Market in recent week
Defense industry (Shenwan) index (+ 3.05%), industry (Shenwan) ranking (2 / 31); Shanghai Composite Index (- 1.13%), Shenzhen Component Index (- 0.35%), gem index (+ 1.03%);
Top five gainers: Xi’An Tian He Defense Technology Co.Ltd(300397) (+ 18.66%), Zhenlei Technology (+ 16.55%), Kaile Science And Technology Co.Ltd.Hubei(600260) (+ 16.19%), Jiangxi Xinyu Guoke Technology Co.Ltd(300722) (+ 12.6%), North Industries Group Red Arrow Co.Ltd(000519) (+ 12.5%);
Top five declines: Hefei Jianghang Aircraft Equipment Co.Ltd(688586) (- 6.21%), Guangdong Hongda (- 4.80%), Fujian Torch Electron Technology Co.Ltd(603678) (- 4.32%), Beijing Beimo High-Tech Frictional Material Co.Ltd(002985) (- 3.97%), Taihai Manoir Nuclear Equipment Co.Ltd(002366) (- 3.96%).
Important events and announcements
On February 22, Avicopter Plc(600038) announced that the company’s shareholders Harbin Airlines Group (holding 26.71%) and Zhongzhi Co., Ltd. (holding 12.78%) planned to transfer all their shares of the company to AVIC science and industry. After the transfer is completed, the direct shareholding ratio of AVIC is 46.05%; The total shareholding ratio of direct and indirect is 49.30%.
On February 23, the US Department of Justice announced the termination of the “China Action Plan” launched during the trump administration. The plan, launched in November 2018, requires judicial departments in 94 regions to file at least one or two lawsuits against China every year to prevent China from “stealing information from the United States”. During the implementation period, it led to a series of lawsuits against academics, which triggered great dissatisfaction among Asian American communities and academia.
On February 23, Huaqin technology made an initial public offering of shares on the science and Innovation Board at an issue price of 189.5 yuan / share, with a total fund of 3.158 billion yuan expected to be raised. The company is mainly engaged in special functional materials, including stealth materials, camouflage materials and protective materials. It is a leading enterprise in China’s military special functional materials industry.
On February 23, Xi’An Triangle Defense Co.Ltd(300775) plans to issue shares, raising a total of no more than 3.127 billion yuan. 300 million yuan is used for the deepening and upgrading project of aviation precision die forging industry, 490 million yuan is used for the precision forging project of Aeroengine Blades, 660 million yuan is used for the project of aviation digital integration center, and 790 million yuan is used for the intelligent manufacturing project of aerospace rocket structure, 290 million yuan is used for the intelligent interconnection manufacturing base project of advanced aviation parts, and 600 million yuan is used to supplement working capital. At the same time, the company announced the equity incentive plan, which plans to grant a total of no more than 5 million restricted shares to 45 people at a price of 22.01 yuan / share. The performance assessment objective is to take the net profit value in 2020 as the base, and the net profit growth rate will not be less than 193.53% in 2022, 281.59% in 2023 and 396.07% in 2024.
On February 24, Russian President Vladimir Putin said in a televised speech that he had decided to launch a special military operation in the Donbas region. Ukrainian President Zelensky announced on February 24 that Ukraine had entered a state of war and announced the severance of diplomatic relations with Russia later that day.
On February 24, Rongjian technology, a wholly-owned subsidiary of Hubei Feilihua Quartz Glass Co.Ltd(300395) Qianjiang Hubei Feilihua Quartz Glass Co.Ltd(300395) holding 51% equity, planned to increase capital and shares to invest in the new “20000 ton annual output ultra-high purity quartz sand project”, expand the production scale of high-purity quartz sand, improve the security of the company’s supply chain and meet the market demand for high-purity quartz sand. The total investment of the project is 300 million yuan. The project is constructed in two phases. The construction scale of the first phase is 10000 tons per year, and the investment amount is 100 million yuan. The total amount of this capital increase is 70 million yuan, and Qianjiang Hubei Feilihua Quartz Glass Co.Ltd(300395) contributed 51.565 million yuan.
On February 25, AVIC UAV made its initial public offering of shares and applied for listing on the science and innovation board, which was approved by the Listing Committee of the Shanghai Stock Exchange. The IPO plans to raise 1.64 billion yuan, which is intended to be used for “UAV system development and industrialization project”, “technical research and R & D capability improvement project” and other projects.
On February 26, Sichuan Haite High-Tech Co.Ltd(002023) announced that the reserved conditions for granting stock options had been fulfilled, and 3116300 stock options were granted to 100 incentive objects who met the conditions for granting, with an exercise price of 12.55 yuan / share.
On February 26, Zhejiang Dali Technology Co.Ltd(002214) announced that it had won the right to use the state-owned construction land. The bidding plot is mainly used to build the industrialization base of photoelectric system products such as photoelectric aiming pod. After the base construction is completed, it will have complete R & D, production, testing and testing capabilities of photoelectric system products, The batch production capacity of photoelectric system products such as photoelectric aiming pod will be greatly improved. It is conducive to accelerating the development strategic layout of the company and enhancing the core competitiveness of the company.
Investment advice
For investment strategy in 2022, please pay attention to the Research Report on January 21, 2022: “investment strategy of military industry in 2022: the wind rolls the red flag too high”.
I. core view
Affected by the escalation of the conflict between Russia and Ukraine this week, the military industry sector rose against the trend, and the military industry (Shenwan) index rose 3.05%, ranking second in the whole industry. In our recent reports, such as “opportunities conceived in doubt” and “entering the stage of time for space”, we all pointed out that geopolitical events such as Ukraine may become the fuse to stimulate the military industry market.
I don’t know the flowers near the water are the first to start. It is suspected that they have not been sold through winter snow. It is suspected that “the snow is not sold”, but actually “the flower is the first”. At present, although there are still doubts about the military industry to varying degrees, many bad or seemingly bad things have been exhausted, and at the same time, more good things are quietly brewing (although the response to relevant good things in the early stage is passivated). On the other hand, the rise of military industry is not only the short-term stimulation of Geopolitics on the surface, but also its internal more profound logic and truth.
After rising for two consecutive weeks, our short-term judgment of the market is that after the sharp decline after the year, it is only an event stimulus, which is difficult to rekindle enthusiasm and promote rapid rise. Since the military industry already has the value attribute and is driven by fundamentals, the recovery and breakthrough of the high level at the end of last year still need to be realized and confirmed, Only in this way can the confidence of the market be gradually reshaped and restored again. Changes in key data such as capital operation, first quarter forecast, first quarter report, interim report guidance, large order announcement and contract liabilities need our key tracking and observation, and are expected to continuously increase the attention of the military industry.
Once again, we reiterate our medium and long-term view. We tend to believe that the military industry is more likely to be a benign “advance, two retreat and one” with a bottom down. At the current time point, our judgment is that the current large-level adjustment is unrealistic. The valuation of the military industry has become cheap and has entered the configuration range with cost performance again. In the face of irrational adjustment, it is more necessary to be rational and calm at the current stage. The space for further deep adjustment is limited. Although it still takes time for confidence recovery and style transformation, the bottom is approaching and has entered the stage of time for space. It is not suitable to be overly pessimistic and blindly kill. Although the recent geopolitical conflict appears to be only a short-term stimulus to the military industry, in essence, it highlights the importance and urgency of developing the military industry, which is the big logic to support the industry and the long logic to support the market.
