Investment advice
[core combination] Avic Xi’An Aircraft Industry Group Company Ltd(000768) , Avicopter Plc(600038) , Aecc Aviation Power Co Ltd(600893) , Jiangxi Hongdu Aviation Industry Co.Ltd(600316) , Avic Shenyang Aircraft Company Limited(600760) , Inner Mongolia First Machinery Group Corporation Co.Ltd(600967) , Unigroup Guoxin Microelectronics Co.Ltd(002049) , Western Superconducting Technologies Co.Ltd(688122) , China Cssc Holdings Limited(600150) , China Marine Information Electronics Company Limited(600764) , Beijing Aerospace Changfeng Co.Ltd(600855)
[Key stock pool] Avic Heavy Machinery Co.Ltd(600765) , Avic Electromechanical Systems Co.Ltd(002013) , Aecc Aero-Engine Control Co.Ltd(000738) , Avic Aviation High-Technology Co.Ltd(600862) , Sinofibers Technology Co.Ltd(300777) , China Avionics Systems Co.Ltd(600372) , Fushun Special Steel Co.Ltd(600399) , Gaona Aero Material Co.Ltd(300034) , Jiangsu Toland Alloy Co.Ltd(300855) , Western Superconducting Technologies Co.Ltd(688122) , Baoji Titanium Industry Co.Ltd(600456) , Weihai Guangwei Composites Co.Ltd(300699) , Xi’An Triangle Defense Co.Ltd(300775) , Chengdu Leejun Industrial Co.Ltd(002651) , Anhui Yingliu Electromechanical Co.Ltd(603308) , Wuxi Paike New Materials Technology Co.Ltd(605123) , Guizhou Aviation Technical Development Co.Ltd(688239) , Wuxi Hyatech Co.Ltd(688510) , Wuhan Guide Infrared Co.Ltd(002414) , Zhejiang Dali Technology Co.Ltd(002214) , Xi’An Bright Laser Technologies Co.Ltd(688333) , China Zhenhua (Group) Science & Technology Co.Ltd(000733) , Fujian Torch Electron Technology Co.Ltd(603678) , Chengdu Zhimingda Electronics Co.Ltd(688636) , Raytron Technology Co.Ltd(688002) , Beijing Beimo High-Tech Frictional Material Co.Ltd(002985)
[last week’s report] [ Aecc Aero-Engine Control Co.Ltd(000738) ] depth: aeroengine control system is the leader, and its profitability is expected to continue to improve.
[views of this week] (1) on February 4, the heads of state of Russia and China held talks in Beijing and issued a joint statement. The two sides are deeply concerned about the severe challenges facing the international security situation. They have made a lot of statements on security issues, and we suggest paying attention to them. (2) The high outlook and medium and long-term investment logic of the military industry have not changed. After this round of adjustment, the investment value has become more and more prominent. Since the beginning of the year, Shenwan national defense military industry index has accumulated a decline of 18%. At present, the overall PE is 59 times, which is in the 25% quantile of the past five years. The configuration value of the military industry sector is prominent. (3) Endogenous epitaxial two wheel drive: we are firmly optimistic about the military industry from 2022 to 2023, and the index has great room for rise; In 2022, as the last year of the “three-year action plan” of state-owned enterprises, the mixed reform / incentive / asset securitization will be promoted in an all-round way, the exogenous growth will exceed expectations, and the military industry will be driven by endogenous + epitaxial growth.
[core view] the deterministic growth of national defense is high. In 2022, it entered the sweet period of “business cycle + asset integration” and “endogenous + extension” two wheel drive, “domestic demand + foreign trade” and “military products + civilian products”. The military industry index is expected to replicate the performance of the wind power index in the second half of 2021 in 2022, and the latter ranks first: (1) the deterministic growth of national defense and military industry is high under the “century change”. “Preparing for war / 2027 / building a strong national defense commensurate with the second largest economy” is the established direction. Large contract liabilities in 2021 highlight the high boom of the 14th five year plan. (2) In the next few years, the securitization of national defense and military assets and the reorganization and listing of core military products are expected to set off a new climax. The restructuring process of AVIC / AVIC group / AVIC group is expected to rise significantly, and the restructuring of AVIC / AVIC group / 901} is expected to start. (3) China’s main battle tank / UAV / Trainer / fighter have global competitiveness, and the demand for foreign trade will gradually rise. Domestic large civil aircraft / civil aviation engines and other industrial chains are also gradually growing.
Defense and military industry: we are optimistic about the missile / informatization / Aviation Development / military aircraft sub industry, scale effect + refined management, “small core and large cooperation”. The performance of national defense mainframe will be flexible in the next five years. With the conclusion of the “three-year action of state-owned enterprise reform”, equity incentive is expected to accelerate the release of performance: Avic Xi’An Aircraft Industry Group Company Ltd(000768) , Avicopter Plc(600038) , Aecc Aviation Power Co Ltd(600893) , Jiangxi Hongdu Aviation Industry Co.Ltd(600316) , Avic Shenyang Aircraft Company Limited(600760) , Inner Mongolia First Machinery Group Corporation Co.Ltd(600967) , China Cssc Holdings Limited(600150) .
2. Continue to be optimistic about high-tech barriers, high scarcity and competitive high-temperature alloy / composite materials / midstream component level supporting enterprises / engine forging and casting / information core midstream and other midstream and upstream sub circuits: Avic Heavy Machinery Co.Ltd(600765) , Fushun Special Steel Co.Ltd(600399) , Gaona Aero Material Co.Ltd(300034) , Western Superconducting Technologies Co.Ltd(688122) , Anhui Yingliu Electromechanical Co.Ltd(603308) , Chengdu Leejun Industrial Co.Ltd(002651) , Wuxi Paike New Materials Technology Co.Ltd(605123) , Guizhou Aviation Technical Development Co.Ltd(688239) , Xi’An Triangle Defense Co.Ltd(300775) , Wuxi Hyatech Co.Ltd(688510) , Avic Electromechanical Systems Co.Ltd(002013) , China Avionics Systems Co.Ltd(600372) , Xi’An Bright Laser Technologies Co.Ltd(688333) , Jiangsu Toland Alloy Co.Ltd(300855) .
3. Missile and informatization: Unigroup Guoxin Microelectronics Co.Ltd(002049) , Fujian Torch Electron Technology Co.Ltd(603678) , China Zhenhua (Group) Science & Technology Co.Ltd(000733) , Chengdu Zhimingda Electronics Co.Ltd(688636) , Wuhan Guide Infrared Co.Ltd(002414) , Zhejiang Dali Technology Co.Ltd(002214) .
The focus of defense Hong Kong stocks is optimistic: AVIC.
Risk tips
1) the rhythm of equity incentive and asset securitization is lower than expected 2) the development and delivery progress of important products is lower than expected
