The economic operation has returned to normal, and the rise in raw materials poses a challenge to the profitability of manufacturing companies. We counted 341 companies listed in the machinery and equipment industry before January 1, 2019.

(Producer/Author: GF Securities, Dai Chuan, Zhou Jing)

Economic operation has returned to normal, and the rise in raw materials poses a challenge to the profitability of manufacturing enterprises

We have counted 341 companies listed in the machinery and equipment industry (according to CITIC first-level industry classification) before January 1, 2019 (excluding companies that have undergone major replacement or injection of ST Changlin, Jiangsu Guoxin, Tianye Tonglian and other businesses; at the same time, Ningbo Dongli, which has fluctuated significantly; Jianrui Woneng and Huatie Co., Ltd. that have made major asset impairment losses were excluded; Tianguang Zhongmao, Qianshan Pharmaceutical Machinery, Kunming Machine Tool that have been delisted). In Q2, 2021, the operating income reached 517.38 billion yuan in the single quarter, an increase of 22.56% year-on-year, and the operating income in the single quarter reached a historical high; the net profit attributable to shareholders was 38.12 billion yuan, an increase of 15.36% year-on-year, slower than the revenue growth rate of 7.3pct. The net profit attributable to shareholders in the single quarter also reached a historical high. With the gradual control of the epidemic, the economic operation gradually returned to normal.

In the first half of 2021, the machinery and equipment industry achieved operating income of 929.31 billion yuan, a year-on-year increase of 36.27%; and achieved net profit attributable to shareholders of 67.72 billion yuan, a year-on-year increase of 57.42%. The high growth in performance was mainly due to the low base affected by the epidemic in the same period last year and the strong downstream demand. The revenue growth rate and net profit attributable to shareholders of both are at a historically high level. The machinery industry began to recover from the end of 2016. Due to objective factors such as the recovery of real estate infrastructure investment after the epidemic was under control, the continued promotion of resumption of work and production in manufacturing, the gradual increase in overseas demand, and the urgent demand for automation such as " machine replacement " caused by the epidemic, the year-on-year growth rate of the machinery and equipment industry revenue has been maintained at more than 20% since the beginning of 20Q2.

Both gross profit margin and net profit margin have declined, and the expense ratio has declined. 21Q2, the overall gross profit margin of 341 listed companies in the machinery industry was 20.7%, down 1.7pct from the same period last year and 0.8pct from 21Q1. In the single quarter of 21Q2, the overall net profit margin of listed companies in the machinery industry was 7.4%, down 0.5pct from the same period last year. In the first half of 2021, the overall gross profit margin of the machinery industry was 21.1%, a slight decrease of 0.9pct from the same period last year, and the overall net profit margin was 7.3%, an increase of 1pct from the same period last year.

The rise in bulk materials poses a challenge to the profitability of enterprises. According to Wind data, taking the price of HRB400 20mm rebar as an example, the price of last year was 3500-4000 yuan/ton, while this year's price continued to remain above 5000 yuan/ton, and once reached 6300 yuan/ton in the first quarter. Similar to steel, bulk raw materials such as aluminum, copper, and coal have experienced different increases. The price adjustment of manufacturing industry is lagging. The price increase of upstream raw materials can only be digested by themselves in a short period of time, so it has formed a certain suppression on the gross profit margin; thanks to the decline in the period fee rate, the decline in net profit margin in 21Q2 was less than the decline in gross profit margin.

21Q2 prepayment growth rate bottomed out and rebounded. As of the first half of 2021, 341 listed companies of machinery had prepaid accounts of 177.88 billion yuan, an increase of 8.3% year-on-year, an increase of 1.78 billion yuan from 21Q1, an increase of 1.78 billion yuan from 21Q1, an increase of 21Q1 (6.9% year-on-year). With the gradual control of the epidemic, the operation of enterprises has gradually returned to normal state, and the growth rate of prepaid accounts is expected to gradually stabilize, reflecting that the overall order trend of the machinery industry remains stable (the new accounting standards began in 19Q3, new "contract liabilities" account was added, so in this article, we will sum "contract liabilities" and "prepaid accounts" as the subsequent "prepaid accounts").

Enterprises continue to invest in innovation, and innovation investment and enterprise revenue generation have gradually entered a virtuous cycle. According to the 341 machinery companies counted, the proportion of R&D expenses in revenue has been increasing in recent years, and the proportion of management expenses after deducting R&D has been declining. In Q21, the R&D expenses of the machinery industry were 18.629 billion yuan, an increase of 23.96% over the previous year, and the proportion of R&D expenses to revenue reached 3.60%, a slight increase of 0.04 pct over the same period last year. In the first half of 2021, the R&D expenses in the machinery industry were 33.58 billion yuan, an increase of 35.25% over the previous year. After a long period of development, the R&D investment in the machinery industry has entered a healthy state, and R&D investment has formed a good cycle with the company's revenue generation; in Q2, the management expenses after deducting R&D expenses were 19.208 billion yuan, an increase of 14.2% year-on-year, accounting for 3.71% of revenue, a decrease of 0.27 pct over the same period last year.

21Q2 prepayment growth rate bottomed out and rebounded. As of the first half of 2021, 341 listed companies of machinery had prepaid accounts of 177.88 billion yuan, an increase of 8.3% year-on-year, an increase of 1.78 billion yuan from 21Q1, an increase of 1.78 billion yuan from 21Q1, an increase of 21Q1 (6.9% year-on-year). With the gradual control of the epidemic, the operation of enterprises has gradually returned to normal state, and the growth rate of prepaid accounts is expected to gradually stabilize, reflecting that the overall order trend of the machinery industry remains stable (the new accounting standards began in 19Q3, new "contract liabilities" account was added, so in this article, we will sum "contract liabilities" and "prepaid accounts" as the subsequent "prepaid accounts").

inventory maintains a high growth rate. As of the first half of 2021, the inventory of 341 listed companies in machinery was 506.41 billion yuan, an increase of 15.9% year-on-year, an increase of 10.16 billion yuan from 21Q1. Since the year-on-year growth rate of inventory bottomed out in 19Q3, it has continued to maintain a growth rate of more than 10%, indicating that the strong downstream demand and also indicating that the entire industry is still in the stage of replenishing inventory.

2. Infrastructure and real estate energy chain

Construction machinery: Medium- and long-term credit supply has slowed down, and the demand for construction machinery is expected to slow down. According to People's Bank of China data, the amount of new RMB medium- and long-term loans added to the enterprise side from April to July 2021 was 6605/6528/8367/4937 billion yuan, respectively, an increase of 19.07%/23.05%/13.87%/-17.28% year-on-year, respectively, a decrease from the high of 1.33 trillion in March 21. As one of the forward-looking indicators of the demand for construction machinery, the growth rate of medium- and long-term loans of enterprises has slowed down, which means that subsequent demand for construction machinery is expected to slow down to a certain extent. According to data from the Engineering Machinery Association, the sales of excavators in 21Q1 were 126,900 units, an increase of 85% year-on-year. The sales of excavators in 21Q2 were 96,900 units, a year-on-year decline of 4.8% and a month-on-month decline of 23.7%. Judging from the latest July data, the sales of excavators in that month were 17,300 units, a year-on-year decline of 9.2% and a month-on-month decline of 24.9%. The issuance of special bonds reserved by many places at the end of the year is expected to provide further support for the demand for construction machinery.

Rail Transit Equipment: The epidemic is effectively controlled and passenger flow is gradually recovering, and railway investment is expected to rebound to normal levels; urban rail construction investment shows accelerated development and broad prospects. In the field of railway investment, according to the National Bureau of Statistics, the national railway fixed asset investment in 21Q1 was 103.3 billion yuan, a year-on-year increase of 29.25%. In the first half of 2021, the national railway fixed asset investment in the first half of 2021 was 362.8 billion yuan, a year-on-year decrease of 7.67%. With the increase in the vaccination rate and the gradual control of the epidemic, railway passenger flow is gradually recovering, and railway fixed asset investment in is expected to recover to a normal level. Currently, the operating mileage of railways in my country is 146,300 kilometers, of which the mileage of high-speed railways reaches 38,000 kilometers. According to the press conference of the National Development and Reform Commission on the "Medium- and Long-term Railway Network Planning", it is expected that by 2025, the scale of the railway network will reach about 175,000 kilometers, of which about 38,000 kilometers of high-speed railways and about 20,000 kilometers of existing lines of ordinary-speed railways will be expanded and renovated; according to the National Railway Administration, by 2035, the scale of the national railway network will reach about 200,000 kilometers, of which about 70,000 kilometers of high-speed railways (including some intercity railways). In the field of urban rail transit, according to , the 14th Five-Year Plan (2021 to 2025), China's urban rail transit operating mileage is expected to increase by 5,000 kilometers, with an average annual increase of about 1,000 kilometers, with a total mileage of 13,000 kilometers. The scale of urban rail investment during the 14th Five-Year Plan is expected to further increase.

Oil and Gas Equipment and Services: In order to hedge against the impact of the epidemic in , countries have launched economic stimulus plans of varying scales. In addition, after the epidemic is gradually controlled, production and life in various countries have gradually returned to normal, international crude oil demand has rebounded, and prices have rebounded accordingly, which is expected to drive the bottoming out of capital expenditure of oil and gas equipment. According to data from the National Bureau of Statistics, the year-on-year growth rate of fixed asset investment in oil and natural gas mining industry from March to July 2021 was -13.80%/-10.70%/-3.90%/-2.10%/-0.40% respectively. The cumulative value growth rate gradually rebounded, which means that the investment in oil and gas equipment has been improving month by month, and the related industrial chain targets are worth paying attention to.

Elevator industry: After the epidemic, the recovery of real estate infrastructure investment has driven industry demand, and the number of new elevator orders has been high, which has promoted the further improvement of the performance and profitability of elevator companies.The country vigorously promoted the renovation of in old communities in to provide support for the subsequent industry prosperity. In June 2021, the output of elevators, escalators and elevators was 148,000 units, an increase of 13.80% year-on-year. In July 2021, the output of elevators, escalators and elevators was 141,000 units, an increase of 15.60% year-on-year, and the year-on-year growth rate remained at a high level.

(I) Construction Machinery: Downstream demand has declined month-on-month, and we look forward to the turning point of profit

We have counted the operating data of 12 listed companies of construction machinery, namely Sany Heavy Industry , Zoomlion Heavy Industry , XCMG Machinery , Liugong , Shantui Shares , Anhui Heli , Construction Machinery, Hengli Hydraulic , Hangzhou Cha Group, Zhejiang Dingli, Eddie Precision , and Nuoli Shares. In 2021Q2, the above 12 companies achieved a total revenue of 111.40 billion yuan, a year-on-year increase of 17.7%; and achieved a total net profit attributable to shareholders of 11.333 billion yuan, a year-on-year decrease of 14.6%. After reaching the high point of 21Q1, the month-on-month growth rate of the construction machinery industry has declined. Against the backdrop of the price increase of upstream raw materials, the industry's profitability has also been challenged to certain extent.

21Q2 The gross profit margin of 12 listed companies in construction machinery was 21.7%, down 4.8pct from the same period last year; while the overall net profit margin level was 10.2%, down 3.8pct from the same period last year. The price increase of upstream bulk raw materials has an adverse impact on the profit level of the company, and the gross profit margin has declined. Benefiting from the high growth in revenue, the scale effect has played a role, the net profit margin has declined, but the decline is smaller than the decline in gross profit margin. In 21Q2, the total operating cash flow of 12 listed companies in engineering machinery was 13.706 billion yuan, a year-on-year decrease of 12.7%. In Q1 last year, due to the impact of the epidemic, many revenues in 20Q1 were confirmed in 20Q2, resulting in a high base of operating cash flow in 20Q2. Overall, the cash flow of the entire industry is in a relatively benign state. Among them, XCMG Machinery's net operating cash flow improved the most significantly in 21Q2, from 38 billion yuan in the same period last year to 180.5 billion yuan this year. Other companies have risen and fallen, and are generally within an acceptable range.

As of 21Q2, the total accounts receivable of 12 listed companies in construction machinery was RMB 124.102 billion, an increase of 18.6% year-on-year, slightly higher than the revenue growth rate of 0.9pct, which is a normal increase as revenue increases. In 21Q2, the total asset impairment losses of 12 listed companies of construction machinery (to ensure comparable, the asset impairment losses here are the sum of the asset impairment loss account and the credit impairment loss account, the same below) was 1.137 billion yuan, a year-on-year decrease of 19.7%. Under the high downstream prosperity, the asset quality of listed companies has improved.

(II) Rail Transit Equipment: Downstream investment is expected to be repaired, and equipment companies are expected to benefit

11 listed companies in the rail transit equipment industry ( China CRRC , Shenzhou High-speed Railway, Dinghan Technology, Yonggui Electrical Appliances, Jinxi Axle, Jinyi Industrial, Huatie Co., Ltd., Jinchuang Group, China Communications Technology, Jiaotong Technology, Tianyi Shangjia) totaled operating income of 69.736 billion yuan, a year-on-year increase of 0.37%; the net profit attributable to shareholders of listed companies was 4.363 billion yuan, a year-on-year decrease of 2.47%. Considering that China CRRC accounts for a high scale of revenue and profit in the industry, we conduct separate analysis of the remaining 10 companies. The remaining 10 companies had revenues of 15.826 billion yuan, a year-on-year increase of 17.5%, and net profit attributable to shareholders of 1.715 billion yuan, a year-on-year increase of 12.2%, mainly because Jinyi Industrial's net profit attributable to shareholders of 10.3 billion yuan in the same period last year, Tianyi Shangjia increased from 1.9 billion yuan in the same period last year to 4.6 billion yuan in the same period last year, and the loss of Shenzhou High-speed Railway decreased significantly, reducing from 18.4 billion yuan in the same period last year to 6.3 billion yuan in the losses of 21Q2, indicating that as the epidemic was initially controlled, passenger flow gradually recovered and the rail transit industry returned to normal. CRRC's operating income in 21Q2 was 51.91 billion yuan, a year-on-year decrease of 3.75%, and its net profit attributable to shareholders was 2.648 billion yuan, a year-on-year decrease of 10.1%. As of July 2021, the national railway fixed asset investment completed (cumulative value) was 362.83 billion yuan, a year-on-year decrease of about 7.67%.

21Q2 The overall gross profit margin of 10 rail transit equipment companies was 24.7%, down 0.9pct from the same period last year; the overall net profit margin was 10.8%, down 0.5pct from the same period last year.As of Q2 21, the total accounts receivable of 10 listed rail transit equipment companies was 29.731 billion yuan, a year-on-year increase of 4.8%; the total prepayments were 1.49 billion yuan, a year-on-year increase of 22.0%.

(III) Oil and gas equipment and services: Oil prices rise, driving capital expenditures to gradually recover

We selected 6 representative oil and gas equipment manufacturers and service providers ( Jerry Co., Ltd. , Furuite Equipment , Shenkai Co., Ltd. , Heimer Technology, Huibopu , Hengtai Aip) for analysis. In 21Q2, the total revenue of 6 oil and gas equipment and services enterprises was 3.528 billion yuan, an increase of 13.5% year-on-year; the net profit attributable to shareholders was 540 million yuan, an increase of 39.9% year-on-year, indicating that as oil prices rebound, capital expenditures in the oil and gas industry are gradually recovering. According to data from the National Bureau of Statistics, the year-on-year growth rate of fixed asset investment in the oil and natural gas mining industry from March to July 2021 was -13.80%/-10.70%/-3.90%/-2.10%/-0.40% respectively. The cumulative value growth rate gradually rebounded, which means that the investment in oil and gas equipment has been improving month by month.

According to the 2020 annual reports released by downstream Sinopec , CNOOC and CNOOC , the total planned capital expenditure of " three barrels of oil " in 21 years increased by 8.70% year-on-year. 20 capital expenditure only increased slightly, with total capital expenditure of 461.1 billion yuan, a year-on-year decrease of 11.74%. In 21 years, only CNPC's capital expenditure decreased, with a total planned capital expenditure of 501.2 billion yuan (CNOOC average), an increase of 8.70% year-on-year, of which the capital expenditure of the exploration, development and production sector was 335.1 billion yuan, an increase of 3.63% year-on-year.

(I) Manufacturing investment from a micro perspective: capital expenditure has declined, but it is still at a high level

(IV) Elevator industry: industry demand has grown steadily, and the prosperity is still

0 We selected Shanghai Mechanical and Electrical , another foreign-funded elevator company, Kangli Elevator, and Yuanda Intelligence as representative companies for financial analysis. The total revenue in 21Q2 was 10.51 billion yuan, a year-on-year growth decline of 6.3%, mainly due to the revenue of Shanghai Electric 21Q2 of , a year-on-year decline of 14.3%, and the other three companies maintained a year-on-year growth of about 10%. The above four companies had a total net profit attributable to shareholders of 825 million yuan in 20Q3, a year-on-year decrease of 11.3%, of which Shanghai Mechanical and Electrical's net profit attributable to shareholders of 376 million yuan in 21Q2, a year-on-year decrease of 24.5%.

The four listed companies in the elevator industry in 21Q2 were 17.2%, down 1.2pct from the same period last year; the overall net profit margin was 7.8%, down 0.4pct from the same period last year. The recovery of real estate infrastructure investment after the epidemic has driven industry demand. In July 2021, the output of elevators, escalators and elevators was 141,000 units, an increase of 15.6% year-on-year. The year-on-year growth rate in the first half of this year remained above 10%, and the elevator industry maintained a continuous expansion.

General equipment fields: including general automation, general machinery and components. As profits in downstream investment fields represented by 3C and automobiles continue to improve, overall investment in manufacturing has entered an upward channel for prosperity. According to data from the National Bureau of Statistics, my country's industrial robot output in 2020 was 237,100 units, a year-on-year increase of 19.1%; the cumulative production of industrial robots in the first half of 2021 was 173,600 units, a year-on-year increase of 69.8%; the production of industrial robots in July 2021 was 31,000 units, a year-on-year increase of 42.30%, maintaining a relatively high growth rate.

With the continuous increase in labor costs and the increase in demand for automation caused by the epidemic, the general automation represented by industrial robots, forklifts, injection molding machines, and lasers remain at a high level. Although medium- and long-term loans on the enterprise side have declined, the general trend of artificial growth will not change, and the medium- and long-term automation demand is guaranteed.

(I) Manufacturing investment from a micro perspective: capital expenditure has declined, but it is still at a high level

According to data from the National Bureau of Statistics, as of the first half of 2021, the completion amount of fixed asset investment in manufacturing (cumulative value) increased by 19.2% year-on-year. As of the latest July, the completion amount of fixed asset investment in manufacturing (cumulative value) increased by 17.3% year-on-year.We have counted the investment situation of 1,325 listed manufacturing companies listed before 2011. The cash paid by fixed assets, intangible assets and other long-term assets of listed companies is used as micro data for downstream fixed asset investment. The results show that since 19Q4, manufacturing investment has entered the recovery stage. The year-on-year growth rate of fixed asset investment in a single quarter turned from negative to positive, ending the continued downward trend of the previous four quarters. In the early 2020, the pace of recovery was disrupted due to the epidemic, but with the continued smooth progress of resumption of work and production in 20Q2, manufacturing investment resumed its recovery pace. Until 21Q2, the growth rate declined, but the year-on-year growth rate was still at a relatively high level. According to Wind data, the total cash paid for the purchase of fixed assets, intangible assets and other long-term assets in Q2 21 was 257.06 billion yuan, a year-on-year increase of 7.3%, a slight decline compared with 268.41 billion yuan in Q1 21, and is still at a relatively high level compared with history.

The strong recovery of consumer goods industry investment represented by 3C and the automotive industry is the main feature of this round of manufacturing investment recovery. The reason behind is the increase in per capita income level, and the demand for consumer goods continues to upgrade, ensuring the profitability of downstream industries. Investment supported by profits is more conducive to forming a virtuous cycle of investment and income generation, and is more sustainable. In the first half of 2021, the total profit of the automobile manufacturing industry was 287.68 billion yuan, a year-on-year increase of 45.2%, continuing the profit improvement trend since 2020. As of July 2021, the total profit of the automobile manufacturing industry (cumulative value) was 322.11 billion yuan, a year-on-year increase of 19.7%, and the profit situation continued to improve. In the first half of 2021, the total profit of the computer, communications and other electronic equipment manufacturing industry was 345.16 billion yuan, a year-on-year increase of 45.2%. As of July 2021, the total profit of the computer, communications and other electronic equipment manufacturing industry (cumulative value) was 413.86 billion yuan, a year-on-year increase of 43.2%. In the first half of 2021, the year-on-year growth rate of more than 40%, showing the high prosperity of the 3C industry. Judging from the capital expenditure of listed companies in the consumer goods industry, the investment in the consumer goods industry in 21Q2 was 115.34 billion yuan, with a year-on-year growth rate of 12.2%. In recent years, the trend of consumption upgrading has been obvious, and the demand for upgrading and transformation of new production lines and old production lines has been strong, ensuring the sustainability of investment in the consumer goods industry.

(II) Industrial Automation: The trend of "machine replacement" remains unchanged, and profits are expected to improve

We have counted 9 representative intelligent manufacturing companies, namely Green Harmonic, Yiheda , Huichuan Technology , Guomao Co., Ltd., Eston , Kerui Technology, Ruike Laser, Robot, Boshi Co., Ltd. . In 21Q2, the 9 companies in industrial automation have a total revenue of 10.202 billion yuan. Yuan, a year-on-year increase of 33.2%. The investment in consumer goods industry represented by new energy, photovoltaics, 3C and automobile industries maintained a recovery trend, effectively boosting the demand of industrial automation enterprises; during the same period, the total net profit attributable to shareholders of 9 industrial automation enterprises was 1.432 billion yuan, a year-on-year increase of 13.4%. The growth rate of net profit attributable to shareholders was slower than the growth rate of revenue. There are two main reasons. One is that robots lost 174 million yuan in 21Q2 and made a profit of 89 million yuan in the same period last year. The other is that the prices of upstream raw materials increased, and the price increase in manufacturing industry has a time lag, and corporate profits are under pressure. It is worth noting that Ruike Laser's profit in 21Q2 reached 150 million yuan, an increase of 168.1% year-on-year. With the further reshuffle of the industry by the laser industry's price war, the company's profit is expected to be further restored; Green Harmonic 21Q2 net profit attributable to shareholders reached 47 million yuan, an increase of 149.6% year-on-year. With the gradual release of production capacity, performance is expected to usher in a period of explosive growth. In the post-epidemic era, the increase in labor costs and the intensification of aging have led to the increasing frequency of labor difficulties in various regions. Under the "scissors gap" formed by rising labor costs and falling robot manufacturing costs, the investment payback period of robots will be further shortened, which will help the robot industry to achieve labor substitution. Enterprises also have internal motivation to improve management and production efficiency. The trend of rising labor costs will not change, and the demand for automation will be guaranteed.

Overall, the gross profit margin of 9 companies in 20Q2 was 33.5%, down 3.9pct from the same period last year, mainly due to the increase in prices of upstream bulk raw materials, as well as the adverse impact of the obstruction of sea freight and the increase in freight fees caused by the epidemic on individual companies. The net profit margin of 9 companies was 14.0%, down 2.4pct from the same period last year.

(III) Pump and valve and compressor : The internalization is large, and the product layout determines profitability

Pump and valve and compressor are representative products in the field of general machinery and equipment. We selected 8 related listed companies (Hanzhong Precision Machinery, Boss Co., Ltd., Kaishan Co., Ltd., Yantai Binglun Co., Ltd., Dalian Co., Ltd., Dalian Co., Ltd., Shaanxi Gu Power , Newway Co., Ltd., etc.) for analysis. The above-mentioned eight companies achieved revenue of 8.698 billion yuan in 21Q2, a year-on-year increase of 26.6%; net profit attributable to shareholders was 833 million yuan, a year-on-year increase of 6.5%. The demand for vacuum products in the semiconductor, photovoltaic and lithium batteries is highly prosperous, and has become an important growth point for enterprises. Among them, Hanzhong Precision Machinery, whose main business is vacuum pump , benefited from the large-scale expansion of the photovoltaic industry. In 21Q2, it achieved revenue of 749 million yuan, a year-on-year increase of 35%, and its net profit attributable to shareholders was 124 million yuan, a year-on-year increase of 40%, faster than the revenue growth rate; the other is Shaanxi Gu Power, which focuses on the distributed energy market, benefiting from the industrial recovery and the increase in downstream orders, and achieved revenue of 2.812 billion yuan, a year-on-year increase of 32%, and its net profit attributable to shareholders was 278 million yuan, a year-on-year increase of 36%, and its net profit attributable to shareholders was faster than the revenue growth rate. In the 21Q2 sample, the company's operating income in the sample achieved a double-digit growth of more than two digits, except for Boss Co., Ltd., but due to the focus of product structure and downstream application fields, the profit situation has a large differentiation. The growth rate of net profit attributable to shareholders of DaLeng Co., Ltd., Yantai Binglun, Snowman Co., Ltd., and Newway Co., Ltd. was negative, and the net profit attributable to shareholders of Hanzhong Precision Machinery, Shaanxi Gu Power, Kaishan Co., Ltd. and Boss Co., Ltd. achieved a positive growth rate.

raw material price fluctuations have an impact on the profitability of machinery enterprises;

(IV) Photovoltaic equipment: The downstream high prosperity continues, and the performance continues to hit a new high

Photovoltaic industry is divided into upstream silicon wafer , midstream battery cell , downstream component production and other links. In this field, we have selected 4 listed companies (Jiejia Weichuang, Jingsheng Mechanical and Electrical , Maiwei Co., Ltd., and Shangji CNC) for analysis. After the epidemic this year, the photovoltaic industry has improved overall, and equipment manufacturers have generous orders. The above four companies achieved revenue of 5.407 billion yuan in 21Q2, a year-on-year increase of 62.41%; net profit attributable to shareholders was 1.232 billion yuan, a year-on-year increase of 138%; gross profit margin was 32.5%, a year-on-year increase of 5.6pct; net profit margin was 22.8%, a year-on-year increase of 7.2pct. Against the backdrop of " carbon neutral ", with the continuous advancement of technology, the cost-effectiveness of photovoltaic power generation has gradually improved, and parity access to the Internet has been achieved across the country, with high certainty of downstream demand. Therefore, all links of the photovoltaic industry chain have ushered in production expansion to varying extents. Expansion of production first provides broad demand for photovoltaic equipment. At the same time, equipment companies are of great significance to improving efficiency. Downstream technology iteration will significantly increase the need for updating the equipment side.

As of the end of 21Q2, the inventory of four photovoltaic equipment companies was 13.341 billion yuan, an increase of 89.08% year-on-year; prepayments were 10.224 billion yuan, an increase of 74.60% year-on-year, indicating that the photovoltaic equipment industry companies have rich orders in hand, providing support for subsequent performance. Especially Jingsheng Mechanical and On-chip CNC, which is in the silicon wafer link, Jingsheng Mechanical and On-chip CNC, the inventory of Jingsheng Mechanical and On-chip CNC at the end of 21Q2 was 4.023 billion yuan, an increase of 153% year-on-year, and On-chip CNC at the end of 21Q2 was 1.761 billion yuan, an increase of 344% year-on-year. The photovoltaic industry is currently undergoing a period of technological iteration and the downstream is actively expanding production, and photovoltaic equipment companies are fully benefiting. After achieving technological breakthroughs in the silicon wafer link, it ushered in a significant expansion plan. According to our statistics, the expansion scale of the silicon wafer link is expected to exceed 300GW in 21-22; in the battery cell link, HJT (heterojunction) technology continues to make breakthroughs, and orders of more than 10GW are expected to be implemented in 21 years. With the progress of cost reduction and efficiency improvement, the nodes of large-scale investment in HJT are approaching.

(V) Lithium battery equipment: It has entered a new cycle of production expansion, and orders have maintained a high growth rate

We have selected 5 lithium battery automation companies ( Pioneer Intelligent , Yinghe Technology, Jinxia, ​​ Nebula Co., Ltd. , Hangke Technology ) for analysis. In 21Q2, the five lithium battery equipment companies achieved operating income of 4.51 billion yuan, an increase of 86.16% year-on-year; and achieved net profit attributable to shareholders of 515 million yuan, an increase of 16.47% year-on-year. The growth rate of net profit was slower than the growth rate of revenue, mainly dragged down by the decline in net profit margins of Yinghe Technology, Hangke Technology and Xingyun Co., Ltd.In the post-epidemic era, the transformation of global economy has promoted the increase in the supply side of lithium batteries. In addition, the wave of automobile electrification has spawned the outbreak of demand side. The world is about to usher in a new round of new energy industry expansion cycle. Represented by CATL , a private placement of 58 billion yuan launched by CATL 21, the lithium battery equipment industry, as the upstream of the industrial chain, is expected to fully benefit from this round of lithium battery expansion cycle.

China's lithium battery equipment companies usher in an opportunity. After years of development, Chinese lithium battery equipment companies have gradually surpassed Japanese and Korean equipment companies in many aspects such as technology, efficiency, and stability, and have entered the international market with their mature domestic production capacity experience. To accelerate electrification in the European automobile industry, three types of battery companies, including Japan, South Korea, China, and Europe, are working together. We believe that the current situation is at the moment when a new round of prosperity is approaching, and domestic companies are expected to make more preparations in product technology and comprehensive services, and then go into battle with lighter equipment. In 21Q2, the overall gross profit margin of the five lithium battery equipment companies was 30.81%, a year-on-year decrease of 14.6pct; the net profit margin was 11.42%, a year-on-year decrease of 6.8pct. The scale of downstream lithium battery companies has a large scale of expansion. In order to welcome the upcoming peak production expansion period, major equipment companies have made advance reserves in raw materials, equipment, employees, etc. As the downstream production expansion progresses, the capacity utilization rate has increased, the cost and expense rate have a large room for compression, and profits have a certain room for elasticity. As of 21Q2, the inventory of five lithium battery equipment companies was 9.605 billion yuan, a year-on-year increase of 113%; the scale of prepayments reached 4.627 billion yuan, a year-on-year increase of 96.26%, indicating that the industry's prosperity has accelerated and various companies have seized development opportunities. The subsequent performance has been strongly supported. Among them, the year-on-year growth rate of Pioneer Intelligent, Yinghe Technology, and Jinxiao's inventory was above 100%, Pioneer Intelligent inventory was 5.931 billion yuan, a year-on-year increase of 124%, Yinghe Technology's inventory was 2.138 billion yuan, a year-on-year increase of 167%, and Jinxiao's inventory was 239 million yuan, a year-on-year increase of 159%.

(VI) Semiconductor Equipment: High prosperity and domestic substitution, the future is expected

For the semiconductor equipment sector, we selected 5 representative companies to analyze, including Northern Huachuang , Huafeng Measurement and Control, Zhichun Technology, China Micro Company and Changchuan Technology . 21Q2 Semiconductor Equipment 5 companies have a total revenue of 4.197 billion yuan, a year-on-year increase of 66.7%; a total net profit attributable to shareholders was 739 million yuan, a year-on-year increase of 99.0%. The semiconductor equipment industry continues to have a high prosperity, and revenue and profits are growing. Although the external environment has had a certain impact on the industrial chain in 2020, with the continuous progress of domestic semiconductor equipment manufacturers, the products have withstood the harsh acceptance process of downstream customers, and the revenue and profits have gradually been realized. Combined with the huge scale of the semiconductor market and the low domestic production rate, domestic semiconductor equipment manufacturers have a promising future.

21Q2Semiconductor Equipment 's gross profit margin is 44.6%, an increase of 6.6pct over the same period last year; net profit margin is 17.6%, an increase of 2.9pct over the same period last year. Downstream demand and scale effect are superimposed, gross profit margin and net profit margin continue to improve, and semiconductor equipment manufacturers usher in a stage of increasing volume and profit margin. As of the end of 21Q2, the total prepayment of 5 enterprises was 5.56 billion yuan, an increase of 68.6% year-on-year; accounts receivable were 4.416 billion yuan, an increase of 11.8% year-on-year, indicating the high prosperity of the downstream and the short-term performance is guaranteed.

(VII) Marine Equipment: The tension in maritime transportation remains, and marine equipment ushers in an outbreak

We will collectively call marine equipment such as shipbuilding, port machinery, containers, and marine engineering fields engaged in marine transportation. The demand is mainly affected by changes in global macroeconomics and international trade. Due to the global maritime transportation capacity tightened due to the epidemic, marine equipment is expected to usher in a wave of outbreak. We selected 8 listed companies including CIMC Group , China Shipbuilding , CIMC Defense, China Heavy Industry, Asia Star Anchor Chain, Runbang Shares, Zhenhua Heavy Industry , and Sunbird as representative companies for financial analysis. The total operating income of the eight listed companies of Marine Equipment in 21Q2 was 80.997 billion yuan, a year-on-year increase of 39.5%; the net profit attributable to shareholders was 3.075 billion yuan, a year-on-year increase of 389.6%. The company's net profit margin reached 3.8%, an increase of 2.7pct year-on-year. It is worth noting that CIMC Group achieved a net profit attributable to shareholders of 2.79 billion yuan in 21Q2, contributing 90% of the net profit attributable to shareholders of 8 marine equipment companies, an increase of 508% year-on-year.With the surge in import demand after the lifting of the epidemic in Europe and the United States, China's exports continue to improve, and sea freight has shown a "hard to find a box" of transportation. In the first half of 2021, CIMC Group achieved a total sales volume of dry goods containers and refrigerated containers of 1.24 million TEU, a year-on-year increase of 201%, and the gross profit margin during the same period was 16.59%, an increase of 9.38pct over the first half of 2020, ushering in a stage of both volume and profit. At present, maritime capacity is still tight, and the company's high container business is expected to continue.

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