Core views:

From a long-term perspective, the internationalization of construction machinery enterprises is the only way to grow. The periodicity and tradability of construction machinery products determine the existence of saturation critical in every market and the commodity price is determined by the global market supply and demand, and its production, distribution, and prices are affected by the international competition situation. At the macro-environmental level, the exuberance of infrastructure and real estate investment has a regional shift with the progress of national urban construction; at the meso-industrial level, domestic demand shrinks during economic maturity, and overseas investment forms a new investment support point; at the micro-enterprise level, leading construction machinery enterprises have achieved a global layout to expand their scale and reduce risks. Therefore, international operation has become the choice path for the development of more and more construction machinery enterprises.

Sales globalization, production globalization, capital globalization and management localization combine the internationalization path of construction machinery enterprises can be divided into sales globalization, production globalization, capital globalization and management localization. Export sales is the first step to realize globalization. The purpose is to sell products to hedge the depression of domestic market demand; the second is to seize the market and use the first-mover advantage to form competitive barriers; the third is to establish a global sales agency system and build channel barriers. The globalization of production is the beginning of scale expansion, following the principle of cost-effectiveness, cross-procurement to form upstream synergies, investment and construction of factories committed to midstream enterprises to reduce costs and efficiency, local product development, close to downstream customers. Capital globalization runs through the development of enterprises, and the amortization of fixed costs produces synergies; the global localization management of talents develops along with the localization of products.

A typical case of domestic construction machinery enterprises marching towards the world-Sany Heavy Industry (600031, stock bar), deeply ploughed its products and started the journey of overseas share expansion. As a representative enterprise of domestic construction machinery marching towards the world, Sany Heavy Industry has taken a solid step in the global layout. Sany's core path on the road of global expansion includes:(1) always focusing on providing high-quality products and high-quality services;(2) Form ten sales regions and four production bases to realize the globalization of sales network and production;(3) Take the lead in adopting the localization business model to reduce the risk of transnational operation. With the growth of overseas scale, Sany's overseas business will become an important profit support point. Compared with overseas leaders Caterpillar and Komatsu, Sany's overseas share is still at a low level, and increasing overseas expansion is an important way for Sany to become a global enterprise.

Investment Suggestions: The high technology and durability of construction machinery and equipment determine the stock nature of the industry and the strong after-sales market characteristics. Therefore, the balanced layout of globalization is the ideal mode for construction machinery enterprises to seek to iron out fluctuations through cycles. The ability of global layout requires enterprises to have the ability of globalization of production and procurement, globalization of sales network and globalization management. We focus on recommend construction machinery main engine factories and parts enterprises with high proportion of overseas business, excellent product quality and service, and complete overseas layout system. Key companies include Sany Heavy Industry and Hengli Hydraulic. Other targets can focus on Zoomlion (000157, Guba), Liugong (000528, Guba) and Xugong Machinery (000425, Guba).

Risk Warnings: The impact of host government policies and economic conditions, the risk of adverse exchange rate movements, differences in cross-border population culture and market conditions, the risk of increased overseas competition, and the impact of changes in domestic market demand.