Sector market: from 20228 to 20220304, the national defense and military industry sector (SW) fell 2.35%, ranking 26th among 31 primary industries. From the beginning of the year to the closing of the last trading day of this week, the national defense industry sector (SW) fell 16.30%, ranking 31st among 31 primary industries.
Industry Valuation: at present, the pe-ttm valuation of the defense and military industry sector (SW) is 60.51, with a 2-year quantile of 27.01% and a 5-year quantile of 29.11%, which is at a low position.
Stock market: the stocks with the highest growth this week are North Chemical Industries Co.Ltd(002246) (+ 20.65%), Tianjin Jieqiang Power Equipment Co.Ltd(300875) (+ 19.34%), Inner Mongolia North Hauler Joint Stock Co.Ltd(600262) (+ 14.44%), Guangdong Ganhua Science & Industry Co.Ltd(000576) (+ 6.84%), Changchun Up Optotech Co.Ltd(002338) (+ 6.27%). The stocks with the highest growth since the beginning of the year are Allwin Telecommunication Co.Ltd(002231) (+ 7.96%), Beijing Ctrowell Technology Corporation Limited(300455) (+ 7.91%), Kingsignal Technology Co.Ltd(300252) (+ 5.38%) Red Phase Inc(300427) (+ 5.11%), Tianjin Jieqiang Power Equipment Co.Ltd(300875) (+ 4.63%).
Industry dynamics: in order to deal with possible security threats, Russia launched special military operations, and the conflict between Russia and Ukraine attracted world attention. More than 2% of Germany's gross national defense expenditure will be used to strengthen national defense every year.
Industry data: macroscopically, China's military budget in 2022 was 145045 billion yuan, a year-on-year increase of 7.1%, an increase of 0.3 percentage points over last year. China's military budget has exceeded 7% for the first time since 2019. In terms of shipbuilding, Borneo's sea freight index (BDI) continued to rise this week, and China's export container freight index (CCFI) remained high; Shipbuilding steel prices fluctuated slightly; In February, the new shipbuilding price index remained at a high level and rose slightly. The price of titanium, acrylonitrile and raw materials remained high.
Industry Week view: the national defense and military industry sector has experienced a significant correction since the beginning of 2022. There has been a phased repair market since mid February, and there has been a correction again this week, maintaining a low shock trend. We believe that there has been no fundamental change in the fundamentals of the military industry. From the perspective of the 2022 military budget, the trend of vigorous development of national defense construction is expected to continue. The current sector valuation is at a low position from the two-year and five-year dimensions, and there is growth potential in the future. In the follow-up, it is suggested to track the estimation of related party transactions of each main engine manufacturer in this year, as well as the changes of accounts receivable, contract liabilities, inventory and other items in the annual report of listed companies.
Investment suggestion: with the improvement of China's comprehensive national strength and the rapid growth of the national economy, it is necessary for China to strengthen national defense construction for a long time in the international environment of big country game. It is suggested that the investment in the military industry should follow the three main lines of military electronics, new military materials and the reform of military state-owned enterprises. (1) Main line of new military materials, recommended Weihai Guangwei Composites Co.Ltd(300699) ; (2) Main line of military electronics, recommended China Zhenhua (Group) Science & Technology Co.Ltd(000733) , Avic Jonhon Optronic Technology Co.Ltd(002179) , Zhuzhou Hongda Electronics Corp.Ltd(300726) ; (3) The main line of the reform of state-owned military enterprises, recommend China Cssc Holdings Limited(600150) , and pay attention to Glarun Technology Co.Ltd(600562) .
Risk analysis: the risk of the impact of changes in the international political situation on the development of the military industry; The risk of intensified competition in the defense equipment market; The risk that the development progress of defense equipment is less than expected.
