According to Zhitong Finance APP, Orient Securities Company Limited (DFZQ) released a research report stating that China's agricultural machinery exports have maintained growth since the beginning of this year. The firm observed that the average export price has risen, reflecting that going overseas has driven the large-scale development of agricultural machinery. With overseas demand continuing to recover, the firm expects that the trend of large-scale agricultural machinery in China will continue, and the prosperity of industry leaders is expected to persist, bringing investment opportunities. Some related targets include: First Tractor Company Limited (601038.SH, not rated), Zoomlion Heavy Industry Science and Technology Co., Ltd. (000157.SZ, buy).

The main views of Orient Securities are as follows: China's agricultural machinery AMI continues to stand above the boom-or-bust line, the sector's prosperity continues to recover, and the trend of large-scale agricultural machinery is obvious. According to data from the China Agricultural Machinery Distribution Association, in August China's agricultural machinery market prosperity index AMI reached 57.2%, up 4.5 percentage points month-on-month and up 1.3 percentage points year-on-year, standing above the 50% boom-or-bust line for two consecutive months and remaining in the prosperity expansion range, reflecting that the agricultural machinery market has entered a recovery channel. From the perspective of operating conditions, the sector's recovery signal is obvious. In August, the sales, profitability, and manager confidence indices all rose simultaneously, and profit improvement also became a core inflection point. From the perspective of model structure, the trend toward larger machines continues, and high-horsepower tractors continue their upgrade trend. In August, the large tractor index was 58.9%, up 6.6 percentage points month-on-month. High-end continuously variable transmission tractors above 200 horsepower, driven by the "premium subsidies for premium machines" policy, continue to release demand, and their prosperity remains higher than that of medium-sized tractors.

Agricultural machinery exports grew, product average prices rose, and exports boosted the large-scale development of agricultural machinery. According to August foreign trade data from the General Administration of Customs, in August China exported 15,183 tractors, up 11.6% year-on-year, with export value of 785 million yuan, up 23.9% year-on-year. In the first eight months, cumulative exports reached 136,243 units, up 13.4% year-on-year, with export value of 7.025 billion yuan, up 19.4% year-on-year. Whether on a single-month or cumulative basis, the growth rate of export value was higher than the growth rate of volume. The firm believes that the current rise in the average unit price of China's tractor exports reflects that going overseas is boosting the trend toward larger agricultural machinery.

Overseas expansion benefits from improved demand and upgraded supply, and the prosperity of leading companies going overseas is expected to continue. The firm believes that the overseas expansion of Chinese tractors and other agricultural machinery mainly benefits from construction in developing countries, and therefore has a certain degree of sustainability. According to the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, Belt and Road countries account for nearly 80% of China's tractor export value, among which Brazil, Ukraine, Indonesia, Argentina and others are major market countries. The firm believes that the overseas expansion trend will continue. On the one hand, from the demand perspective, after two years of downturn, the global agricultural machinery market is expected to stabilize as agricultural product prices recover. On the other hand, from the perspective of China's supply, in recent years domestic agricultural machinery large-scale and intelligent technology levels have risen, and product competitiveness has continued to increase, which is conducive to increasing market share. In the past, China's agricultural machinery overseas expansion relied more on small models for volume, but as the supply of high-horsepower products gradually matures, overseas market procurement of high-efficiency, high-horsepower tractors is expected to continue to expand. The firm expects that the space for agricultural machinery overseas expansion will further open up, driving revenue and profit growth for domestic agricultural machinery leaders.

Risk warnings: macroeconomic fluctuations leading to investment falling short of expectations, grain prices falling short of expectations, overseas high interest rates dragging down demand, intensifying overseas trade frictions, rising raw material prices dragging down corporate profitability, and adverse effects from climate change.