1、Jamie Cook,CFA Themis DavrisKevin WilsonAlexander Khan Research Analyst Research AnalystResearch Analyst Research Analyst 212-538-6098+44 207 888 1060 212-325-5079 212-325- DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AN
2、D THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this
3、 report as only a single factor in making their investment decision.WHATS COOKININ MACHINERY AND ENGINEERING&CONSTRUCTIONYOU SAY YOU WANT A RESOLUTIONCATALYST WATCH4/9WASDE4/9DCI Investor Day4/9-10(est.)US Tractor Data4/9-10(est.)German Tractor Data 4/9-10(est.)DE Retail Sales4/10EIA Petroleum Statu
4、s Report4/12Baker Hughes Rig CountWHATS HOT AND WHATS NOTMachinery:The Machinery group outperformed this week with GTES and URI leading the way,helped by optimism on China trade war resolution.China PMIs also surprised on the upside for the month of March with the index rising to 50.5 compared to 49
5、.2 in February.Sentiment on shorter cycle names like Parker Hannifin is improving,reflecting confidence increases that industrial production momentum should improve in the back half of 2019 coupled with what is viewed as a conservative guide.News flow on truck was mixed.Class 8 truck orders for Marc
6、h came in at 15.7K units,largely in line with expectations,although a 66%decline from the prior year.The significant decline in orders as compared to the prior year has been largely anticipated,while freight growth has been slowing(however still growing),and OEs are full through year-end.Overseas,tr
7、uck sales surprised positively with China heavy truck sales volume in March up 4%YoY and Brazil semi-heavy and heavy increased 38%in March on difficult comparisons.Shifting to Farm Equipment,Brazil Tractors jumped 57%and combines rose 42%in March.While smaller tractors drove most of the increase,up
8、110%,larger tractors were also solid,up 10%,and combines were very healthy.Finally CAT received another downgrade this week,although the stock remained resilient.We believe concerns NA construction is rolling are overdone based on our more constructive stance on energy infrastructure projects moving
9、 ahead in particular LNG and petrochemical coupled with potential upside from China.Furthermore,commodities like oil and copper are on the rise,a leading indicator for CATs end markets.We also think potential structural higher cash flow this cycle and answers on capital allocation and the likelihood
10、 of a margin target increase at CATs analyst day in May provide another leg to the story.Engineering&Construction:The oil-driven names outperformed this week with MDR and FLR both up,leading the group.Bottom line,momentum on LNG FIDs moving forward continues to build.MDR was helped on news flow that
11、 Anadarko was very close on the final investment decision on Mozambique LNG which is expected by the second quarter.This would serve as a positive catalyst for MDR,diversifying away from problem projects Cameron and to a lesser Freeport and reiterating the view customers do not view MDRs balance she
12、et as an issue.Additionally,COEEC was awarded a contract to fabricate 19 modules for LNG Canada.There was also positive news on Goldboro LNG,which is expected to start construction in 2019,and Nigeria train 7 is expected to move forward in October with KBR viewed as front runner on both.Finally on t
13、he pipeline side,President Trump is looking to remove hurdles on construction of TransCanada Corp.s Keystone XL pipeline,issuing a permit that allows the project to move ahead without federal environmental review.This would be viewed as a positive for PWR.4/5/2019MACROTrump says U.S.-China trade dea
14、l may be reached in four weeks:Per Reuters:U.S.President Donald Trump said on Thursday the United States and China were close to a trade deal that could be announced within four weeks,while warning Beijing that it would be difficult to allow trade to continue without a pact.The two countries are eng
15、aged in intense negotiations to end a months-long trade war that has rattled global markets,but hopes of a resolution rose after both sides expressed optimism following talks in Beijing last week.Speaking to reporters at the White House at the start of a meeting with Chinese Vice Premier Liu He,Trum
16、p said some of the tougher points of a deal had been agreed but there were still differences to be bridged.“Were getting very close to making a deal.That doesnt mean a deal is made,because its not,but were certainly getting a lot closer,”Trump said in the Oval Office.“And I would think with,oh,withi
17、n the next four weeks or maybe less,maybe more,whatever it takes,something very monumental could be announced.”Trump said he would hold a summit with Chinese President Xi Jinping if there were a deal.Xi assured Trump that text of the China-U.S.trade could be finalised soon,in a message conveyed by L
18、iu He.According to state-run news agency Xinhua,Liu He told Trump that Xi believed under his and Trumps leadership,China-U.S.relations will make new and greater progress.Xi said that in the past month or more,the two sides trade teams had maintained close contact and“achieved new and substantive pro
19、gress on issues in the text of two countries trade agreement.”“I hope the two sides trade teams can continue working in the spirit of mutual respect,equality,and mutual benefit to resolve each others concerns,and finish negotiations on the text of the China-U.S.trade agreement soon,”Xi said to Trump
20、 through Liu.China Manufacturing Gauge Hits Six-Month High:Per The Wall Street Journal:An official gauge of activity in Chinas crucial manufacturing sector rebounded strongly in March,suggesting that Beijings support policies are gaining traction.Factories showed a pickup in activity almost across t
21、he board,from new orders to production,according to the official purchasing managers index released Sunday.The index rose to a six-month high of 50.5 in March from 49.2 in February,well above the forecasts of many economists.While economic activity typically picks up in March and April after the lon
22、g Lunar New Year holiday,some economists said the strong and broad rebound this March suggests the governments efforts to boost lending,cut taxes and provide other stimulus measures are taking effect.“Its beyond seasonal,”said Shuang Ding,an economist at Standard Chartered.“Such strong readings refl
23、ect both seasonal effects and support measures.”The worlds second-largest economy slowed markedly in the middle of last year,as a government campaign to curb risky lending and uncertainties about trade friction with the U.S.hit confidence.Chinas gross domestic product grew 6.4%in the fourth quarter
24、from a year earlier,the slowest quarterly expansion in nearly a decade.A turnaround hasnt taken root,economists said,noting that economic activity in January and February was dismal and that China and the U.S.have yet to resolve their trade fight.David Lipton,the International Monetary Funds first d
25、eputy managing director,said last week that trade tensions between the two biggest economies“pose the largest risk to global stability.”As a result of Beijings recent measures,economic growth isnt likely to slow sharply in the first quarter and will probably maintain the same pace as the fourth quar
26、ter,said Wen Tao,an analyst at China Federation of Logistics&Purchasing,which issues the data together with the National Bureau of Statistics.The purchasing managers index is based on replies to monthly questionnaires sent to purchasing executives at 3,000 companies in 31 manufacturing sectors.In th
27、e March index,a subindex for production rose to 52.7well above the 50 mark that separates expansion from contractionand up from 49.5 in February.The new orders subindex climbed to 51.6 from 50.6.A new exports subindex,an indicator of external demand for Chinese goods,rose to 47.1 from 45.2,although
28、still showing contraction.A separate official purchasing managers index for nonmanufacturing businesses edged up to 54.8 in March from 54.3 in February,as construction activities accelerated.To arrest the slowdown,policy makers urged banks to lend more,especially to small and private companies,boost
29、ed spending on infrastructure and promised 2 trillion yuan($298 billion)in cuts to taxes and fees on businesses and households.First-quarter reports of company borrowing matched the highest level since mid-2013,while loan applications rose and rejection rates plummeted,according to a survey of busin
30、esses in China issued by consulting firm China Beige Book.The report noted headwinds to continued growth,pointing to deflationary pressure in manufacturing and commodities.Marchs factory activity data“doesnt necessarily mean a stabilization in economic growth,but at least the pace of slowdown seemed
31、 to have been arrested,”said Yang Weixiao,an economist at Founder Securities.He and Standard Chartereds Mr.Ding think the recent exports slump and softening home sales likely knocked economic growth 4/5/2019down a notch to 6.3%in the first quarter.Mr.Ding said Beijings continued policy support shoul
32、d result in a more pronounced pickup in the second half of the year.MACHINERY/MULTI-INDUSTRYZoomlion Heavy Industry In line with preliminary results;strongest OpCF in its history:CS analyst Zhao Zhang published the following in a note:Mixed gross margin largely expanded by 6.2 pp to 27.1%.OpCF regis
33、tered larger inflow of Rmb4,717 mn compared to Rmb2,453 mn in 2017,and reached the highest level in its history.Dividend of Rmb0.25 per share was proposed,implying a 96.1%payout ratio.Management remains optimistic on 2019 outlook,driven by replacement demand,emission standard upgrade and strong infr
34、astructure FAI.It expects higher than 20%sales growth for all product segments and continued margin expansion.We raise 2019/20E earnings by 31%/32%,given(1)higher than our expected 2018 earnings;(2)lower SG&A expenses.We revise H/A TP to HK$4.85/Rmb4.27(from HK$4.03/Rmb3.53).Maintain OUTPERFORM rati
35、ng on Zoomlion-H and NEUTRAL on Zoomlion-A,respectively.Introduce our 2021E EPS of Rmb0.42.(Link to Note)Oshkosh Corporation Appoints John C.Pfeifer as Executive Vice President and Chief Operating Officer:Oshkosh announced the following in a press release on Thursday:Oshkosh Corporation(NYSE:OSK),a
36、leading designer and manufacturer of specialty vehicles,vehicle bodies and access equipment,today announced it has appointed John C.Pfeifer as Executive Vice President and Chief Operating Officer,a newly created role,effective May 1,2019.Pfeifer brings to Oshkosh more than 25 years of senior leaders
37、hip and management experience,most recently serving as President of Mercury Marine,a division of Brunswick Corporation.He will be responsible for Oshkoshs commercial business portfolio,including the access equipment,fire&emergency and commercial segments and will play a vital role in shaping and exe
38、cuting the Companys business strategy.Pfeifer will report to Wilson R.Jones,President and Chief Executive Officer.“We welcome John to the Oshkosh team and are pleased to have an executive of his caliber in this important role,”said Jones.“John is a proven leader with a history of delivering sustaine
39、d operational and financial performance.We look forward to benefitting from his expertise and experience.”“I am excited to take on this new role to help advance Oshkoshs key strategic initiatives and to support Oshkoshs global operations,”said Pfeifer.“I look forward to working closely with Wilson a
40、nd the entire team to build on Oshkoshs momentum and positive culture as we position the Company for continued success and value creation.”Pfeifer brings to Oshkosh a wealth of global leadership and general management experience with a track record of delivering sustained improvement in sales and ea
41、rnings growth as well as operating performance.For the past five years,he led Mercury Marine,the world leader in marine propulsion systems,to significant sales and operating margin growth.Under his leadership,Mercury has been recognized with numerous awards for innovation,sustainability,and manufact
42、uring and was in the top 100 on the Forbes list of“Americas Best Employers.”Prior to joining Brunswick,Pfeifer held executive positions with ITT Corporation,first as Executive Vice President and General Manager of ITTs joint venture with Sanoh Industrial,supplying fuel and fluid handling systems to
43、the Japanese automotive industry.Subsequently,he served in various general management roles in ITTs Electronic Components division.Pfeifer earned both a bachelors degree in economics and a bachelors degree in Japanese language from the University of Michigan,Ann Arbor.Komatsu Monthly Demand Update:P
44、er Komatsu,China excavators were up 35%in February,consistent with the Hitachi data point.Komatsu Monthly KOMTRAX Data:Komatsu released monthly KOMTRAX data,showing NA up 3.4%,Europe up 4.8%,China up 6.5%,and Japan down 7.2%.AG EQUIPMENTBrazil Tractor Data:Brazil Tractors up 57%in March on easy comp
45、s,combines up 42%.Our Take:Positive data point.While smaller tractors drove most of the increase,up 110%,larger tractors were also solid,up 10%,and combines were very healthy.TRUCKS/TRANSPORTSNA March Truck Orders Brake Lights Ahead:Heavy Duty Orders Fall in March:Class 8 orders for March came in at
46、 15.7K units,largely in line with expectations.This represents a 6.7%sequential decrease and a 66%decline from the prior year.On a seasonally adjusted basis,orders were slightly higher at 16K units.The significant decline in orders as compared to the prior year has been largely anticipated,while fre
47、ight growth has been slowing(however still growing),and OEs are full through year-end.Looking ahead,orders are unlikely to materially change in the coming 4/5/2019months,as backlogs are largely full.As freight/rates continue to soften,orders should remain in the mid-teens range.Additionally,per ACT,
48、the Class 8 backlog is likely to have fallen by 14.7K units(data to be released mid-month).Finally,ACT will release Class 5-7 orders separately(awaiting data from one OEM).(Link to Note)China Heavy Duty Truck Sector March heavy truck sales up 4%YoY due to front-loading demand for LNG truck:CS analys
49、t Wei Fang published the following in a note:Above market expectation,Chinas heavy truck sales volume in March increased by 4%YoY to 144k units,according to CV Worlds media report.Upward surprise mainly comes from the front-loading demand for China 5 LNG truck(estimated at 10k units per month),befor
50、e the implementation of China 6 on LNG trucks from 1 July 2020.The outperformance of Shaanxi Auto(+22%YoY,versus sectors+4%YoY)also proves strong LNG truck demand,as the company owns the largest market share in LNG truck products thanks to relatively lower gas price in Shaanxi region.Considering the