First, the operating performance is low
Many important A-share construction machinery enterprises have disclosed their 2022 annual reports, and the industry's development achievements last year have been preliminarily reflected.
As of press time, Sany Heavy Industry, Zoomlion, Railway Construction Heavy Industry, etc., have disclosed financial results, Liugong, Construction machinery has also disclosed relatively detailed performance letters. Five companies represented more than 80 per cent of the CITIC Construction Machinery Index.
Overall, the performance of the industry is further lower than that of 2021, showing a double decline in revenue and profit, and the decline in profit is far greater than the decline in revenue. Reflects the rapid growth from 2016 to 2020, the industry's overall cyclical decline.
The median revenue of the five companies was 26.48 billion yuan, down about 18% from a year earlier, according to Wind. The median net profit was 2.39 billion yuan, down about 63 percent year on year. The current downward cycle of construction machinery started in the middle of 2021. The overall performance of the industry in that year was to increase revenue but not profit, with the year-on-year change range of the median operating income and net profit of 12% and -27%.
The slump in domestic demand is at the heart of the decline. According to the China Construction Machinery Association's statistics on 26 excavator manufacturers, a total of 261,000 excavators were sold in 2022, down nearly 24 percent year-on-year. Among them, only 152,000 units were sold in the domestic market, down 44.6 percent year-on-year and the lowest since 2018.
Leading companies Sany Heavy Industry and Zoomlion saw their revenue fall 24.6 percent and 38.0 percent, respectively. Sany Heavy Industry said in the annual report, the domestic construction machinery market is in a downward adjustment period, superimposed macroeconomic growth slowdown, engineering effective operating rate is insufficient and other factors, market demand has declined significantly. Zoomlion also reported a decline in construction and real estate projects in 2022.
Railway Construction Heavy Industry because of the product structure, bucking the trend to achieve revenue and profit growth, year-on-year growth of about 6%. Railway Construction Heavy Industry is mainly engaged in tunnel boring machines and rail transit equipment. The rail transit market, which is mainly used by Railway Construction Heavy Industry, will see strong investment in 2022. The completed investment of water conservancy and hydropower market in 2022 increased by nearly 44% year-on-year to exceed RMB trillion.
Although the industry as a whole is in a downward cycle, the market share of leading companies is stable, and the market share of some categories has expanded against the trend.
Sany Heavy mining Machinery has been the sales champion in China for 12 consecutive years. The market share of super-large excavators has increased to the first place, and the market share of stirring trucks has increased by 9 percentage points to exceed 30%. Zoomlion's concrete machinery launched the 70-meter "Lingyun" pump truck for the first time, becoming the industry's high-end pump truck single product sales champion, and the market share of mixing trucks increased to the second in the industry.
Second, find ways to protect profits
Although the downward cycle poses challenges to the overall profitability of the industry, leading enterprises generally strive to stabilize the level of gross profit margin through product structure adjustment, cost reduction and efficiency improvement measures. Both Sany and Zoomlion said their fourth-quarter gross margins had reached their highest levels of the year.
The gross profit margin of Sany's products gradually recovered from 18.9% in the fourth quarter of 2021 to 22.8% in the second quarter of 2022 and 27.3% in the fourth quarter of 2022. Sany explained that the recovery of gross profit margin was due to the improvement of domestic and international market structure and product mix, cost reduction and efficiency measures. Zoomlion also introduced that in 2022, the annual gross profit margin of the company was nearly 22%, and the gross profit margin reached the annual high in the fourth quarter.
The performance of overseas markets is a bright spot for the construction machinery industry in 2022. In 2020 and 2021, the export growth of excavators reached 31% and 97%, respectively. In 2022, the export of excavators reached a new high. The export volume accounted for nearly 42% of the total sales volume, which doubled from 20% in 2021. In September 2022, the monthly export volume of excavators exceeded the domestic sales for the first time.
On the one hand, the strength of overseas sales is an effective hedge against falling domestic demand. Sany Heavy Industry's annual overseas sales revenue of 36.571 billion yuan, a year-on-year growth of 47%, the p
