According to the Zhitong Finance APP, China Galaxy Securities has released a research report stating that from mid to late January 2025, local two sessions will be held successively in 31 provinces and cities across the country. By sorting out the investment targets and key projects and industrial policies disclosed by various provinces and cities for 2025, the recovery of domestic demand is the biggest investment theme in 2025. Counter-cyclical adjustment policies are expected to take effect, and investments related to new productive forces will continue to grow significantly. It is recommended to focus on investment opportunities in three major directions: construction machinery, new productive forces, and equipment upgrades.
<h2>The main viewpoints of China Galaxy Securities are as follows:</h2>
Construction Machinery: Domestic demand bottoms out and recovers, benefiting from the background of infrastructure investment recovery due to debt conversion
The weighted fixed asset investment growth target for 2025 in various provinces and cities has been adjusted down from 6.4% in 2024 to 5.7%. As an important support for stable growth, infrastructure is expected to benefit from a new round of debt conversion and special bonds, with growth rates expected to rebound. According to Galaxy's macro forecast, it is neutrally estimated that China's infrastructure investment growth rate will be 6.6% in 2025. Provinces and cities such as Tianjin, Shandong, Sichuan, Heilongjiang, and Fujian have stated that they will make good use of ultra-long-term special government bonds, special bonds, and other policy tools in 2025 to seize the opportunity for &#34;two heavy&#34; construction and strengthen infrastructure investment. The year 2024 is expected to be a year of bottoming out and rebound for domestic sales of construction machinery, with annual excavator sales expected to grow by 3.13% year-on-year; among them, domestic sales are expected to grow by 11.7% year-on-year. The Central Economic Work Conference emphasized the need to implement a moderately loose monetary policy and a more proactive fiscal policy. In the future, under the background of local government debt conversion and the stabilization of the real estate market, the funding situation and demand for construction machinery are expected to improve. The recovery of domestic demand combined with equipment upgrades is expected to benefit mainframe products represented by medium and large excavators first.
New Productive Forces: Transformation of old and new driving forces, new productive forces are expected to flourish
China's economy is at a critical period of transformation from old to new driving forces, and investments related to the transformation of new productive forces are expected to continue to maintain high growth. Local governments will accelerate the layout of emerging and future industries as one of the key tasks for 2025, with a focus on humanoid robots and the low-altitude economy sector.
Humanoid Robots: One of the important directions for the implementation of general artificial intelligence, at the forefront of new productive forces. Recently, the industrial chain has been continuously catalyzed, with Zhiyuan Robotics announcing mass production of over a thousand units, Tesla showcasing the Optimus next-generation 22dof dexterous hand and rugged terrain walking capabilities, and announcing the latest mass production plan at CES, aiming to produce thousands of units in 2025, with a target of 50,000 to 100,000 units in 2026, and continuing to increase production tenfold to over 500,000 units in 2027. Huawei has established an embodied intelligence industry innovation center to accelerate the layout of embodied intelligence. It is recommended to pay attention to the Tesla industrial chain, Huawei's robotics industrial chain, and related component suppliers.
Low-altitude Economy: Accelerated development of the low-altitude industry under the joint promotion of policies and industries, commercialization is gradually approaching. Beneficial directions related to the mechanical equipment sector include various types of aircraft processing equipment, rail transit control system companies transforming into low-altitude air traffic control, aircraft take-off and landing platforms, and charging and swapping equipment.
Equipment Upgrades: Tianli implements the &#34;two new&#34; policy, and the elasticity of upgrades is expected to gradually emerge
Tianjin, Shanghai, Zhejiang, Hebei, Sichuan, and other places have reiterated the importance of utilizing the &#34;two new&#34; to promote equipment upgrades; Henan proposed to implement 3,000 equipment upgrade projects; Inner Mongolia proposed to promote the replacement of industrial equipment, construction machinery, and other &#34;should be replaced as much as possible.&#34;
The sectors that will benefit from the certainty of equipment updates in the machinery industry are railway locomotives, with other benefiting sectors including construction machinery, machine tools, etc.
Railway Locomotives: The replacement of old diesel locomotives with new energy locomotives is expected to release flexibility. The number of railway locomotives in China is 22,400, of which 7,800 are diesel locomotives, and about 4,000 are old (over 30 years). Policies encourage the replacement of old diesel locomotives with new energy locomotives, and it is expected that by 2027, with a new vehicle replacement ratio of 1:2, the demand for about 2,000 new energy locomotives will be released in the next three years.
Construction Machinery: In 2023, the number of hydraulic excavators and loaders is 1,912,069 and 866,000 to 938,000, respectively, with a total of about 1.7 million excavators of all types over 8 years. The last boom cycle began in 2016, and the update cycles for excavators and loaders are generally 7-8 years and 8-9 years, respectively. Starting in 2024, a new replacement cycle will gradually begin.
Machine Tools: The large-scale equipment update policy proposes to focus on promoting the replacement of machine tools in the industrial mother machine industry that have been in service for over 10 years. Based on a machine tool usage of 10-15 years, the average annual output of metal cutting machine tools and metal forming machine tools from 2009 to 2017 was 750,000 and 270,000, respectively. Therefore, the average annual demand for machine tool replacements from 2024 to 2027 is expected to be about 1 million units.
Investment Recommendations:
1. Construction Machinery: Sany (600031.SH), XCMG (000425.SZ), Zoomlion (01157,000157.SZ), LiuGong (000528.SZ);
2. Humanoid Robots: Sihua Intelligent Control (002050.SZ), Top Group (601689.SH), Beite Technology (603009.SH), Wuzhou Xinchun (603667.SH), Green Harmonic (688017.SH), Mingzhi Electric (603728.SH), Bosheng Co., Ltd. (002698.SZ), UBTECH (09880), etc.;
3. Low-altitude Economy: Yingliu Co., Ltd. (603308.SH), Bolite (688333.SH), Huashu High-tech (688433.SH), Jiaokong Technology (688015.SH), China Railway Signal &amp; Communication (03969,688009.SH), Zhonghe Technology (000925.SZ), Bozhong Precision (688097.SH), etc.;
4. Railway Locomotives: CRRC (01766,601766.SH), Times Electric (03898,688187.SH), Siwei Liekong (603508.SH);
5. Machine Tools: Haitian Precision (601882.SH), Neway CNC (688697.SH), etc.
Risk Warning: Risks of manufacturing investment falling short of expectations; risks of policy strength or timing being lower than expected; risks of uncertainties in the international political environment, etc

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600031

000425

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01157

000680

China Galaxy Securities released a research report, suggesting to focus on three major investment directions: construction machinery, new productivity, and equipment upgrades. It is expected that domestic demand will rebound in 2025, with infrastructure investment growth rate returning to 6.6%. Domestic sales of construction machinery are expected to rebound, with a year-on-year growth of 3.13%. Investments related to the transformation of new productivity will maintain high growth, with a focus on humanoid robots and low-altitude economy

Zhitong

Tuoshan

Sany

XCMG

Zoomlion

ZOOMLION

SHANTUI

Tuopu Group

Tesla

EHang

HENAN THINKER AUTOMATIC EQUIPMENT

HIMILE SCIENCE AND TECHNOLOGY

UniTTEC

Caterpillar

Eontec

HAO TIAN INTL

Leaderdrive

JSHL

First

BOZHON

Qinchuan

HCNC

Neway CNC

CKI HOLDINGS

Capital Securities

UBTECH ROBOTICS

Victor Hydraulics

NHPM

Sanhua

CRRC

Feinan Resources

GRIPM

Direxion Daily TSLA Bull 2X Shares

TIMES ELECTRIC

PIA Automation

SHBT

Paguld

YINGLIU

Huawei

CHINA CRSC

CHINA COMM CONS

LIUGONG

Boshiac

MOONS’

Nonfemet

NIO-SW

China Galaxy Securities: Three Major Investment Directions in the Machinery Industry from the Local Two Sessions