[TrueZhuo HK Market Trends] Mining Recovery Drives Heavy Machinery Orders Surge, China Longgong (03339.HK) Plays Catch-up

Heavy industry and machinery stocks $SANY INT'L(00631.HK) and $SINOTRUK(03808.HK) have shown very strong stock performance since last December, especially Sany International. In just over two months, its stock price rose from around HKD 7 to HKD 13.54, nearly doubling. One catalyst is the continuous surge in mineral and metal prices, which now includes not just gold and silver but also metals like molybdenum, copper, tin, and rare earths—almost all minerals are seeing price increases. The explosion in mining machinery orders has driven industry development and boosted demand for related stocks. $LONKING(03339.HK) is a less noticed company among construction machinery stocks. Its brand recognition comes from its loader products, but mine automation is steering the company toward high-growth areas.

Sany International's growth in the mining sector is astonishing. According to a CLSA report, Sany International continues to receive a large number of mining equipment orders. Compared to last year's scale of about RMB 5 billion, order size is expected to triple by 2028. The order delivery ratio for its port equipment business has hit a record high, with order visibility extending to 2027. Overall, CLSA forecasts that Sany International's adjusted net profit will quadruple between 2024 and 2027, with over 50% of this growth coming from overseas markets.

China Longgong also has mining machinery business, but not in the traditional sense of large open-pit mining machines. Its mining business mainly focuses on two product categories: first, mining dump trucks, for which Longgong has actively developed wide-body dump trucks suitable for small and medium-sized mines and quarries in recent years; second, heavy loaders and excavators, which are Longgong's traditional strengths. For the high-intensity operating environment of mines, Longgong has launched large loaders from 7 to 12 tons and large excavators above 50 tons, which are core tools for material handling in mines. In the 2025-2026 period, Longgong significantly increased the proportion of electric mining loaders, which is highly competitive in mining areas with extremely high environmental requirements.

China Longgong issued a positive profit alert on the 21st of last month, expecting full-year 2025 net profit to reach RMB 1.25 to 1.33 billion, a year-on-year increase of 23% to 31%. One growth driver comes from export business: the gross profit margin from overseas markets, especially along the Belt and Road routes, is much higher than domestic, becoming a key engine for profit growth.

Another growth point comes from high-margin new products. The increased sales proportion of heavy mining equipment and electric products has improved the overall gross margin. In addition, the group has always been known for its strong cost control, which allows profit elasticity to be released faster in the early stages of industry recovery and maintains strong price competitiveness within the industry.

With the new round of "construction machinery replacement" policy starting in 2025, domestic replacement demand for existing stock is bottoming out and recovering. In terms of electrification dividends, Longgong's market share in the electric loader market remains at the forefront, giving it long-term advantages under the trend of energy saving and carbon reduction.

China Longgong's current valuation is around 12x historical P/E and about 10x forward P/E, with a long-term price-to-book ratio below 1x, indicating a high margin of safety. Its extremely high dividend yield is its most attractive investment feature. The 2025 dividend is HKD 0.13, with the dividend yield consistently maintained between 6% and 8%. Compared to peers, its stock price has lagged behind, but with high dividend support, it has greater value for playing catch-up.

In the mining machinery field, China Longgong enters the market through cost-effective mining auxiliary equipment like loaders and wide-body trucks. It does not benefit as directly from the surge in mining equipment orders as Sany International does, but it shares the same important growth advantage in mine site business. Benefiting from industry recovery, China Longgong has both the defensive advantage of high dividends and certain growth prospects. Playing catch-up now offers a fairly high risk-reward ratio.