China's machinery construction has a cautious view of the construction machinery industry

We are cautious about the construction machinery industry, but we maintain our BUY rating on Zoomlion We increase our EPS forecast for 2011-2013 by 7%-13% to take into account better-than-expected earnings in the fourth quarter. Impact. Therefore, we have adjusted our 12-month target price for Zoomlion’s H-shares based on Director “sCut from HK$9.7 to HK$11.3, and raised our target price for A-shares from RMB8.7 to RMB10.0. We are still in the construction machinery industry. We are cautious, but Zoomlion remains our top pick because: 1) The stock's current P/E of 2012 is only 8.6 times, which is lower than the industry average of 12.3x. We think the current valuation of the stock. More attractive, it should be a good opportunity to buy; 2) We expect the concrete machinery demand in the short term should be relatively stable, but due to the further slowdown in new real estate starts and weak recovery of infrastructure construction, we believe that the long-term growth rate will slow down; 3 As the only national tower crane manufacturer, we expect the company to gain more shares in this market. We believe its unique market position will allow the company to continue to integrate this decentralized market; 4) The company is the financial strength of the industry The most solid company, the net cash amounted to RMB 7 billion as of the third quarter.

Downgrade Sany Heavy Industry to Neutral We downgrade Sany's rating from Buy to Neutral, and the 12-month target price is still RMB 14.3. Following the recent strong performance of the stock (up from 15% in the past two months and only 5% in the industry), the current target price implied only upside is 4%. We still believe that Sany Heavy Industry is a leading company in the industry. The management team is highly motivated, has a good incentive mechanism, and has an excellent execution record. The company's product line is the most abundant in the industry, and it has a leading market position in all core market segments. However, the stock's current stock price corresponds to a 2012 forward P/E of 12.5, while the global leader Caterpillar is 11 times, and the profitability of the latter is much more predictable. We believe that Sany’s current valuation is less attractive than before.

Mean Return Opportunities; Buy Tiandi Technology Tiandi Technology has been 20% behind the entire mechanical sector in the past two months. Therefore, we believe that there should be an average return opportunity for the stock.

Our 12-month target price is still RMB 19.4, implying 18% upside. We believe that Tian Di's diversified business model (coal coal, coal sales and services, etc.) should provide the company with better defensiveness in the current uncertain macroeconomic environment.