Current cycle vs. past cycle – three key differences. 1) This cycle, from 2016onwards, is driven by replacement demand – we estimate c350-420k in 2021e,representing 50-60% of total demand (Exhibit 6); 2) excavator sales have substituted forloader sales since 2016 – we estimate the excavator/loader ratio (installed base) will risefrom 0.5x in 2011 to 2x in 2026e, similar to the ratio for Europe; 3) market consolidationhas intensified since the last cycle, especially for excavators – total market share of SanyHeavy, XCMG and Caterpillar increased from 43% in FY17 to 52% in 2019 (Exhibit 8).Machinery upcycle sustainable for longer. We saw strong momentum in Jan/Feb2021 – excavator and loader sales rose 205% and 110% y-o-y in Feb, respectively.We think two drivers will benefit the current upcycle: 1) healthier competition amongsuppliers: profitability is improving for the leaders (Exhibit 14) and a stricter creditsales policy underpins robust balance sheets (Exhibit 16); and 2) steady replacementdemand supported by National VI emission upgrades for on-road machinery in July2021 and National IV upgrades for off-road machinery in Dec 2022 (Exhibits 20-21).