1. Market review this week
This week, the Shenwan national defense industry index fell 1.54%, the Shanghai Composite Index fell 0.39%, the gem index fell 4.00%, the Shanghai and Shenzhen 300 index fell 0.67%, and the national defense industry sector ranked 20th among the 28 Shenwan level industries. The PE (TTM) of Shenwan national defense and military industry sector is 68.20 times, the aerospace equipment in each sub sector is 68.00 times, the aviation equipment is 70.74 times, the ground military equipment is 45.61 times, and the shipbuilding is 121.76 times.
2. In 2022, we will focus on the two main investment lines of “growth” and “reform”
This week, the plate continued to make a slight correction. On the whole, the plate valuation is still lower than the valuation center in recent ten years. This round of military industry market has fundamental support, the plate growth is highly deterministic, the plate valuation has entered the upper repair channel, and there is still much room for repair. Looking forward to next year, the sector investment will focus on the two main lines of “growth” and “reform”. On the one hand, as a growth sector, the military industry has long-term logic such as dual-use for military and civil purposes, which is suitable for long-term investment; On the other hand, next year will be a big test year for the three-year action of state-owned enterprise reform. The mixed reform of military state-owned enterprises is expected to speed up, and the reform dividend is expected to accelerate the release.
3. The “quality” and “quantity” of batch production in the aviation industry reached a new high throughout the year, and the prosperity of the industry continued to rise
On December 24, AVIC official wechat released the article “perfect ending: the last flight!”, In the aviation industry, Shenfei completed the annual batch production test flight task 16 days in advance, the annual batch production quantity reached a new record, and the model development and production task of Shenfei is increasing day by day. Xi’an Airlines completed the annual batch production test flight task 9 days in advance, realized the overall planning of production organization resources, stable process, flexibility and efficiency, realized the new normal of balanced delivery, and finally completed the annual task delivery with high quality. Changfei completed the batch production delivery task 16 days in advance. Through a series of batch production optimization measures, Changfei broke through the production bottleneck and realized the high-quality start of the 14th five year plan. Hafei completed the annual batch production test flight one week ahead of schedule, extensively carried out management improvement, quality improvement and efficiency increase in various business areas, the number of model delivery reached a record high, and the core competence and governance level of the enterprise were steadily improved. In the first three quarters of 2021, the economic operation of the aviation industry has made steady progress, accelerated progress and improved quality, the main benefit indicators have maintained rapid growth, and the product delivery has achieved the goal of “2323” advanced equilibrium stage. AVIC is the backbone of China’s national defense construction. In recent years, advanced fighters have greatly increased batch production tasks, and the aviation industry chain has entered a high boom. At the same time, advanced weapons and equipment such as “20 series” advanced aircraft, new stealth shipborne aircraft and new UAVs have appeared one after another. With the solidification of equipment technical status, these new equipment are also expected to start mass production, and the industry is expected to maintain high-speed growth. Moreover, the balanced delivery rhythm of “2323” led by the aviation industry has greatly improved the operation quality of upstream and downstream enterprises in the industrial chain and helped to promote the long-term stable and healthy development of the industry. At the same time, it is expected to see a good performance of the industry in the fourth quarter.
4. Key recommendations this week
1) The targets of military electronic components with low valuation and high performance flexibility are recommended: China Zhenhua (Group) Science & Technology Co.Ltd(000733) , Zhuzhou Hongda Electronics Corp.Ltd(300726) , Beijing Yuanliu Hongyuan Electronic Technology Co.Ltd(603267) .
2) Focus on the midstream aviation manufacturing targets with gradual scale effect and significant improvement of comprehensive supporting capacity: Avic Heavy Machinery Co.Ltd(600765) , Chengdu Ald Aviation Manufacturing Corporation(300696) , Chengdu Haoneng Technology Co.Ltd(603809) , Anhui Yingliu Electromechanical Co.Ltd(603308) .
3) Focus on recommending the overall and key systems of weapons and equipment with monopoly and scarcity and huge long-term growth space: Avic Shenyang Aircraft Company Limited(600760) , Aecc Aviation Power Co Ltd(600893) , Avicopter Plc(600038) , Aecc Aero-Engine Control Co.Ltd(000738) and Wuhan Guide Infrared Co.Ltd(002414) .
4) It is suggested to pay attention to the beneficiary objects of the mixed reform of state-owned enterprises: Chengdu Spaceon Electronics Co.Ltd(002935) , Aerospace Ch Uav Co.Ltd(002389) , Avic Xi’An Aircraft Industry Group Company Ltd(000768) , Avicopter Plc(600038) , Guizhou Space Appliance Co.Ltd(002025) and Sun Create Electronics Co.Ltd(600990) .
Risk warning: the release and delivery of military orders are not as expected; Performance growth is less than expected; The data is not updated in time.
