Key investment points
With the great development of national defense in the 14th five year plan, listed military companies are expected to meet the peak of asset injection
The state promotes the reform of state-owned enterprises with the goal of “improving the efficiency of state-owned capital and enhancing the vitality of state-owned enterprises”. In 2022, the year when the “three-year action for state-owned enterprise reform” ends, relevant reform measures are expected to accelerate;
During the 14th Five Year Plan period, there is a large amount of national defense equipment, and all military research institutes hope to speed up the asset injection: the asset injection of military research institutes is conducive to improving the conversion rate of scientific research achievements and preventing the separation of production and research. The injected high-quality assets can improve the core competitiveness of listed companies and improve the quality of assets; Improve profits, provide financial support for scientific research activities and form positive feedback. The marketization and capitalization of institutions is a long-term trend.
A number of listed companies under the military industry group have carried out major asset restructuring, and the follow-up business is expected to accelerate
The number of major asset restructuring companies accounted for 35%. Since 2015, a total of 32 listed companies under the military industry group have carried out major asset restructuring. The restructured companies account for 35% of the number of A-share listed companies under all central military enterprises, and the cumulative injected assets with an estimated value of more than 130 billion; Among them, the asset securitization rate of AVIC is as high as 80%, followed by electronic information group 59%, shipbuilding group 53% and ordnance equipment group 48%; Aerospace Science and industry and Aerospace Hi-Tech Holding Group Co.Ltd(000901) asset securitization rate is the lowest, only 14% and 18% as of 2021h1.
Following the peak of asset integration in 2017, there is a new upsurge in the opening year of the 14th five year plan in 2021. Since the peak of integration and injection of military industry group in 2017, with the continuous promotion of the “three-year reform action of state-owned enterprises” in 2021, enterprise asset injection has set off a new peak, which is expected to remain high in 2022 and the 14th Five Year Plan period.
The restructuring brought a significant increase in net profit. From the comparison of income before and after the injection of major asset restructuring, the total income of 33 companies in the early stage of restructuring totaled 213.3 billion, and the total income of the current period after asset injection totaled 272.1 billion, with a year-on-year increase of 28%; From the comparison of the net profit attributable to the parent before and after the major asset restructuring, the total net profit attributable to the parent before the restructuring was 4.6 billion, and the total net profit of the current period after the restructuring was 8.4 billion, with a year-on-year growth rate of 83%, and the net profit attributable to the parent increased significantly.
CETC and AVIC are at the forefront, and there is a large space for follow-up capital operation of the Aerospace Department group
CETC and AVIC group are at the forefront: AVIC group has the highest asset securitization rate, which has reached 80% by 2021h1, and many of its listed companies have become the leaders of the subdivision track; CETC has started the mode of “sub group formation – incentive of listed companies – injection of high-quality assets”. The following sub groups have integrated the assets of the Institute as a platform, and have carried out major asset restructuring of 6 subordinate enterprises. While injecting high-quality assets into listed companies, CETC has realized the effective restructuring of the assets of the core Institute, and the asset securitization rate is expected to continue to increase in the later stage;
The asset securitization rate of the Aerospace Department group is low, and the asset reorganization in the later stage is expected to accelerate: the Aerospace Department Group has less early capital operation, and the overall asset securitization rate is low at this stage, which is 18% and 14% respectively by 2021; There are many high-quality institutes and core assets of the Aerospace Department. The overall capital operation of the group is expected to accelerate, and the asset securitization rate has great room to improve.
Military industry welcomes the dual wheel drive of “endogenous + extension”, and the two wings of “domestic demand + foreign trade” and “military products + civilian products” fly together
(1) under the “century changing situation”, the national defense industry has a high growth rate, and “preparing for war / 2027 / building a strong national defense commensurate with the second largest economy” is the established direction. Large contract liabilities in 2021 highlight the high boom of the 14th five year plan; (2) In the next few years, the securitization of national defense and military industry assets and the reorganization and listing of core military products are expected to set off a new round of climax, paying attention to the reorganization process of China shipbuilding group, Aerospace Hi-Tech Holding Group Co.Ltd(000901) , China Electronics Technology, China aviation industry, aerospace science and industry, ordnance industry and other groups; (3) China’s tanks / UAVs / trainers / fighters are globally competitive, and the demand for foreign trade is gradually rising. Domestic large aircraft / civil aviation engine and other industrial chains are also gradually growing.
Investment suggestions:
Strong fundamentals continue to recommend strong fundamentals, and good performers continue to recommend strong fundamentals. Good ones are the Avic Xi’An Aircraft Industry Group Company Ltd(000768) \ \, Hebei Sinopack Electronic Technology Co.Ltd(003031) Phenix Optical Company Limited(600071) , North Electro-Optic Co.Ltd(600184) , North Navigation Control Technology Co.Ltd(600435) and other subsidiaries of the military industry group are expected to improve their performance in the later stage.
Risk tips:
1) the rhythm of equity incentive and asset securitization is lower than expected 2) the delivery progress of military products is lower than expected.
