Construction machinery giant Caterpillar enters domestic coal market

On November 10th, Caterpillar, the world's largest builder and mining equipment manufacturer that had been tangled with Xugong for many years in the excavator business, announced that it will acquire electric coal and electromechanical devices listed in Hong Kong for no more than HK$6.89 billion. The focus of development in the next few years turned to the domestic coal market.

Before Caterpillar's acquisition, JOY, another global giant in mining equipment, signed an acquisition agreement with international coal producer TJCC in July 2011 at HK$8.50 per share (closer to last trading day's closing price). A 30% premium on the acquisition of the latter's 41% stake in International Coal Machines at a consideration of HK$4.55 billion, and the completion of all acquisitions is expected to require HK$11.05 billion.

Some market participants believe that these two acquisitions have occurred one after another, indicating that the world’s two largest mining equipment giants will accelerate the development of China’s coal machinery market, and in particular, strengthen its relatively weak underground well-mechanized mining equipment. In recent years, except for a few high-end shearers, the domestic coal mine machine products have basically achieved localization. This year, foreign giants re-enter China's underground coal market through acquisitions, especially the hydraulic support market, and their synergistic effects deserve attention.

Addition, Modification, Mechanization: Three Drivers of Demand

The coal machine in the broad sense can be divided into open-pit mining equipment and underground mining equipment according to the coal mining method. The open-pit mining equipment includes mining heavy-duty trucks, dump trucks, scrapers and excavators, etc. The underground mining equipment is mainly based on the mining sequence. Divided into exploration equipment, comprehensive mining equipment, lifting equipment, washing equipment, coal safety equipment and other equipment.

The coal machine in the narrow sense refers to coal comprehensive mining equipment, including roadheaders, coal cutters, scraper conveyors, and hydraulic supports, collectively referred to as “three machines and one aircraft.” The boring machine is mainly used for digging various roadways in coal mines; the coal mining machine is used for coal falling and coal loading in the coal mining face; the scraper conveyor is used for coal transportation in the coal mining face of the coal mine, and is also a coal mining machine. The walking track; hydraulic support for the payment and control of the top board of the fully mechanized mining face and the walking of the working surface equipment. Three aircraft and one aircraft accounted for more than 75% of the total output value of the coal machinery industry.

According to the “12th Five-Year Plan” energy adjustment structure, the share of coal in primary energy consumption will be reduced from 70% in 2009 to 63% in 2015. However, judging from the fact that our country is rich in coal, less oil, and lean, coal will continue to be China's major energy source for a long period of time, and the proportion of consumption in primary energy will remain at around 60% for a long period of time in the future. According to the “12th Five-Year Plan” of the China Coal Industry Development Consultation Draft, China’s coal production in 2015 will reach 3.79 billion tons, the compound growth rate will be 3.44% in 2011-2015, and the corresponding new coal machinery investment will reach 1250. Billion, the compound growth rate reached 10% in 2011-2015.

At the same time, due to the harsh environment in which coal machinery is used, the average update period is 4-5 years. Coal machinery purchased in 2006-2010 will gradually enter the renewal cycle, and the annual growth rate of coal machinery investment in 2006-2010 will exceed 35%, which will drive the rapid growth of coal-machinery equipment renewal demand in 2011-2015. Moreover, the need for renewal is not only a simple replacement after the expiry of the old equipment service period, but also the upgrading of the original coal machinery equipment. According to the prediction of the Coal Machinery Industry Association, from 2011 to 2015, the investment in renovation and transformation will reach 358.1 billion yuan, the compound growth rate will reach 23% in 2011-2015, and the proportion of equipment renewal demand will increase from 55% in 2011 to 2015. About 75% of the year.

The promotion of mechanization is also a solid guarantee for stable growth of the coal machinery industry. With the advancement of the downstream coal industry consolidation, it is expected that the proportion of coal production of large and medium-sized coal mines will increase from 56% in 2010 to 13% in 2015 to 65% in 2015 and 21% in 2015. The increase in proportion of large and medium-sized coal mines will further promote the mechanization of coal mining. By 2015, the mechanization rate for large-, medium-, and small-scale coal mining will increase from the current 95%, 80%, and 40% to 100%, 95%, and 55%, respectively. According to the forecast of the Coal Machinery Industry Association, from 2011 to 2015, the increase in mechanization rate will drive the investment in coal machinery to reach 31.8 billion yuan, and the compound growth rate in 2011-2015 will be 4.3%.

With the addition of new, retrofit, and mechanized improvements, the total output value of the coal machinery industry in 2011-2015 will reach 514.9 billion yuan, with an annual compound growth rate of 22%.

Private, State-run: Production of Double Champions

The State Administration of Work Safety website reissued the 12th Five-Year Plan for Safety Production Technology on November 17th, proposing the promotion of safe production technology with the core fields of coal mines, non-coal mines and hazardous chemicals, and the establishment of a large number of safety technologies. Demonstration project, research and innovation center and technology support platform.

China's coal machinery industry has long been the leader in the high-end equipment manufacturing industry in China. Before the 1990s, large-scale coal equipment manufacturers were mostly directly subordinate to the former Ministry of Coal and were in a monopoly position. These monopolistic enterprises absorbed and absorbed advanced technology from abroad. In the late 1990s, they basically had independent technological research and development, and the products reached the international advanced level. After entering the 21st century, the marketization of coal machinery has promoted a rapid increase in the level of technology, the continuous increase in the localization rate of equipment and the rapid expansion of the industry scale.

At present, the domestic coal machinery industry mainly includes two categories of state-owned enterprises and private enterprises. The characteristics of these two types of enterprises are significantly different. Founder Securities believes that state-owned enterprises mainly look at technological strength, competitive advantages and valuation levels in subdivided areas, while private enterprises mainly look at High growth in performance. The state-owned enterprises in the coal mining industry mainly include Zheng Coal Machinery and Tiandi Technology. Judging from the three indicators of coal-fired state-owned enterprises, first, technical strength, Zhengjiji and Tiandi Technology are leading enterprises in the domestic coal machinery industry, and their technical strength is very strong. Secondly, in terms of subdividing the competitive advantages in the sector, Zhengzhou Coal Mining Machinery has a high concentration of business and its competitive advantage in the field of hydraulic support with an income ratio of more than 70% is very prominent. Its market share is the highest in the world. Tiandi Technology has a wide range of main products. The competitive advantages in various segments are relatively weak compared to world technology. Third, the Zhengjiji has more advantages in terms of valuation.

The private enterprises in the coal mining industry mainly include Linzhou Heavy Machinery, Shandong Mining Machinery, and Uloka and Mei Anson. The private enterprise mechanism is flexible. When the coal machine industry is in a high growth cycle as a whole, the performance growth mainly depends on the management style and market development capabilities of the management team. In contrast, the management team of Linzhou Heavy Machinery is aggressive, aggressively expanding, and has strong market development capabilities, and the equity incentive plan promises that the growth rate of the next three years will be in line with the growth rate of not less than 63%. The company's high growth in the next few years is guaranteed.

In addition, in the field of prediction and early warning of major accidents in coal mines, Eulka has a strong competitive advantage. Meansen has certain advantages in the field of gas prediction and underground personnel positioning systems.