The Zhitong Finance App learned that J.P. Morgan Chase released a research report saying that China's machinery sector has recently experienced a sharp sell-off. After reviewing recent management briefings, operating updates and the latest sales trends, it believes that the sell-off margin was not supported by fundamentals. The bank is optimistic about the sector and suggests taking advantage of the low absorption; the bank rated Weichai Power (02338), Chuangke Industrial (00669), Sany Heavy Industries (06031) and Sinotruk (03808) all rated “additional holdings”. HKD, HKD 31 and HKD 55.
The bank pointed out that the US AD/CVD investigation mainly targets linear hydraulic cylinders and some parts imported from China, focusing on component suppliers rather than complete machine OEMs. The management of Sany Heavy Industries, XCMG, and Hengli Hydraulics all emphasized that the investigation did not target their core business, and that the risk of expanding to complete machines or other key components is still low. Sany Heavy Industries and XCMG account for only a small number of units of direct US revenue, and North America accounts for less than 3% of group sales; even under 50% tariffs and the inability to pass on, it is estimated that the impact on the gross margin of Sany Heavy Industries or XCMG is about 0.15 percentage points.
Overseas growth remains strong, margin discipline is maintained, and new products and automation initiatives are bearing fruit; domestic demand is weak, but pricing discipline and cost control support resilience. Sany Heavy Industries and XCMG expect overseas revenue growth of more than 20% in the third quarter, while domestic sales may remain flat or fall slightly year-on-year. According to the bank, Generac announced that it has signed a long-term agreement with Amazon to supply backup generators for the data center, with an initial delivery of about US$2.4 billion from 2027 to 2028, highlighting the scale and visibility of AIDC opportunities, and has positive implications for Weichai Power.
The bank sees the recent adjustments as an opportunity to collect AIDC leaders and global machinery stocks with strong operating cash flow and visible growth, while remaining selective about Chinese cyclical stocks. I continue to recommend Weichai Power and Chuangke Industrial because they directly benefit from AIDC, are self-sufficient in growth, and the visibility of orders for infrastructure related to data centers and power grids over the years; they are also optimistic about Hengli Hydraulic (601100.SH), Sany Heavy Industries, and Sinotruk.