The year 2024 marks a pivotal moment for China’s construction machinery industry, a sector that has faced its fair share of challenges in recent yearsAs a bellwether for economic activity, the performance of excavator sales has illustrated these trends vividly.

After experiencing a decline, excavators are finally making a comebackIn 2024, major domestic manufacturers sold a total of 201,100 excavators—a modest increase of 3.13% compared to the previous yearThe domestic market, in particular, exhibited a robust recovery with an impressive growth rate of 11.7%, signaling a positive shift in the industry landscape.

However, not all companies are enjoying the same level of recoveryPerformance metrics have become a critical measure of competitiveness, serving as a litmus test for firms in the sectorTake Liugong, for exampleIn the first three quarters of 2024, Liugong reported revenues of 22.856 billion yuan, representing an 8.25% year-on-year increase, alongside a staggering net profit of 1.321 billion yuan—up by nearly 60%. This remarkable feat distinguishes Liugong as a leading player amidst the recovery cycle.

In contrast, rivals such as Xugong Machinery and Sany Heavy Industry posted profit increases but at substantially lower growth rates, indicating a widening gap among competitors.

On January 28, 2025, Liugong released its year-end performance forecast, projecting a net profit between 1.258 billion and 1.475 billion yuan—an annual increase of 45% to 70%, reflecting the company’s sustained growth momentum from the earlier quarters.

What accounts for Liugong’s impressive performance? One key factor is their strategic international expansionLiugong embarked on a global outreach initiative in 2003, becoming one of the first domestic companies to explore international marketsOver two decades, the firm has established a sales network that spans more than 140 countries and regions.

This global footprint not only enhances revenue streams but also effectively mitigates domestic market volatility, boosting the company's resilience against economic cycles

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For instance, while domestic revenues faltered in 2022, Liugong’s overseas income surged by 35.67% and continued its upward trajectory with a further 41.17% increase in 2023, generating over a billion yuan in international sales.

The boost in overseas revenues has largely counterbalanced the decline in domestic earningsDuring the first half of 2024, nearly 50% of Liugong’s sales came from international business—becoming a central driver of its overall financial performance.

Moreover, the competition abroad is far less intense than in the domestic space, allowing Liugong to sell its products at premium prices and attain significantly better profit marginsIn the first half of 2024, Liugong's gross margin from overseas operations reached a remarkable 29.09%, dwarfing the domestic figure of 18.15%. This expansion in international markets has steadily bolstered Liugong’s profitability.

Since 2022, Liugong’s gross and net profit margins have shown signs of recovery, aligning closely with 2019 levelsIn the first three quarters of 2024, the gross margin hit 23.48%, while net margin reached 5.94%. The overall quality of earnings has also improvedBetween 2019 and 2023, except for 2021, Liugong consistently maintained a net cash ratio above 1, indicating strong cash flow support for net profitsThis enhances the reliability of their reported earnings, ensuring they reflect real financial health rather than mere accounting figures.

Another essential strategy for Liugong has been product diversificationTraditionally, earthmoving machinery, including excavators and load-haulers, formed the backbone of its revenueLiugong excelled in this area, sustaining a significant market shareHowever, in recent years, it has pivoted away from sole reliance on traditional earthmoving equipment and aggressively pursued a multi-faceted product strategy, extending both horizontally and vertically to create a diverse product matrix.

For instance, the company has made strategic moves to enhance its portfolio with high-tech machinery, agricultural implements, and forklifts—essentially broadening its offerings in response to market trends and cyclical variations

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Additionally, Liugong's venture into industrial robotics has yielded considerable successThe company's subsidiary, Guangxi Zhitou Technology Co., has developed integrated systems for manufacturing processes bespeaking innovation.

These robots are not only enhancing internal production capabilities but are also making waves in external markets, generating additional revenue streamsSuch innovations effectively diversify Liugong’s product lines while mitigating operational risks.

The transformation towards electrification is another critical facet of Liugong's evolutionAs the construction machinery sector faces stricter emissions regulations, the shift towards green technology is not just advisable but necessaryWhile initial production costs for electric machinery may be higher than those for traditional combustion-engined machines, the long-term operational cost savings render electric models far more competitiveFor example, electric loaders can cut lifecycle costs by 40%, saving about 280,000 yuan in annual operating expenses.

Recognizing the importance of R&D in maintaining a competitive edge in electrification, Liugong has significantly increased its research expendituresBetween 2019 and 2023, research funding rose from 464 million yuan to 907 million yuan, with the R&D expense-to-sales ratio climbing from 2.42% to 3.29%. Through these sustained investments, the company has successfully overcome various technical challenges and uplifted the performance and quality of its electric products.

Currently, Liugong boasts 11 electric product lines—the broadest portfolio in the construction machinery sectorA landmark partnership with contemporary battery leader CATL in 2022, aimed at accelerating the transition to electric heavy machinery, further solidified Liugong’s position in the marketBy 2023, electric loader sales had surged by 67%, securing Liugong’s status as a market leader.

Will Liugong maintain its impressive growth trajectory in the future? Several factors may play into this equation

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