March 10 (Bloomberg) -- China's construction equipment sales may jump 20 percent in the second half as orders recover on the government stimulus, said Lonking Holdings Ltd., the nation's biggest maker of four-wheeled earthmovers.
Orders started to rise last month after dropping since August, Lonking's Chairman Li Sanyim said in an interview in Beijing. First-half sales for the industry may drop 10 percent from a year ago before recovering after June, Li said, without giving a company-specific forecast.
China is boosting spending on infrastructure by building railways, airports and housing as exports collapse, threatening its plan to grow the economy by 8 percent. As much as 1.5 trillion yuan of the 4 trillion yuan ($585 billion) stimulus is marked for building projects, and local governments will also spend, Li said.
"The market is reacting strongly to the stimulus package with higher demand," said Li while attending the country's National People's Congress. "We're optimistic about demand, but not too optimistic."
Lonking, based in Fujian province, rose 4 percent to close at HK$3.95 in Hong Kong trading. Rival Guangxi Liugong Machinery Ltd. rose 2.9 percent in Shenzhen trading. Sany Heavy Industry Co., the country's biggest supplier of concrete-making equipment, rose 2.3 percent in Shanghai trading.
"We think the sector is reaching its bottom now, and March 2009 sales would be the only possible risky number," Victoria Li, an analyst at Credit Suisse Group AG said in a note today. "There could be upside surprise to sector sales if the fiscal stimulus is higher than planned."
Growth Target
China's Premier Wen Jiabao last week said the government's economic growth target is within reach. China National Building Material Co., the country's second-biggest cement maker, last month said it was winning orders to supply highway and railway projects in southern China because of government spending.
Construction equipment sales for the industry plunged more than 90 percent in the past 6 months, Li said. Lonking is expanding factory capacity and increasing research and development spending by 300 million yuan this year to meet the expected demand gains, Li said.
The company aims to more than triple sales of excavators to more than 2,600 units this year from last year's 813, he said.
Output of forklifts will also almost triple this year to 8,000 from 2,800 in 2008, Li said. Overall revenue grew more than 20 percent last year, he said, without giving details.
Lonking and rival Guangxi Liugong Machinery probably won't cut prices for their wheel loaders, as the four-wheeled earthmovers are called, Li said.
The company, which controls more than 20 percent of the domestic market, and Liugong are the two biggest makers and should focus on quality and service as selling points rather than price, Li said.
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