Weekly performance of the sector: This week (2025/3/10-2025/3/14), the CJ Machinery and Equipment Index rose by 0.4%, and the top five sectors were: Internal Combustion Engines/ Shipbuilding/ Semiconductors & 3C Equipment/ Abrasives/ Oil & Gas Equipment, up 9.9%/5.5%/5.1%/4.1%/4.1%/4.0% respectively.

Sector valuation level: The median PE (TTM) of the machinery sector reached 45x, of which the highest valuation was agricultural machinery (94x) and the lowest was construction machinery (19x). Judging from the historical data in the past 10 years, the price-earnings ratio of the machinery sector is at the 67.6% percentile.

In the first two months of this year, the sales of excavators were positive, and the start of construction has recovered. According to the statistics of the China Construction Machinery Industry Association, from January to February 2025, 31,782 excavators of various types will be sold nationwide, a year-on-year increase of 27.21%. In terms of markets, the domestic sales of excavators from January to February were 17,045 units, a year-on-year increase of 51.4%; Export sales were 14,737 units, a year-on-year increase of 7.37%, and export sales accounted for 46.4%. We believe that the first two months of this year's excavator sales performance has sent a very positive signal, domestic sales since the middle of last year has shown a recovery trend, the first two months of this year in the case of excluding the Spring Festival factor still achieved more than 50% growth, behind the reflection of policy support and second-hand replacement and other factors to promote the demand upward. Judging from the equipment start-up data, the operating hours of Komatsu China's excavators in January and February were 66 hours and 56.8 hours respectively, and the average value from January to February increased by 13% over the same period last year, which shows that the start-up data has also recovered to a certain extent. From January to February 2025, 195,000 forklifts of various types were sold nationwide, a year-on-year increase of 9.15%. In terms of markets, the domestic sales of forklifts from January to February were 121,000 units, a year-on-year increase of 6.48%; Export sales were 74,000 units, a year-on-year increase of 13.84%. We believe that in the first two months of this year, forklift sales still maintained last year's steady domestic growth and rapid export growth.

It is recommended to pay attention to: (1) Construction machinery: Sany Heavy Industry (600031, not rated), Zoomlion (000157, buy), Hengli Hydraulics (601100, not rated), Construction Machinery (600984, not rated), Eddie Precision (603638, not rated); (2) Industrial equipment:

Hangcha Group (603298, not rated), Anhui Heli (600761, Buy), Haitian Precision (601882, overweight), Neway CNC (688697, not rated), Kede CNC (688305, not rated), Qinchuan Machine Tool (000837, not rated), Yizumi (300415, Buy), Eston (002747, not rated); (3) Logistics automation: Yinfei Storage (603066, not rated), Nuoli (603611, not rated), CIMC Vehicles (301039, not rated); (4) Energy equipment: Pilot Intelligent (300450, not rated), Jiejia Weichuang (300724, not rated), Jereh (002353, Buy), Dewell (688377, not rated), Zheng Coal Machinery (601717, Buy), Tiandi Technology (600582, not rated); (5) Rail transit equipment: CRRC (601766, not rated), China Railway Industry (600528, not rated), Traffic Control Technology (688015, not rated); (6) Services & Consumption: Anche Testing (300572, not rated), CTI (300012, not rated), Jack (603337, not rated), Jiecang Drive (603583, not rated), Kaidi (605288, not rated), Yongchuang Intelligent (603901, Buy); (7) Laser equipment: Dier Laser (300776, not rated), Innova Laser (301021, not rated), Hymson (688559, not rated); Risk warning: the macro economy is less than expected, real estate investment is less than expected, infrastructure investment is less than expected, raw material prices are rising, overseas demand is slowing down, geopolitical conflicts, and humanoid robots are not progressing as expected.