Construction machinery industry changes and 3C automation industry as a whole: CITIC Machinery Index changed by 3.59% this week, while the Shanghai-Shenzhen 300 Index changed by 2.12%. CITIC Machinery Index beat the Shanghai-Shenzhen 300 Index by 1.47 percentage points, ranking fifth in 29 industry categories.

As of the weekend, the cumulative change in the 2017 CITIC Machinery Industry Index reached - 7.9%, compared with the Shanghai-Shenzhen 300 Index cumulative excess earnings of - 20.4%, ranking 24th in 29 industry categories.

From the industry valuation level, the CITIC machinery industry index by the end of this week, P/E 95.73 times (TTM, excluding negative), P/E 3.09 times, the overall valuation level is high.

Segmented industries: According to the concept, this week's artificial intelligence index relative to the Shanghai and Shenzhen 300 index cumulative excess earnings of 7.2%, ranked first; according to the performance of the three sub-industry market, this week's instrument III (Shenwan) sub-industry cumulative earnings of 4.7%, ranked first.

In terms of stocks, China's shipbuilding technology (600072.SH, not rated) is up to 19.7%.

Investment strategy and key recommendations:

Construction machinery leading enterprises continue to enjoy the industry recovery benefits, but also can withstand the upstream raw material price rises. The price fluctuation of upstream industry has great influence on the construction machinery industry. Steel prices have been rising rapidly recently. Take medium and heavy steel (10-20mm), which is mainly used in construction machinery manufacturing, for example. The most significant performance is that the average price of medium and heavy plates in 2017 increased by about 30% compared with the average price in 2016.

Relatively speaking, the leading listed companies of construction machinery have a strong pricing power, so they have a good ability to transfer costs. They can control costs through centralized purchasing, the pressure of price-sharing in the industrial chain and other strategies. Generally speaking, the steel price rise or will continue to increase the value of construction machinery, further reduce the cost of purchasing machinery, so that waste equipment is worth upgrading. Continuously recommend Sany Heavy Industry (600031) as the construction machinery tap, and the core components of construction machinery cylinder production tap Hengli hydraulic (601100).

3C automation equipment will continue to boom with the increase of market space and the appearance of new technology. (1) In the field of display equipment, the domestic 3C automation equipment manufacturers mainly produce testing equipment and module equipment. The downstream panel manufacturers'main technical strength lies in the production of large-scale LCD. The leading panel manufacturer Jingdong has continuously invested in the world's top 10.5 generation line, bringing new equipment demand space. Domestic LCD testing and module equipment supply experience, deep reserves, will benefit directly from the construction of the next generation of LCD line in the demand for new equipment. The key recommendation is precise electronic testing (300567), and it is recommended to pay attention to equipment (300545). (2) Apple products are the vane of other 3C products. The possible stainless steel frame technology used in the iPhone 8 will bring a strong demand for stainless steel frame processing of mobile phones, and the demand for stainless steel CNC equipment is expected to increase. We should pay attention to Jinsheng intelligence (300083) and East China heavy machine (002685).

Portfolio: The portfolio yield we recommended last week was 2.2%, beating the Shanghai-Shenzhen 300 index by 0.1 percentage points and the CITIC Machinery Industry Index by 1.3 percentage points. The portfolio recommended this week remained unchanged: Yantai Ice Wheel (20%), Xintian Technologies (20%), Oriental Seiko (20%), Natural Control (20%) and Pioneer Intelligence (20%).