Morningstar | Re-Initiating Coverage on Sany With a FVE of CNY 6.40, No-Moat and Stable Moat Trend Ratings
Sany is a leading construction machinery manufacturer in China. Through the years, it managed to build a significant market share for major products in the excavator, concrete, and crane machinery industries in China, which includes excavators, pumps, mixing plants, truck crane, and crawler crane. With around 70% of sales coming from China, demand for Sany’s construction machinery would rely on the infrastructure spending and real estate investment in China. In the near term, we expect demand for construction machinery to remain strong driven by growth from end-user demand and replacement demand. The last time when demand for construction equipment peaked was in 2009 to 2012. Given that a typical machinery could last around 8-10 years, we expect the next replacement cycle to take place around 2017 to 2020, supporting the demand for construction machinery in the near term. However, in the longer term, as China transitions to a consumer-driven economy from an investment-oriented economy, we expect demand to weaken as the real estate and infrastructure sectors slow down.In order to expand and strengthen its market positioning overseas, Sany acquired Putzmeister, the world’s largest concrete pump maker, in 2012. This move helps to solidify Sany's leading position in the concrete machinery space. This acquisition has not only helped Sany in terms of technological advancement, it also helped to penetrate large construction machinery markets such as Europe, the U.S., and Brazil. In view of the advancement of technology, Sany is focusing on artificial intelligence technology and Internet of Things to improve the competitiveness of its products in the future. Sany has a monitoring system that will help to monitor the conditions of its machinery and will notify its customers of any potential issues so that they could rectify the issue before it caused a disruption to its customers. This ensures speedy parts delivery and technicians arriving on site quickly to repair its machinery. Hence, we expect Sany’s dominant market position in the excavator, concrete, and crane machinery industries in China to remain intact in the long run. Nonetheless, Sany does not have a moat.SANY HEAVY INDUSTRY CO.,LTD is a China-based company principally engaged in the research and development, manufacture, distribution and provision of services of engineering machinery. The Company's major products are categorized into five types, which are concrete machinery, excavating machinery, hoisting machinery, pile driving machinery and road construction machinery, including truck-mounted concrete pumps, trailer concrete pumps, excavators, truck cranes, rotary drilling rigs and sets of road equipment, among others. The Company distributes its products in both domestic and to overseas markets.
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