Used Excavators

1. Event

3 26 Liugong Released 2009 Annual Report, the Company realized main business income of 10.183 billion yuan, up 9.87%; realized a total profit of 1.032 billion yuan, up 150.84 percent; net profit of 866 million yuan, an increase of 154.58%. Fully diluted earnings per share the company was 1.33 yuan, net assets was 21.1%. Distribution plan as follows: 3.00 for every 10 shares in cash (including tax).

2. Our analysis and determine

1) 2009 in Financial Crisis and our four trillion investment plan and other relevant policies under the double impact of domestic Construction Machinery Demand gradually picked up from the 2 quarter, mainly sub-sectors, Excavator , Rollers and cranes industry grew 22.7%, 57.20%, 26.76%, but Loader Industry fell 12.2%, 10.8% decline in the forklift industry. Construction machinery exports dropped very significantly, which loader, excavator industry, export volume decreased by 37.8% year on year and 70.2%.

Liugong 2009 sales reached 38,920 units all kinds of machine, an increase of 7%. The leading products of which continue to set new loader sales, higher than the industry average growth rate of 13 percent domestic market share increased 2.7 percentage points to 22.6%, maintaining the industry first. Excavator on sales up 16% market share of 3.5%, down 0.5 percentage points. Crane sales rose 62% market share by 1.05 percentage points to 4.77%, the third in the industry. Roller sales up 80% market share increase of 1.5 percentage points to 11.6% in the third sector. Export business, the company in a disadvantageous situation in the international market, increasing efforts to develop, although exports fell 11.7%, but well below the industry average decline; is worth mentioning that in Australia, North America, and Africa regional market and achieved good growth.

2) 2009 Liugong sustained recovery in the market situation, to maintain a relatively stable price, and because Steel Decline in raw material costs, etc., so that the profitability of the company’s products show up in the situation, in which operating profit margin of 22.04 earthwork machinery, increased 5.86 percentage points year on year, and other engineering machinery and accessories operating profit margin of 16.52%, 1.23 percentage points year on year increase. Inc. 2009 Sell Costs and administrative expenses were 615 million yuan and 4.34 billion yuan, rose by 2.8% and 11%, growth at a reasonable level.

3) the next two years, the domestic infrastructure and real estate development will remain rapid development period. From 2010, a quarter to see market demand for construction machinery, excavators and other products are still better than expected, which will increase the performance of the company is facing a more optimistic outlook. According to March 23 the company adopted the “Company from 2010 to 2015, the development of strategic planning.” The company’s strategic focus is to establish the loaders, excavators and cranes three core businesses of dominant position; the same time, promote the forklift and the Bulldozer And other business development; and actively used equipment, leasing, re-emerging manufacturing and logistics operations to form the ability to provide total solutions. 2010, the company’s business objectives for the sales of 12 billion yuan.

3. Investment advice Liugong

We expect earnings per share in 2010 -2 011 years, were 1.59 yuan and 1.82 yuan, according to 15-18 times earnings, a reasonable valuation of the company in 2010 as 23.85-28.52 dollars to maintain the “recommended” investment rating.

Liugong stock drivers: If the state has increased infrastructure investment, or real estate investment better than expected, will support the company’s share price up.