Investment advice
[core combination] Avic Xi’An Aircraft Industry Group Company Ltd(000768) , Aecc Aviation Power Co Ltd(600893) , Jiangxi Hongdu Aviation Industry Co.Ltd(600316) , Avicopter Plc(600038) , Avic Shenyang Aircraft Company Limited(600760) , Inner Mongolia First Machinery Group Corporation Co.Ltd(600967) , Avic Electromechanical Systems Co.Ltd(002013) , Avic Jonhon Optronic Technology Co.Ltd(002179) , Gaona Aero Material Co.Ltd(300034) , Beijing Beimo High-Tech Frictional Material Co.Ltd(002985) , Western Superconducting Technologies Co.Ltd(688122) , Chengdu Zhimingda Electronics Co.Ltd(688636)
[Key stock pool] Avic Heavy Machinery Co.Ltd(600765) , Beijing Yuanliu Hongyuan Electronic Technology Co.Ltd(603267) , Zhuzhou Hongda Electronics Corp.Ltd(300726) , Fujian Torch Electron Technology Co.Ltd(603678) , Gaona Aero Material Co.Ltd(300034) , Wuhan Guide Infrared Co.Ltd(002414) , Raytron Technology Co.Ltd(688002) , Aecc Aero-Engine Control Co.Ltd(000738) , Weihai Guangwei Composites Co.Ltd(300699) , Anhui Yingliu Electromechanical Co.Ltd(603308) , Baoji Titanium Industry Co.Ltd(600456) , Xi’An Triangle Defense Co.Ltd(300775) , China Zhenhua (Group) Science & Technology Co.Ltd(000733) , Wuxi Paike New Materials Technology Co.Ltd(605123) , Jiangsu Toland Alloy Co.Ltd(300855) , Anhui Yingliu Electromechanical Co.Ltd(603308) , Beijing Beimo High-Tech Frictional Material Co.Ltd(002985) , Wuxi Hyatech Co.Ltd(688510) , Weihai Guangtai Airport Equipment Co.Ltd(002111)
[this week’s view] (1) China Cssc Holdings Limited(600150) two companies under the group Cssc Science & Technology Co.Ltd(600072) suspend trading and restructure, China Shipbuilding Industry Group Power Co.Ltd(600482) plan major asset restructuring. We believe that after the merger of the two ships, China Cssc Holdings Limited(600150) group opened the prelude to the reorganization and integration of its listed companies, and the subsequent integration of other listed companies can be expected; It is expected that the reorganization, integration, mixed reform and incentive of other military industrial groups can be expected under the background of the “three-year action plan for state-owned enterprises”; Pay attention to the restructuring trend of CETC group, Aerospace Hi-Tech Holding Group Co.Ltd(000901) group and other groups. The military industry has entered the sweet period of business cycle start + asset integration, and the national defense and military industry sector will be the latecomer! (2) Several main engine plants under AVIC group exceeded the annual target in advance: a) Chengdu Airlines “exceeded the annual batch production task in advance”, reached the “2323” advanced equilibrium target, continuously refreshed the record of one week transfer, and the annual transfer reached a record high. b) Hongdu Aviation Industry completed the annual production test flight one week in advance. The number of man hours completed in the whole year increased by 21% compared with that in 2020, more than 100 aircraft were transferred and delivered, some aircraft models exceeded the annual batch production task, and a number of key research projects achieved breakthrough results.
[core view] National Defense: high deterministic growth, endogenous + restructuring, domestic demand + foreign trade, military products + civil products, ranking the latter. (1) Under the “Centennial change”, the national defense and military industry has a high growth rate. “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. In 2022, when the “three-year action of state-owned enterprise reform” is coming to an end, the reform is accelerated, and the relevant central military enterprises are expected to benefit. (2) In the next few years, the securitization of national defense and military assets and the reorganization and listing of core military products are expected to set off a new climax. CSSC’s companies have started restructuring, and the restructuring of the top ten military industrial groups is expected to increase significantly. We pay attention to the restructuring process of CSSC, Aerospace Hi-Tech Holding Group Co.Ltd(000901) , CETC, AVIC, aerospace science and industry, ordnance industry and other groups. (3) China’s main battle tanks, UAVs, fighters and other products are competitive in the world, and the demand for foreign trade will gradually rise. The medium and long-term demand for civil products such as large civil aircraft and civil aviation engines will prolong the demand cycle. (4) Compared with lithium, photovoltaic, wind power and other new energy indexes, the national defense and military industry index is expected to replicate the performance of the wind power index in the second half of 2021 in 2022, and the latter ranks first.
Defense industry: scale effect + fine management, “small core and large cooperation”; The performance of the main engine plant is flexible, and the “three-year action of state-owned enterprise reform” will welcome the end of the year, and the equity incentive will boost the release of performance
1. The performance flexibility of downstream main engine plants is large: Avic Xi’An Aircraft Industry Group Company Ltd(000768) , Avicopter Plc(600038) , Aecc Aviation Power Co Ltd(600893) , Jiangxi Hongdu Aviation Industry Co.Ltd(600316) , Avic Shenyang Aircraft Company Limited(600760) , Inner Mongolia First Machinery Group Corporation Co.Ltd(600967) .
2. Upstream raw materials with high barriers and core midstream manufacturing with good competition pattern: Avic Heavy Machinery Co.Ltd(600765) , Fushun Special Steel Co.Ltd(600399) , Gaona Aero Material Co.Ltd(300034) , Western Superconducting Technologies Co.Ltd(688122) , Anhui Yingliu Electromechanical Co.Ltd(603308) , Chengdu Leejun Industrial Co.Ltd(002651) , Wuxi Paike New Materials Technology Co.Ltd(605123) , Guizhou Aviation Technical Development Co.Ltd(688239) , Xi’An Triangle Defense Co.Ltd(300775) , Wuxi Hyatech Co.Ltd(688510) , Avic Electromechanical Systems Co.Ltd(002013) , China Avionics Systems Co.Ltd(600372) , Xi’An Bright Laser Technologies Co.Ltd(688333) , Jiangsu Toland Alloy Co.Ltd(300855) .
3. Missile and informatization: Unigroup Guoxin Microelectronics Co.Ltd(002049) , Fujian Torch Electron Technology Co.Ltd(603678) , China Zhenhua (Group) Science & Technology Co.Ltd(000733) , Chengdu Zhimingda Electronics Co.Ltd(688636) , Wuhan Guide Infrared Co.Ltd(002414) , Zhejiang Dali Technology Co.Ltd(002214) .
Key bullish on defense Hong Kong stocks: AVIC.
Risk statement
1) The development progress of advanced models is less than expected; 2) Equipment procurement volume or delivery confirmation rhythm is lower than expected
