Sector market: from 20220307 to 20220311, the national defense and military industry sector (SW) fell 5.22%, ranking 23rd 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 20.67%, ranking 31st among 31 primary industries.
Industry Valuation: at present, the pe-ttm valuation of the defense and military industry sector (SW) is 57.37, with a 2-year quantile of 14.02% and a 5-year quantile of 16.28%, which is at a low position.
Stock market: the stocks with the highest growth this week are North Chemical Industries Co.Ltd(002246) (+ 24.86%), Huaqin Technology (+ 10.96%), Suzhou Sushi Testing Group Co.Ltd(300416) (+ 6.47%), Beijing Relpow Technology Co.Ltd(300593) (+ 4.62%), Aerosun Corporation(600501) (+ 4.56%). The stocks with the highest growth since the beginning of the year are North Chemical Industries Co.Ltd(002246) (+ 10.68%), Allwin Telecommunication Co.Ltd(002231) (+ 7.79%), Red Phase Inc(300427) (+ 4.35%), Kingsignal Technology Co.Ltd(300252) (+ 3.03%), Beijing Unistrong Science & Technology Co.Ltd(002383) (+ 0.69%).
Industry dynamics: Pakistan Air Force held the first batch of 6 J-10 CE installation ceremony in Kamla. The Prime Minister of Pakistan attended the ceremony. This indicates that China’s new generation of aviation main combat equipment has been officially installed in the Pakistani air force, realizing the systematic and organic export of China’s new generation of main combat equipment. With the improvement of the performance of China’s exportable weapons, or more international military trade users choose to purchase China’s weapons and equipment, the military trade market can be expected in the future.
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. In terms of military raw materials, the price of sponge titanium remained high, and the price of acrylonitrile increased slightly.
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. In the first half of this week, there has been a significant correction following the market trend, and there has been a slight repair in the second half of this week. 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. It is suggested to track the estimation of the related party transaction amount of the main engine factory in this year and the changes of accounts receivable, contract liabilities, inventory and other items in the annual report of the listed company.
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, recommend Weihai Guangwei Composites Co.Ltd(300699) , and pay attention to Gaona Aero Material Co.Ltd(300034) ; (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, recommended China Cssc Holdings Limited(600150) , Glarun Technology Co.Ltd(600562) . Recommendation of other targets Suzhou Sushi Testing Group Co.Ltd(300416) .
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.
