Key investment points:
Market review: as of February 11, 2022, Shenwan defense industry fell 0.62% this week, 1.44 percentage points lower than Shanghai and Shenzhen 300 index, ranking 26th among Shenwan 31 industries; Shenwan defense and military industry fell 0.62% this month, 1.44 percentage points lower than the Shanghai and Shenzhen 300 index, ranking 26th among Shenwan 31 industries; Shenwan defense and military industry sector has fallen 18.43% year to date, 11.57 percentage points lower than Shanghai and Shenzhen 300 index, ranking 31st among Shenwan 31 industries.
As of February 11, 2022, the navigation equipment and aerospace equipment sectors of Shenwan national defense and military industry have performed well. From the performance of the recent week, the navigation equipment sector increased the most, at 3.18%. Other sectors showed as follows: the aerospace equipment sector rose 2.15%, the ground military equipment sector fell 0.08%, the aviation equipment sector fell 1.19%, and the military electronics sector fell 1.73%.
Weekly view of Defense Industry: Shenwan defense industry index has retreated by 18.43% compared with the beginning of the year. The fundamentals of some middle and upper reaches companies have not declined significantly. The long-term logic of the industry has not changed greatly. At present, the industry has a certain cost performance. The valuation of military industry and aviation sector has fallen below the average value of nearly one year, so it can be arranged at an appropriate time.
In the short term, the global interest rate increase cycle may have an impact on companies with high valuation. Superimposed on the fact that the performance growth rate of some military industrial groups is lower than expected, the industry may have great volatility in the short term, but the short-term volatility will not affect the high prosperity of the industry during the whole “14th five year plan” period. In the long run, geopolitical events are becoming more and more complicated. The United States and its allies are showing signs of shifting their strategic focus to the Asia Pacific region. The emergence of the US Navy in the South China Sea has become a norm. The number of global military exercises is becoming more and more frequent. Only by improving their military strength can they better cope with the increasingly complex world situation.
Optimistic about the high prosperity of the industry under the demand for equipment upgrading during the 14th Five Year Plan period; From the perspective of usage, with the increase of actual training times, the loss of trainer aircraft and the replenishment of missile inventory are increased. We are optimistic about the aviation industry chain and the missile industry chain with high consumables. On the other hand, Wu Yanhua, deputy director of the National Space Administration, said at the white paper press conference of China’s aerospace in 2021 that in the next five years, we should accelerate the transfer and transformation of aerospace technology achievements to economy and society, and be optimistic about the development of Beidou industrial chain under Aerospace industry services and the Internet of things, as well as the development of special chips under the new round of digital currency reform. Suggestions on the subject: Xi’An Triangle Defense Co.Ltd(300775) (300775), Unigroup Guoxin Microelectronics Co.Ltd(002049) (002049), China Zhenhua (Group) Science & Technology Co.Ltd(000733) (000733), Western Superconducting Technologies Co.Ltd(688122) (688122), Gaona Aero Material Co.Ltd(300034) (300034), etc.
Risk warning: the number of new orders of the main engine factory is less than expected; Enterprise reform is not as expected; The epidemic worsened more than expected.
