinery industry is still in a more obscure period because of the high degree of correlation between construction machinery and investment. Due to the current macroeconomic policy environment, it is not conducive to investment. Therefore, although the sales volume and incremental speed of the construction machinery industry are also Since the highest level of the model, but the stock price performance has been suppressed by the policy is more obvious, the current regulatory measures, in fact, will have a negative market expectations, the decline rate may be relatively rapid, the government's regulation of real estate, control of the start of the project The local financing is too rectified and has already been reflected in the new construction. The growth rate of the total investment in new start-ups in April has dropped very quickly. This actually has a certain negative impact on future engineering needs. At the same time as real estate regulation and control, the government has also introduced the construction of affordable housing. We believe that the starting point of the government is relatively good. We hope to avoid a hard landing during the regulation and control of commercial housing, speed up the construction of affordable housing, and hedge against the control of commercial housing. We think that for the hedging effect, we think we still need to observe. We analyze that from the start of construction area, the area of ​​affordable housing starts is still relatively large, both in terms of the amount of investment, it is still relatively small, because the government budget this year is 63.2 billion. , The increase is very low. Considering stimulating efficiency, it is still relatively small for the amount of investment in development. The final effect must be judged after the construction of affordable housing in various places in July has increased.

Although the short-term macro-control has a greater impact on construction machinery, the increase in urbanization rate by the government to stimulate domestic demand is still a strong demand for medium and long-term construction machinery. After all, the increase in the urbanization rate in our country is very large. The main areas for future improvement should be In the central and western regions, the central and western regions now account for 70% of the fixed asset investment contribution. Therefore, in the process of increasing the urbanization rate in the central and western regions, fixed-asset investment, including demand for construction machinery, will also play a better role. Support function. The construction machinery 06, 07, 08, 09 we think his sales are still relatively normal, and he has a relatively stable relationship with the fixed assets investment, thinking that the sales pressure of construction machinery is still relatively large, and it is still hot in recent years. However, adjusting the growth rate is still more appropriate. Therefore, we are still optimistic about heavy machinery, benefit from the adjustment of government policies, construction machinery is currently a wait-and-see stage, and the space for declines and rises are relatively limited, the decline is because the current valuation is at a relatively low level of increase is affected by the policy environment and future policies With the suppression of the effect, we believe that the opportunities for the entire industry still need to wait.