Machinery industry: window observation period does not represent a trend decline

Construction Machinery: The window observation period does not represent a decline in trend. The recent disappointment with regard to infrastructure, unstable expectations of real estate policies, and pessimistic speculation about layoffs have been the core factors driving down the share price of construction machinery. Judging from the data in June, related indicators such as newly-started project investment, monthly growth of medium and long-term credit, FAI infrastructure growth, growth rate of bidding projects, state budget funds, real estate sales growth, and other related indicators have further risen. Excavator sales in June were basically in line with seasonal characteristics. In July, sales are expected to be between 6500 and 7200. The year-on-year decline is further narrowed, slightly exceeding seasonal characteristics. We still maintain the previous view that July and August are window observation periods, and the excess return rate of construction machinery will fall back compared with the first half of the year. However, this does not mean that the trend has declined. The gradual recovery of infrastructure and the recovery in the growth of real estate sales volume will confirm that construction machinery will regain excess returns in the fourth quarter.

Aerospace: It is expected that the Beidou navigation policy will enter the bonus period in the second half of the year. At the end of the year, Beidou Navigation will officially provide free passive positioning, navigation and timing services to users in the Asia Pacific region. At present, ground-enhanced signals can reach a precision of 2m, which can meet the needs of some high-precision customers. At the same time, on-board testing of the mass market also shows that Beidou multimode chips are superior to GPS chips. However, the cost or performance disadvantages still make it difficult for the application market to effectively expand. We believe that in order to ensure the development of the Beidou navigation application industry, before the release of ICD documents at the end of this year, the government will focus on supporting the development of the industry by formulating mid- and long-term development plans, mandatory installations, accelerated demonstration projects, and support for research and development costs.

Energy Machinery: The second round of bidding for shale gas is about to start. The Ministry of Land and Resources issued “Technical Requirements for Shale Gas Resources/Reserves Calculation and Evaluation (Trial) (Draft for Solicitation)” on the 13th, which paves the way for the actual development of shale gas. We expect the second round of shale gas tenders will be held as soon as possible in July. Investors are advised to actively pay attention to the relevant conditions of the shale gas tenders in July and August. If private enterprises obtain quality blocks at reasonable prices, they will have a positive impact on shale gas exploitation and future development. During the 12th Five-Year Period, the growth of conventional oil and gas was slow, unconventional oil and gas made breakthroughs, and the manufacturers of proprietary equipment in unconventional oil and gas benefited. We recommend Jereh Co., Ltd. and Furuiz equipment separately from the two industry chains (exploitation and utilization), and recommend Kaishan Stock, a supplier of shale gas, coalbed methane extraction, and gathering and transportation (collection and transportation) equipment. Short-term positives will stimulate the stock price, and it is recommended to pay attention to the trading opportunities in the energy machinery sector.

Instrumentation: Policy promotion contributes to the development of environmental monitoring instruments. In 2015, the scale of China's environmental monitoring equipment market will reach 27.4 billion, and the denitrification on-line monitoring equipment will be the focus of development during the “Twelfth Five-year Plan”. Looking back at the development from 2000 to 2010, the scale of CEMS (Continuous Monitoring System for Smoke Emissions) will increase in 2002 and 2007. The fastest, reaching 69.8% and 81.9% respectively, the CEMS market growth is greatly related to policy promotion and enforcement. In 2011, the national emission of nitrogen oxides did not complete the target of the beginning of the year, and the policies will be successively introduced. The performance of the remaining four years of desulphurization monitoring instrument companies in the “Twelfth Five-Year Plan” may exceed expectations. It is recommended to pay attention to snow dilong.

Shipbuilding: Downgraded new orders for the entire year are expected to reach 45 million DWT. In June 2012, the global new orders received were 2.99 million DWT, a year-on-year drop of 74% and a further decrease of 20% from the previous quarter. In the first half of 2012, the total number of new orders received worldwide was 20.91 million DWT, down 59% year-on-year, and not reaching half of the 50 million DWT expected for the whole year. We believe that although the shipping market will gradually pick up in the future, the oversupply situation has not changed in the short term. Therefore, we once again cut down on new orders expected to reach 45 million DWT.

This week is the tenth week of the fourth phase of the Shenwan Machinery Group and is given to Sany Heavy Industry, Zoomlion, Shantui, China Satellite, Beidou Xingtong, Shaanxi Drum Power, Unioka, Yawei, Kaishan, Jie. The investment proposal of Ruirui shares and Furui equipment.