The situation in Russia and Ukraine is still cloudy, and the game of great powers may affect China. First of all, through the baptism of the contradiction between Russia and Ukraine, all European Member States, especially the small countries in Eastern Europe, increasingly feel the importance of the United States to their national security and the increase of dependence on the United States, which may eventually be transformed into the improvement of the consistency of foreign policy; Secondly, the ultimate goal of the United States is to curb the development of Russia and weaken the global competitiveness of China and Russia through joint sanctions. Just as Sullivan said when talking about the issue of Russia and Ukraine, China will eventually bear part of the cost of Russia's invasion of Ukraine. The improvement of NATO's diplomatic consistency may make its sanctions more effective; Thirdly, on the issue of Russia and Ukraine, the United States also mobilized so many people to make China use force against Taiwan, but we believe that these are two events of different nature, and it is difficult for the United States to achieve its purpose in this regard.
The proportion of 21q4 fund positions has increased significantly, and will be restrained first and then increased in 22 years. 2021q4 fund military industry
Positions accounted for 5.10%, an increase of 1.08 PCT month on month, the highest level in history, and achieved positive growth month on month for three consecutive quarters. The fund's 2021q4 military position concentration was 61.5%, down 3.05pct month on month. In 2021q4, the proportion of military industry oversupply further increased to 1.91%, indicating the return of market investment enthusiasm in the military industry sector. In 2022, the Q1 military industry sector retreated significantly, the fund position adjustment was obvious, and the proportion of fund positions fell or became a foregone conclusion. However, we believe that with the release of industrial chain capacity, the high outlook of superimposed industries continued, and the investment value of the military industry sector became prominent. This index is expected to gradually stabilize and rise to more than 5%.
Investment suggestion: the investment value of the military industry sector is further highlighted, and time can be changed for space in operation.
In the short term, after a sharp correction in the early stage, the valuation risk of the military industry sector has been fully released. At present, the PE (TTM) of the sector has dropped to 53.4x (57x in the center), the safety margin is high, and it is expected to stabilize gradually in the later stage. Based on the EPS driven logic, the performance of the military industry index in the past two years is obvious. We tend to think that the adjustment space of this index is no more than the increase of 25.6% in the previous round; In the medium term, as the second year of the 14th five year plan for equipment procurement, 2022 is expected to be intensively implemented, the overlapping capacity bottleneck will be broken, the prosperity of the industry may continue to improve, and the rapid growth of the industry in the next three years is still expected; In the long run, the "Centennial goal of building the army" is nearly late, and the "Centennial change" is bound to promote the rapid development of the industry.
We are optimistic about the medium and long-term performance of the military industry sector and suggest the "four dimensions" configuration: 1) the targets of oversold rebound include Avicopter Plc(600038) (600038. SH), Fujian Torch Electron Technology Co.Ltd(603678) (603678. SH), Nanjing Quanxin Cable Technology Co.Ltd(300447) (300447. SZ) and Guangdong Shenglu Telecommunication Tech.Co.Ltd(002446) (002446. SZ); 2) Targets with sufficient adjustment and both performance growth and valuation include Nancal Technology Co.Ltd(603859) (603859. SH), Tianjin 712 Communication & Broadcasting Co.Ltd(603712) (603712. SH), Beijing Relpow Technology Co.Ltd(300593) (300593. SZ); 3) Targets with higher than expected performance and high certainty of growth, including China Zhenhua (Group) Science & Technology Co.Ltd(000733) (000733. SZ), Unigroup Guoxin Microelectronics Co.Ltd(002049) (002049. SZ); 4) The targets of performance growth improvement by state-owned enterprise reform include Avic Xi'An Aircraft Industry Group Company Ltd(000768) (000768. SZ), Avic Electromechanical Systems Co.Ltd(002013) (002013. SZ), Addsino Co.Ltd(000547) (000547. SZ), China Marine Information Electronics Company Limited(600764) (600764. SH), etc
Risk warning: the risk that the 14th five year plan and military industry reform are not as expected
