The sales of excavators in June were -24% year-on-year, and the leading performance is expected to stabilize and rebound. In June 2023, the sales of excavators (including exports) totaled 15766 units, a year-on-year decrease of 24%, including 6098 units in China, a year-on-year decrease of 44.7%; Export 9668 units, a year-on-year decrease of 0.68%. From January to June 2023, there were 108818 domestic excavators, a year-on-year decrease of 24%; Among them, 51031 units were domestically produced, a year-on-year decrease of 44%; Export 57787 units, a year-on-year increase of 11.2%. Due to the tight funding of downstream projects, the domestic sales of construction machinery continued to decline significantly in June. In May 2023, the newly constructed area of houses decreased by 27% year-on-year, and the completed amount of real estate investment decreased by 22% year-on-year. The heat of real estate construction has not recovered. The completed amount of infrastructure investment is 2 trillion yuan, an increase of 11% year-on-year, maintaining a relatively high growth rate. The year-on-year negative growth in export sales of excavators in June is mainly due to the decline in export share of foreign brands, and the higher export growth rate of domestic brands compared to the industry. Considering that other models such as cranes and concrete machinery have performed better than excavators this year, the sales structure of major excavators in China has improved, the export profit margin is higher than that in China, and the prices of raw materials such as steel have significantly declined. Against this backdrop, we judge that the profit growth rate of construction machinery leaders is higher than the revenue growth rate, and we are optimistic that the performance will stabilize and rebound from the second quarter onwards.

The marginal improvement of real estate in North America combined with changes in exchange rates and sea freight rates is beneficial for export-oriented enterprises. In 2022, the year-on-year growth rate of export sales in the excavator industry reached 60%, and the proportion of total sales jumped to 42%, mainly benefiting from the recovery of overseas construction machinery and the realization of the leading global Alpha. Looking forward to 2023, Sany Heavy Industry's overseas revenue share is expected to exceed 50%, XCMG is expected to account for about 40%, Zoomlion is expected to account for about 30%, and the growth rate of export revenue is expected to maintain 30%, with exports becoming the main driving force for performance. Benchmarking overseas leaders Caterpillar and Komatsu, globalization is expected to contribute to performance growth, flatten cyclical fluctuations, and engineering machinery leaders are expected to face upward valuation. Data on new home construction and sales in North America in June showed signs of a bottom recovery in real estate. According to data from the National Association of Home Builders, the NAHB real estate market index in the United States was 55 in June, marking the sixth consecutive month of marginal upward trend, reaching a new high since July 2022; According to data from the United States Department of Commerce, the annual total number of new housing starts in the US in May was 1.631 million, higher than the 1.4 million expected by the market. We believe that against the backdrop of marginal improvement in sales and construction of US real estate data, the export demand of the construction machinery sector is expected to improve marginally. Coupled with changes in exchange rates and a decrease in sea freight costs, profit margins are expected to increase.